4 models that can help you unlock real value from the Internet of Things

The Internet of Things, loosely defined as the growing number of everyday objects that are now being shipped with sensors and are capable of connecting to the internet, is big business. How big? Well, according to research company IDC, the market was worth US$4.8-trillion in 2012, a number that’s set to grow to US$8.9-trillion by 2020, with an install base of 212-billion objects.

Just because something’s growing though, doesn’t mean you’ll just be able to pitch up to the table and watch the profits roll in. Yes, you need to be there — with numbers that big, you simply can’t ignore the space — but if your business gets it wrong, it could end up neglecting the space and getting left behind.

“As the Internet of Things grows rapidly, it is linking millions of assets, including devices, people and places, to deliver and share information, enhancing business value and competitive advantage, and creating new business opportunities,” says Hung LeHong, vice president and fellow at research house Gartner. “In this early and emergent phase of development, entrepreneurs are experimenting across such a diverse range of sectors, applications, business models and technologies in their efforts to uncover value. This creates confusion and makes it difficult for others to easily identify the potential in their own geographies, industries and business sectors.”

If you’re going to benefit from the Internet of Things, you therefore need to know how to manage it carefully. As Gartner points out, each individual business will be presented with its own challenges and opportunities when it comes to the space. It adds however, that there are four general guidelines everyone can follow in order to benefit from the Internet of Things.

1. Manage — looking at an object to improve its use

As various assets (which could be a device or piece of equipment, or a location, such as a meeting room or a parking space) are connected and are able to provide up-to-date status information, then their can be optimised by putting the right systems in place. They may be simple and report very limited data (occupied or vacant, for example), or very complex (such as a jet engine) and involve multiple sensors reporting real-time streams of data, which may amount to terabytes per hour — but this does not detract from the essential principle.

2. Monetise — charging for usage on an incremental basis

This is a specific business model that is about the monetisation of a connected object by accurately measuring usage. It enables a (potentially very expensive) smart object to be used as the basis for a usage-based service. This brings business opportunities and also provides more-accurate plotting of product life cycle and more-effective preventive maintenance.

An example is monitoring engine hours, actual load, fuel usage and so on of a piece of equipment to bill usage against actual wear and tear. By combining this information with location, speed and time information, the company can accurately assess additional charges to reflect the risk.

This could, for instance, apply to a “pay as you drive” vehicle insurance service, a clear example of the application of this use case to physical objects not actually owned by the enterprise itself.

3. Operate — using the smart object to control its surroundings

This model builds on the well-established realm of “operational technology,” which is technology used to manage the equipment and processes inside manufacturing plants. Operational technology is increasingly moving away from the proprietary and isolated architectures of the past to exploit more mainstream technology, software and architectures and, in doing so, coming in some cases under the CIO’s and the IT department’s purview.

At its most simple level, a smart object could be used to control a valve, but in a more complex example, the data from thousands of sensors might combine weather and atmospheric conditions with water flow, pressure and depth information to manage entire water supply or irrigation systems. This in turn will reduce the need to physically visit the remote device, and avoid hazardous environmental conditions around the device.

4. Extend — using a smart object to provide extra information

A physical supply chain ends when a product is shipped. However, when that product is connected, a digital supply chain continues to exist in which digital services and products can be delivered to it.

In effect, the physical product is extended with digital services. Simple examples might be automatic (perhaps subscription-based) downloads of firmware to a device to provide new capabilities or rectify newly identified faults. Owners of a connected car meanwhile may be able to download the ability to upgrade or extend the driving mode of the car.

More-complex examples might be the provision of warnings (such as imminent part failure, and excessive wear or overheating of a device) to avoid the costs of failure through preventive action. Media content is a digital product that could be sent to any connected asset, such as streaming movies to a train seat.

“Although much of the spotlight today is on the Internet of Things, the true power and benefit of the Internet comes from combining things with people, places and information systems,” says Hung LeHong, vice president and Gartner Fellow. “This expanded and comprehensive view of the internet is what Gartner calls the Internet of Everything.”