The Internet of Things (IoT) is a key driver of the digital transformation that will enable businesses to reinvent products, services, internal operations and business models.
As a result, the majority of executives surveyed by The Economist Intelligence Unit (EIU) for this report believe that following an IoT technology path is crucial to their long-term success.
Many respondents say that the Internet of Things has already had a marked impact on their business model, allowing them to generate greater revenue and sparking a new innovation wave within their organisation. One-fifth have already seen a major impact on their industry, and a further 30% believe they will see significant impacts in the near future.
But while there is immense positivity across almost all sectors, many executives feel that the Internet of Things has not progressed quite as fast as they had expected three years ago. So far, fewer than one in ten companies surveyed have achieved “extensive” implementation of the IoT for both external and internal operations.
These are some of the findings of the Internet of Things Business Index 2017. The purpose of the index, conducted by The EIU is to measure periodically the adoption of IoT technologies and services by businesses throughout the world and across all relevant industries.
The inaugural Internet of Things Business Index 2017 was conducted in 2013 and provides the baseline for this update, which tracks the business uptake of the Internet of Things over the following three years to the end of 2016, giving a firm indication of how businesses are progressing with their plans.
Companies worldwide are eagerly pursuing the cost reductions, efficiency gains and new insights promised by a world of connected devices that are able to convey data on their usage and environment and can receive instructions remotely, the index reveals.
But even as underlying technologies and high-level business models have matured, companies are discovering that there are considerable organisational challenges to be addressed before the IoT will become a mass-market tool, such as the need to understand how companies must adapt their internal structures, as well as their go-to-market strategies. That will include how they work with suppliers.
Other key findings from the research include the following:
Many companies are seeing payback from their early Internet of Things efforts. One in four (25%) survey respondents report that their organisation’s use of the IoT has “sparked a new wave of innovation thanks to data that give us better insights”.
Almost as many (22%) say it has “unlocked new revenue opportunities from existing products and services”, while 15% say it has lowered costs. For one in five respondents (20%) the IoT has changed existing business models or strategies, and 16% say it has enabled them to push into new markets and industries.
Executives believe in the IoT’s potential, but progress has not happened as fast as expected. When asked about the impact of the IoT on business in general, one in five respondents (21%) believe that it has already had a major impact, and a further 32% believe that while it has had a limited impact on business so far, it will have a major impact in the future. However, almost six out of ten (56%) agree “somewhat” or “strongly” that their progress with the IoT has not happened as fast as they had expected.
The main obstacles to IoT implementation are practical. In 2013 the main challenges to IoT adoption cited by executives related to understanding and perception. Today, they are more concerned with practical matters, with 29% of respondents suggesting that the high cost of required investment in IoT infrastructure is seen as a challenge. Concerns about security and privacy appear in second place, cited by 26% of executives.
Executives continue to put measures in place to get the IoT used more extensively in their businesses. Thirty-five percent say they are learning from the experience of early adopters, while the same proportion say they are seeking advice from third-party experts and consultants. One-third (33%) say they have already taken steps to train existing staff to work with the IoT, while 27% are conducting or sponsoring research to establish market size and demand.
There is still great optimism about the rewards ahead, and a firm belief that the IoT holds the key to digital transformation for many firms. More than half (55%) expect IoT technologies to help them make internal cost savings and/or generate external revenue in the next three years.
Meanwhile, 47% agree that the IoT will be one of the most important parts of their organisation’s digital transformation strategy. As one executive puts it: “The IoT has been a challenge in some respects, [but]there’s potentially a huge upside here for us.”
Internet of Things Business Index 2017: Transformation in motion is an Economist Intelligence Unit report, sponsored by ARM and IBM. It is intended to gauge the current and future use of the Internet of Things (IoT) by the global business community.