The Internet of Things (IoT) is one of the most talked-about technologies today, and for good reason. While there are many possibilities for how IoT will be used, the opportunities are endless, and the possibilities are exciting. However, the IoT has been facing many challenges, including change management and cost in recent years. Change management, talent, cost, and cybersecurity are some issues, especially in enterprises that have hindered the scaling of IoT. A new research by McKinsey explores how the IoT economic value will increase in this decade. Some key findings are discussed here.
The potential value of IoT
With the ever-growing potential of economic value that IoT has, reports estimate that it could unlock up to $5.5 trillion to $12.6 trillion value globally. This includes value captured by consumers and customers as well!
The IoT’s economic-value potential depends on the types of physical environments where IoT is deployed.
Optimizing operations in manufacturing and making daily management of assets and people more efficient has the greatest potential for value creation in the factory setting. It could account for around 32% to 39% of the total potential IoT economic value created in the factory setting.
The second highest value generator is the human-health setting. It is estimated that the IoT economic value could reach around 14% of the total by 2030.
Disaggregating the potential economic value of IoT by use-case cluster, autonomous vehicles are the fastest-growing IoT-value cluster. Its CAGR is expected to be 37% between 2020 and 2030 i.e. $0.3 trillion in 2030 from $0.01 trillion in 2020, in the high-end scenario. There will be a steady increase in the use of sensors throughout vehicles as consumers demand greater safety and reliability. Increased safety features will account for much of the IoT added value during the first half of the next decade.
As per reports, by 2030, the safety and security use-case cluster in the vehicle setting will contribute around $130 billion to $140 billion to IoT potential value.
B2B and B2C contributions to IoT value
B2B solutions have contributed the most to the economic value of IoT. However, B2C applications like home automation were widely adopted at a faster pace which led to increased contribution of B2C to IoT value. As a result of these changes, reports estimate that B2B applications will account for 62% to 65% of the total IoT value in 2030, which translates to around $3.4 trillion to $8.1 trillion.
Geographical contribution
The contribution of the developed countries towards IoT economic value is expected to be 55% in 2030. China has become a global force in the IoT as a manufacturing hub, technology supplier and end market for value creation and could account for around 26 % of the estimated economic value of IoT globally by 2030 which is greater than that estimated from all emerging markets (19%).
What steps can organizations take to scale IoT?
The IoT has a huge potential economic value but capturing it has been challenging for many enterprises. They have struggled to transition from pilots into those that can capture at scale successfully with the technology.
Some ways by which enterprises can successfully deploy IoT at scale are:
- Many organizations have no clear owner for the IoT, which leads to decision-making being dispersed across functions and business units. Companies that have succeeded in deploying the IoT at scale address the situation by assigning a clear owner for the IoT.
- The IoT must be grounded in business outcomes so that companies don’t get caught up in the technology and focus only on pilots. Enterprises must design for scale from the beginning.
- There is no one silver-bullet use case for the IoT and deploying multiple use cases at the same time can force organizations to transform their operations and capture value.
- Technical talent is in short supply for IoT, and one step to filling the gap is investing in them by hiring those who are familiar with the language and landscape and also focusing on upskilling them.
- IoT deployments should not be just technology projects, but business transformations.
- The IoT landscape is fragmented and proprietary, which limits the ability to scale and integrate. Interoperability will enable seamless integration of different vendors, providers and use-cases.
- IoT ecosystems should be built and controlled with cybersecurity in mind.
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