Amazon.com has about 50 of the most highly automated warehouses in the world, centers through which flow some of the 13 million items the company ships daily.1 In these centers, goods come to warehouse workers via robots that pick the shelves, rather than the opposite. The robots—400 to 500 of them whirling around a 125,000-square-foot warehouse at a time—are equipped with visual sensors so they don’t collide with each other or have boxes fall off.2 The robots in one Amazon center have increased the number of items a worker can pick from 100 to 300 to 400 per hour.3
Automated warehouses are just the tip of the iceberg of how businesses, government agencies, and other institutions are using Internet of Things (IoT) technology. Digital sensors are now embedded in products ranging from aircraft engines and appliances to electric toothbrushes and traffic lights. (Cities will spend $2 billion this year on ‘smart’ traffic lights that change based on traffic volumes.4)
However, with 14 billion ‘things’ already connected to the Internet5 (nearly three times the number in 20156) and another 11 billion expected by 2021, companies can easily lose their way with IoT initiatives. Their IoT strategies can quickly become tactical, fragmented, and misdirected, resulting in tens of millions of dollars spent but far less gained in return.
Companies need clear strategies to guide their IoT initiatives. The strategy development process should begin with a deep understanding of how IoT technology fundamentally changes the game: by bringing the company real-time insights on the performance of its products, processes, and people. We have seen four core sources of business value from IoT technology:
■ New digital business models—by which product companies can charge for post-sale services that help customers maintain and make better use of those products (so-called ‘servitization’), as well as shift from ownership to subscription pricing.
■ Seamless customer experiences—largely digital—that relieve buyers of the multitude of logistical and other headaches they often face in using a product or availing themselves to a service.
■ Optimized and responsive value chains—i.e., production and distribution operations that detect and overcome internal bottlenecks and external conditions, making automatic adjustments that keep products moving or services flowing.
■ Enhance quality of life—with safer operations by monitoring the condition of buildings, factories, products, and people.
Companies get the greatest value from IoT technologies when they view them as a new transformative force that, as we put it, ‘brings life to things.’