The benefits and challenges of the Internet of Things
The convergence of operations technology and information technology presents new and expanding market opportunities. The “Internet of Things” is a center point of this convergence. IoT can bring remarkable benefits to today’s ever-changing business environment and an effective culture must be in place to make it work. Core values of cooperation and continuous learning drive the culture to form a foundation necessary for the alignment.
In IoT, interconnected electronic network systems are created that record, process and transmit information from sensors that are embedded into physical assets. According to McKinsey Global Institute, IoT can create as much as $11.1 trillion a year globally in economic value. Business-to-business transactions could generate $5 trillion in additional global GDP as energy, manufacturing, agriculture and real estate industries incorporate IoT technologies. Sensors built into manufacturing equipment can electronically tag items and components to track products throughout the supply and inventory chain. Smart networks are able to determine performance, location and production of physical assets. Hard asset providers create new business opportunities when IoT allows hardware, software and services to be integrated. For example, an industrial machinery supplier can evolve into a service provider when their in-depth knowledge of how assets function across an industry assist customers to operate more efficiently than they could by themselves.
There are challenges as well in IoT. The data does not speak for itself. Leaders must understand the information. They must extract relevant actionable insights from the voluminous data and strategically communicate these insights. Some organizations, however, find it difficult to effectively employ the mountains of data produced. Although there is great potential value, information generated by IoT sensors are often underutilized or worse yet, ignored. Additionally, such a reliance on interconnected technology creates massive cybersecurity risks. Greater interconnectivity means many points of vulnerability that must be guarded and larger system failures could result from a breach. Malicious hackers, for example, can cause life-threatening problems in the case of healthcare.
These new technologies that may bewilder some managers and traditional roles can shift. In the world of Big Data, information replaces instinct and past experience in decision-making. Senior management could find themselves more reliant on a tech savvy younger generation, and these “techies” must be developed into effective leaders. Values of continuous learning must come into play.
Silos within the organization means trouble in this new world. A culture of collaboration incorporating data technology across enterprise functions must ensue. The Chief Information Officer, in particular, must have constructive working relationships with the senior leadership team. Furthermore, managers within IT must be fully integrated into increasing areas of the business, collaborating and strategically communicating across the organization. These analytics experts and data scientists must be connected with executive decision makers and with frontline managers. Through teamwork, insights from large data sets can be employed to capitalize upon data-driven customer knowledge. Information mining can stimulate innovation and allow the organization to embrace change faster, developing service-oriented products that reflect the customer voice. IT thus becomes a communications center, not a cost center, using data to better serve the organization and its customers.
