Stephanie L. Woerner, Research Scientist at the MIT Sloan Center for Information Systems Research
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.
There is a fundamental change underway in the way that companies make decisions. Instead of relying on a leader’s gut instincts, an increasing number of companies are embracing a new method that involves data-based analytics. This ‘Big Data’ revolution is occurring mainly because technology enables firms to gather extremely detailed information from and propagate knowledge to their consumers, suppliers, alliance partners, and competitors.
Companies that use this type of ‘data driven decision making’ actually show higher performance. Working with Lorin Hitt and Heekyung Kim, I analyzed 179 large publicly-traded firms and found that the ones that adopted this method are about 5% more productive and profitable than their competitors. Furthermore, the study found a relationship between this method and other performance measures such as asset utilization, return on equity and market value. There is a lot of low-hanging fruit for companies that are able to use Big Data to their advantage. Read More »
Much of the attention on Facebook’s initial public offering this week has been on whether the social networking giant is valued too highly. But whatever its current worth, Facebook has a potentially huge new source of revenue coming its way from “social advertising.” According to a new research paper I’ve just published, Facebook itself is only just beginning to realize the untapped potential of social advertising, in which marketers use online social relationships to improve ad targeting using data on Facebook users’ friend networks.
Andy McAfee and I have just released a short e-book, Race Against the Machine. In it, we try to reconcile two important facts. 1) Technology continues to progress rapidly. In fact, the past decade has seen the fastest productivity growth since the 1960s, but 2) median wages and employment have both stagnated, leaving millions of people worse off than before. This presents a paradox: if technology and productivity are improving so much why are millions being left behind?
In the book, we document remarkable advances in digital technologies in particular. Innovations like IBM’s Watson, Google’s self-driving car, Apple’s Siri are turning science fiction into reality. Machines are doing more and more tasks that once only humans could do.
We use the Internet to research things all the time. Whether it’s a big purchase like a vacation or something smaller like a pair of running shoes, we often begin with a search for the topic online, eventually drilling down to find specific product reviews and details. But what happens when the pattern of websites we visit triggers personalized online ads that follow us around the Internet? If you’re later reading an unrelated article on a news site, will you really pay more attention to an ad for the specific hotel or pair of shoes you were looking at earlier?
The answer is: probably not. It turns out that when people are at the early stages of researching on the Internet — and haven’t likely developed strong product preferences — they respond better to generalized messages intended for a mass audience. Ads that are too specific aren’t going to convert