From MIT SMR Custom Studio
Realizing value through the Internet of Things (IoT) may begin with simple goals, but it can also catapult a business toward new horizons. The level of commitment to completing the journey really depends on the presence of four factors:
- Translating Threats Into Opportunity.
A major driver in IoT initiatives is finding a new source of revenue in the face of changing industry trends. In CISR’s survey of 352 CIOs, respondents with the highest levels of IoT commitment generated 50% of their revenues from products introduced in the past three years. These CIOs see firsthand how quickly disruptive change can occur.
Consider Schindler Holdings AG, which manufactures, installs, and maintains escalators, elevators, and moving walkways. In this increasingly price-sensitive industry, maintenance accounts for 75% of operating profits. This prompted Schindler to use IoT to not only improve equipment maintenance through the data generated by its elevators but also to reposition itself as a service provider that helps customers with building management using this data. To move in this direction, it developed a Web-based customer portal and a mobile app to provide real-time insights.
- Turning to the CIO for Innovation.
At companies realizing the biggest IoT benefits, CIOs spend 52% of their time on innovation, CISR research found. They probe for areas within—and outside of—the company that offer new digital opportunities. Strong governance mechanisms free these CIOs from day-to-day technology duties to focus on innovation. They also have strong support from top executives, who themselves spend a significant amount of time focused on industry disruption.
- Investing in IT Underpinnings.
Companies farther along the IoT maturity curve have a large percent of IP-addressable assets. They also devote a higher percentage of revenues to digital infrastructure than those receiving a minimal IoT payback.
CIOs at these top-performing firms work to develop key IoT capabilities, such as miniaturization and human-computer interfaces. If companies lack these capabilities internally, CIOs seek out partnerships or acquisitions that can fill the gaps—from connectivity to analytics—necessary to succeed in a connected world.
- Ensuring Organizational Readiness.
When companies change their business model, the impact goes beyond technology. For example, using IoT data to shift from one-time product sales to subscription- and service-based pricing requires training employees—from sales to customer service—to support these new revenue streams.
Business commitment to IoT varies significantly from industry to industry, as well as within subsets of specific industries. This area of study is crucial, because it can show us how next-generation enterprises are finding competitive advantage. Already, it is evident that the sweet spot is not simply IoT but the ability to link IoT data with mobile apps and real-time analytics to drive faster decision making and boost revenues.
Reaching full IoT maturity depends on cross-organizational commitment to identifying new revenue sources, spurring innovation, investing in supporting technology, and nurturing relevant skills. With these capabilities in place, businesses can reap the full set of IoT rewards.
This article is excerpted from Executive Scholar Exchange “IoT Maturity: Bridging the Gap Between Devices and Values.”
Stephanie L. Woerner is a Research Scientist at the MIT Sloan Center for Information Systems Research.