The past five years has seen huge advancements made in the technology industry, in particular, when we look at the developments made regarding internet of things (IoT) technologies. There are already so many connected devices, objects and animate objects in our world but with so many more to come, how can we map the real economic value these developments are having?
McKinsey Global Institute have recently released a new report which aims to identify this economic value. The report: ‘The Internet of Things: Mapping the value beyond the hype’ seems to take the view that, although there is a definite hype about IoT technology, the real potential of IoT, is actually being understated.
The Institute analysed over 150 cases of IoT use in order to gain a better understanding of what the benefits and challenges of the technology were to the global economy. These cases studies included a range of industries, from people in the health sector to those in equipment manufacturing.
The Institute’s analysis estimates that IoT’s total economic impact potential will be between $3.9 trillion and $11.1 trillion each year by 2025. This equates to approximately 11% of the global economy.
However, at the moment, these are only estimates. For IoT to make this kind of impact on the world’s economy there are a number of hurdle to overcomes, especially in the technical, organisational and regulatory sense. More importantly, the report notes, it is critical that companies who are using IoT technology put in place the right systems and processes to ensure IoT’s value is maximised.
If challenges such as these can be addressed and overcome, the conditions for IoT to fulfil its full potential will be in place.
The report also notes the following must be utilised to unlock the full potential of IoT:
1. Interoperability – this creates the “seamless” programmability of our connected devices and/or sensors, which in turn unlocks the full potential of customers’ IoT connected experiences. The reports states that interoperability is therefore essential for IoT to reach its total economic value potential.
2. IoT data – The report states that not enough data from IoT is being examined and acted on. The data that most companies focus on currently is data which reports on and controls anomalies, however, this generally accounts to approximately only 1% of data. More data therefore needs to be analysed to ensure IoT technology is optimised and used for prediction, since this is what will result in the greatest value.
The report also notes that:
– More value will probably come from business-to-business (B2B) applications over consumer uses, with the report estimating that B2B will account for 70%. However, it is worth noting that there are many consumer applications, for instance health/wellbeing monitors and self-driving vehicles, which are likely to add significant value as well.
– Developing economies will likely drive forward IoT technology, with the report estimating that developing countries could generate up to 40% of IoT’s value. However, the report also strongly indicates that it is the advanced economies which will likely have a higher overall value impact. This is down to the higher value per use in these economies.