Pure hype or source of new business models? According to McKinsey, the Internet of Things (or "IoT" for short) is definitely a source of new business models – powerhouses that will deliver a major boost to business around the globe.Patrick Bizzarri
In fact, the experts estimate that ten years from now, IoT could be adding up to $11.1 trillion per year to the global economy.
According to the experts, the next great leap forward in innovation will come from the Internet of Things. The term "Internet of Things" refers, of course, to the interconnectedness of people with things (e.g. smart homes) and things with things (M2M). Think self-driving cars, drones, fitness trackers, and app-controllable domestic appliances. And, like the Industrial Revolution of the last century, it’s all about achieving greater efficiency and convenience.
In its June 2015 study titled "The Internet of Things: Mapping the Value beyond the Hype," McKinsey Global Institute concluded that this mixing of the physical and digital worlds offers significant opportunities for both consumers and enterprises. The authors estimate, for instance, that the Internet of Things has the potential to add up to $11.1 trillion per year to the global economy by 2025. That’s more than a tenth of the global GDP projected for 2025 by the World Bank. Corporations like IBM and Swisscom are already investing billions.
Currently, the primary beneficiaries of IoT innovations are consumers. But, according to the study, the greatest potential lies in business applications for Industry 4.0. The study notes that achieving digitization and integration up and down value chains depends very much on deriving additional value from big data. At present, the report says, less than one percent of the data being gathered is actually being used. And that tiny percentage is mainly in the area of anomaly detection and real-time control, rather than optimization and prediction.
McKinsey notes that another area where IoT can achieve significant added value is in the optimization and more efficient scheduling of existing work processes. As an example, the study cites the metals and mining giant Rio Tinto, which is already using integrated sensor technology to remotely control its enormous dump trucks. And then there’s the auto parts supplier Wurth USA, which has developed an “iBins” system that uses intelligent camera technology to monitor the fill level of supply boxes and automatically re-order supplies.
The McKinsey analysts reviewed just on 300 IoT applications. They found that, in addition to more effective use of big data, the successful implementation of the Internet of Things will very much depend on technological improvements. One effect of these improvements will be a reduction in the cost of key enabling technologies. So, for instance, the study predicts that ten years from now, Google Glass and other augmented-reality devices may reach the $200-300 price point, where widespread adoption in factories would be affordable. These technologies could then be used to simplify employee training and provide cost-effective support in the maintenance of complex machinery.
The upcoming CeBIT will also focus on the IoT – since without effective networks, components and data processing systems, the IoT would remain more hype than a working business model. At the “ IoT SOLUTIONS ” cluster, market leaders from many sectors are using concrete examples to showcase the radical changes in many different industries. As a part of “Communication & Networks ” in Hall 13, this special display combines exhibition, professional conference and B2B matchmaking.
Not that the success of the Internet of Things depends solely on big data and technological development. The McKinsey study makes it clear that regulatory barriers will need to be overcome as well. As examples of this, the study points to the healthcare and public transport sectors. The challenges here include security, protection of personal privacy and intellectual property, and data sovereignty.