Alongside Big Data and Artificial Intelligence, the Internet of Things (IoT) is driving forward a digital revolution that is being called the “Fourth Industrial Revolution” as well as the “Second Phase of the Internet”.
The Economist Intelligence Unit (EIU), a department within The Economist, released in June 2020 a new market study on IoT –“The Internet of Things: Application for Business – Exploring the Transformative Potential of IoT”. The report is based on an extensive literature review and a comprehensive interview program comprising over 20 IoT experts (Including Daniel Price, Ioterra’s CEO).
The focus of The EIU report is on the current state of IoT, the projected near-term economic impact, the challenges that IoT must overcome, and the to-dos for any corporate leader that is preparing their business to succeed as the second wave of the internet arrives.
- IoT will generate $1.1 trillion USD in revenue by 2025— approximately 1% of projected global GDP.
- Businesses that have adopted IoT business solutions see, on average, 20-30% efficiency gains in their operations.
- The EIU defines IoT as “a network of physical objects or devices that communicate and interact with each other via an internet connection.”
IoT Economic Growth
Approximately $6 trillion USD will be invested into IoT solutions over the period of 2016 to 2021. Globally, in that same period, IoT has generated more than $80Bn in mergers and acquisitions, alongside an additional $30Bn in venture capital.
IoT growth across various industries verticals:
- In manufacturing $10Bn was invested globally into IoT solutions in 2015. In 2020 $40Bn will be invested. (CAGR of 32%)
- In logistics $10Bn was invested globally into IoT solutions in 2015. In 2020 $40Bn will be invested. (CAGR of 32%)
- In utilities $7Bn was invested globally into IoT solutions in 2015. In 2020 $40Bn will be invested. (CAGR of 42%)
- In healthcare $5Bn was invested globally into IoT solutions in 2015. In 2020 $15Bn will be invested. (CAGR of 26%)
- In energy $3Bn was invested globally into IoT solutions in 2015. In 2020 $12Bn will be invested. (CAGR of 32%)
- In retail $2Bn was invested globally into IoT solutions in 2015. In 2020 $12Bn will be invested. (CAGR of 43%)
Current Challenges in IoT
Despite the economic opportunity and commercial benefits, current adoption rates of IoT are lower than expected. In fact, less than 50% of businesses have an active IoT project. When asked about IoT, business executives point to concerns over security and privacy, gaps in digital infrastructure, and nascent regulation holding back adoptions. While these challenges are real, in many of these cases the concerns are overstated and there are viable solutions to these challenges that already exist in the market.
Security and Privacy
As more devices become connected to the internet, the “surface area” for cyber attack increases. Once a machine gets smart, it is in a position to be outsmarted by hackers. There are two principle attack surfaces for an IoT device – hijacking the device itself or hijacking the data stream between the device and the internet. The EIU recommends the below actions to address privacy and security challenges:
- Companies need to establish guidelines for their products outlining best practices among vendors and users, even when not mandated by law.
- Security considerations need to be accounted for at each step of the development process of new IoT technology – not as a bolt-on at the end.
- All stakeholders need to be covered by appropriate regulation – avoid adopting a “top-down” approach that is only focused on the final output.
- Companies should train and then encourage best practices for all employees working with IoT.
While there is not an overarching, regulatory framework that applies to all of IoT (as IoT exists across so many sectors), there are several aspects of IoT that are regulated by existing, broader digital economy regulatory frameworks – such as GDPR, FCC, CCPA, etc. In order to build momentum towards IoT-specific legal frameworks, the EIU recommends the below actions:
- Proper technical skill sets and/or training among lawmakers are critical to ensure appropriate and technically feasible regulation is put in place.
- Regulation must be forward-looking and harmonized across various industry sectors and geographies – otherwise companies producing IoT products may find they need to adhere to an impossible number of similar, but varied, regulations.
To reach mainstream adoption, IoT requires the convergence of both macro-infrastructures (5G rollouts, stable LPWAN technologies, etc), as well as micro-infrastructures (corporate digital infrastructure capable of securely ingesting and utilizing IoT data). Getting the foundational digital infrastructure in place unlocks that path to widespread IoT interoperability. The EIU recommends the below actions to address gaps in current digital infrastructure:
- Governments and the private sector need to work together to find creative joint ventures that can lower the financial cost of IoT and wider 5G rollout.
- Companies and policymakers should create alliances, shared standards and interoperability protocols – open standards allow for large-scale adoption and prevent “lock-in.”
- Companies need to upskill their staff who are handling IoT in order to get the micro-infrastructure in place.
What can business leaders do to prepare their organizations to successfully navigate the growing “second phase of the internet” that is IoT?
- Seek out and collaborate with technical experts to identify and advise how IoT may benefit their businesses.
- Invest in digital infrastructure as well as employee upskilling now as part of any new strategy.
- Regardless of their internal IoT strategy, leaders also need to prepare for how IoT adoptions by their competitors could disrupt their sector.
Read the full article from The Economist Intelligence Unit here: https://www.eiu.com/n/the-internet-of-things-applications-for-industry/