The Value Created by IoT Solutions

As we established in the previous article, IoT is about bringing the physical world online. But the physical world is incredibly diverse, and IoT Solutions can therefore provide value in diverse ways. That said, we can group the kinds of value created by IoT Solutions into roughly 6 categories. But first, what is an IoT Solution and why do we focus on enterprise?

"The physical world is incredibly diverse, and IoT Solutions can therefore provide value in diverse ways."

-Leverege

What is an IoT Solution?

For there to be a solution, there needs to be a problem. When we talk about the term “IoT use case,” what we mean is that there are one or more customer pain points that can be solved with IoT technologies. An IoT Solution is therefore a combination of IoT technologies seamlessly integrated into a holistic system to solve one or more customer pain points. In general, these IoT technologies include:

• Devices, which collect data from the physical world and sometimes perform actions.
• Connectivity, which transports the data to and from devices and can be by wired and/or wireless methods.
• Computational infrastructure that provides the compute and storage to ingest, apply logic, analyze, and/or store the data from devices.
• User interfaces that provide the means by which humans can interact with the data and gain value.

A Focus on Enterprise

In the next section, we’ll share the 6 kinds of value created by IoT and you’ll notice that we look at value through the lens of enterprises. So, why do we focus on enterprise IoT and ignore consumer IoT Currently, enterprise represents the largest opportunity in IoT and that’s where we recommend you to start. Consumer solutions can be viable, but they are more difficult to identify, market, and sell.

Enterprises represent the best opportunity right now because the IoT industry is still relatively immature. The relative immaturity of the IoT industry means that there is much complexity and fragmentation, so your customers must have a powerful incentive to adopt IoT and the willingness to bear the costs. Enterprises have the most to gain from IoT because enterprises have the most “things” to manage and typically have the largest budgets and are willing to spend if the value is there.

To provide an analogy, just look at the computing industry as a whole. In the 1950s, computers were used primarily by governments and large enterprises because they were huge, expensive, hard to use, and not that powerful. Governments and large enterprises had the most to gain from these computers because they had the most data to collect, store, and analyze and the most willingness to invest the capital and time to purchase, install, learn, and maintain these room-sized computers.

As computers became smaller, less expensive, and more powerful, more and more people adopted them, eventually making the jump from mainframes and microcomputers (aka PCs) to the smartphones of today. The same progression is going to happen with IoT. Right now, we’re just at the government and large enterprise stage.

6 Categories of Value

IoT Solutions can create value in many ways for organizations, which we can roughly organize into the following six categories:

#1: Reduce Costs

Many organizations need to manually collect critical business data. By automatically collecting data with an IoT Solution, organizations can reduce the human labor required for mass data collection and therefore reduce their costs. IoT can reduce costs in other ways too. Unexpected equipment failures can disrupt business operations, leading to lost revenue while the equipment is non-operational and increased costs to perform emergency maintenance. IoT data can make equipment maintenance more effective with preventative (and even predictive) maintenance to minimize disruptions to business operations and avoid unnecessary expenses associated with emergency maintenance.

#2: Increase Efficiency

With IoT data, certain decisions and actions can be automated so that a human isn’t necessary, increasing the speed and efficiency of processes. This category often has significant overlap with the category of cost reduction because increased efficiency usually means reduced costs. However, increased efficiency can mean that more can be accomplished with the same resources, so costs might stay steady while the output (and usually revenue) increases.

#3: Improve Customer Experience

Customers have come to expect accuracy, convenience, and transparency when it comes to the delivery of services. When you order a package online, you expect that the estimated delivery time will be accurate, you expect the convenience of being able to check where the package is during its transit, and you expect that any delays will be transparently and proactively communicated to you.

For service-based businesses, IoT can enable those businesses to provide a better customer experience by automatically collecting data about their services to more accurately predict delivery times, give customers the convenience of directly checking the status of their service, and provide transparency if there are any issues. As a bonus, enabling customers to check the status of their service directly can reduce customer support costs that would otherwise be necessary to field customer calls.

#4: Enable Better Decision Making

Leaders at every level of an organization want to make more data-driven decisions. IoT means that organizations can collect, organize, and surface invaluable insights about the real-time and historical operations of the business to drive better decision-making. Just like other categories of value, this too tends to overlap with other categories. Better decision-making often means reduced costs, increased efficiency, and improved customer experience.

#5: Mitigate Risk

Risk can take many forms. There are health and safety risks, compliance risks, and the risk of stolen and/or lost assets. IoT Solutions can help to mitigate all these risks. IoT Solutions can monitor environmental conditions and worker behavior to proactively identify unsafe conditions and alert before accidents happen. IoT Solutions can monitor key business processes and automate data collection to ensure regulatory compliance. Finally, IoT Solutions can monitor the location of valuable assets to trigger alerts if assets are moved unexpectedly and/or out of defined geofences to reduce lost assets and recover stolen assets.

#6: New Data-Centric Revenue Streams

The previous five categories of value are primarily focused on improving the bottom line, but the data collected by IoT Solutions can sometimes be monetized to improve the top line too. This data monetization can be direct (e.g. by selling insights from the data to third parties) or it can be indirect (e.g. by enabling new products/services that are built on the data).

3 Phases of Value Unlocked

IoT Solutions can create value in multiple ways, as we just covered in the 6 categories of IoT value. What’s particularly exciting about IoT is that it also creates increasing value over time. The value unlocked by IoT occurs in three distinct phases.

Phase #1: Real-Time Data

Phase 1 is about understanding the present. Going from no data to real-time data is an immediate win for organizations. Most organizations don’t know the real-time location and/or status of their assets, meaning that their operations are highly inefficient. IoT Solutions mean that organizations can now understand how their business is operating in real-time to unlock many of the sources of value covered previously.

Example: Medical staff in hospitals spend significant time just searching for the medical equipment that they need (IV pumps, telemetry transmitters, etc). This is frustrating, inefficient, and negatively impacts patients. Real-time data for the location of all medical equipment in the hospital means that medical staff can use a mobile device, tablet, or laptop to quickly identify the location of the equipment they need. This improves staff well-being, increases efficiency, and enables better care for patients.

Phase #2: Historical Data

Phase 2 is about learning from the past. With an IoT Solution installed, the organization will now have both real-time data and historical data. This historical data unlocks additional value because it enables the organization to get insights into how their business has functioned over time, such as how certain assets are actually being used.

Example: The hospital procurement team is responsible for purchasing or renting medical equipment when more equipment is needed, but they often over-purchase or under-purchase equipment. Over-purchasing results in wasted capital and under-purchasing results in lost revenue and poor patient care. Historical data about how much each piece of medical equipment is used and by which departments means that the procurement team can identify when a department is underutilizing their allocated equipment and reallocate that equipment to departments in need, instead of unnecessarily purchasing/renting new equipment. This significantly reduces costs and boosts revenue by optimizing asset usage.

Phase #3: Predictions

Phase 3 is about seeing the future. With enough historical data, advanced analytics and AI/ML models can be applied to the data to unlock even more value by predicting what will happen in the future. These predictions enable organizations to make more intelligent decisions, such as when to perform maintenance on assets and when to purchase more assets.

Example: Medical equipment breaks down and needs to have maintenance. When medical equipment breaks down unexpectedly, it negatively impacts patients and can result in higher costs since the hospital may need to rent equipment until the broken equipment is fixed. With all the historical data that’s been collected for the medical equipment, advanced analytics and AI/ML models can be applied to the data to predict when medical equipment will break down so that the hospital can dispatch a maintenance team before the medical equipment breaks down. This reduces costs and improves the patient experience.

IoT Solutions for Value

We have made it clear how IoT Solutions bring value in this article. In the third part of this series, “How to Identify Potential IoT Use Cases,” we go over useful questions that will help you identify potential use cases for your enterprise to pursue.