sweeping other industries. And it's due to the rise of IoT.
Now when we purchase a new car, we're actually buying, as I noted, a smartphone on wheels (Figure 1.4) and a mobile datacenter. Looks and style are important, of course, but for the majority of us speed and performance are secondary. What we really care about is how we interact with the car and how we automate tasks. We also care about how the car interacts with us – telling us when to change the oil based not on the mileage but on the actual use of oil. The car should warn us, and the dealer, that a part in the engine is about to break before it happens. And in the next few years we should expect an electric car to just pick us up and drive us wherever we want to go. Everything else becomes an afterthought.
Figure 1.4 Smartphone on Wheels
Asit Goel, senior vice president and general manager at NXP Semiconductors, responsible for the firm's IOT solutions, summarized this new world well: “Ultimately, technology needs to replace or augment the senses of a human driver in a smart connected car. An army of sensors, radars, laser scanners, cameras, computing processors, wireless and cellular communications devices is needed to do this, to gain a 360-degree view of the car's surroundings and make critical decisions. The car isn't just a thing anymore; it's a system of things that delivers this hyper-connected experience with greater fluidity of service across my personal device, professional environments, and more.”
Is the auto industry ready for such a dramatic transformation? Ford Motor Company's James Buczkowski, a Henry Ford Technical Fellow and director, Electrical and Electronics Systems Research and Advanced Engineering, has emerged as a thought leader on automotive electronics, including connected and autonomous vehicles. He assured me that the industry is comprehensively addressing smart mobility, which includes user experience, software, cyber security, data analytics and working toward new emerging mobility business models.
IoT Today – Digitally Transforming the World
Did the previous discussion about smart cars leave you disconcerted? Don't be. It's just the latest example of the revolution sweeping the world – and with it every industry segment. This new stage is transforming everything from the local pizza shop in Germany to a global Fortune 500 company in the United States; from an ice cream shop in India to brand new cities in China and Korea; from water pumps in Africa to wind farms in Europe. Businesses, governments, and nongoernment organizations are scrambling to figure out how they must adapt to thrive in this new world. That's the attraction – and payoff – of IoT.
So is adoption of IoT optional? Can you skip it or ignore it? For a while yes, but at considerable risk. Think of the horse and buggy industry at the start of the 20th century. The buggy and carriage trade survived for a couple of decades. Today it exists only for a few collectors and specialized use cases.
IoT is producing an economic tidal wave that will engulf everything in its path. Tim Jennings, chief research officer at Ovum, an analyst and consultancy firm that publishes the Machine-to-Machine and Internet-of-Things Contracts Tracker, told me that IoT is being adopted across many industries. Manufacturing, business services, and energy and utilities sectors are leading the way with most IoT deployments to date, with transportation, retail and wholesale, public sector, and health care industries being next in line. “As digital transformation accelerates across industry sectors, permeating deeper into the enterprise, the Internet of Things has become a key enabler of digital operations, with Ovum's research showing that deployment is occurring across a wide range of connected business processes,” he commented. “An initial wave of adoption tended to focus on industry-specific use cases, but we are now seeing the emergence of cross-industry applications built on IoT platforms. Coupled with increased business awareness, we expect enterprises to take a more systematic approach to digitizing their processes and operations, and look for new opportunities to create business value from the Internet of Things,” Jennings added.
We've already peeked at IoT in factories through Harley-Davidson. This book will also discuss other industries, focusing primarily on the B2B segment since B2B innovations are driving the transition to IoT today.
Moving forward, the research conducted by James Manyika and Michael Chui of the McKinsey Global Institute in July 2015 pegged the real dollar value of the global IoT market at potentially $11.1 trillion by 2025.3
Will this economic tidal wave hit your industry? Without a doubt. It will hit every industry and every segment sooner or later. McKinsey projected the first nine impacted industry segments as seen in Figure 1.5.
Figure 1.5 McKinsey Projection of Impacted Industry Segments
Ovum and McKinsey, of course, are not the only observers to weigh in with IoT status and projections. In May 2016, IDC's Vernon Turner predicted that the worldwide Internet of Things (IoT) market spending will grow from $692.6 billion in 2015 to $1.46 trillion in 2020 with a compound annual growth rate (CAGR) of 16.1 percent.4 Furthermore, “We expect the installed base of IoT endpoints to grow from 12.1 billion in 2015 to more than 30 billion in 2020,”5 Turner told me. In a July 2014 report titled “Hype Cycle for Emerging Technologies, 2014” written by Hung LeHong, Jackie Fenn, and Rand Leeb-du Toit, research and advisory firm Gartner put IoT at the top of the “hype curve,”6 Gartner's terms for the blizzard of vendor hype that accompanies technology advances. Going forward, we can hope that the hype will start to subside as organizations embark on substantive IoT initiatives.
Why Now: Three Driving Trends
As previously noted, IoT isn't exactly new, having been around in different forms for more than a decade (think RFID, where every item sold at a retail store can speak with the supply chain). So why is it finally generating so much attention? I see three major trends coming into play:
■ The lines of business, as represented by the line of business (LOB) manager, are emerging as a major buying center for technology. LOB managers are concerned with business outcomes and look for business solutions, especially those that reduce cost, increase productivity, and – most importantly – increase profitability. They look for the ways to improve overall equipment effectiveness, production delivery times and throughput, asset uptime and increasingly target specific sustainability metrics. Line of business managers weren't among the primary beneficiaries of the first stage of the Internet, which focused on IT, service providers, and consumers. Today, however, LOB leaders are starting to harness technology to drive business outcomes. As a consequence, unlike the Internet's first stage, IoT promises not to be a technology-led transition; rather, it's a business-driven transition where technology is a tool to achieve specific business goals. Yes, LOB managers can create and spend budgets, but they're looking to increase both top-line and bottom-line results. For example, some manufacturing operations are reporting a 160 percent return on investment (ROI), a 20 percent reduction in cost, and a 75 percent reduction in network downtime from IoT. To LOB managers, such outcomes demonstrate a value proposition so compelling that they're willing to open up their wallets to fund such efforts.
■ The convergence of information technology and operational technology improving communication and efficiency. Remember when millions of people read John Gray's book Men Are from Mars, Women Are from Venus? This best-seller suggested that the frequent misunderstandings between genders make it seem as though men and women are from different, alien worlds. But it's not just men and women who