Internet of Things

The Internet of Things (IoT) comprises a rapidly evolving suite of technologies to monitor, compare, and act on insights across and within systems that previously operated in digital isolation. Devices now have growing capabilities to communicate with one another, fundamentally changing the way companies run their manufacturing plants, how energy utilities manage demand, and even how families keep their homes safe.

IoT technologies can empower private companies to potentially change lives.

For private companies, the IoT can transform conventional processes, such as supply chain management, into a true competitive advantage. By arming a company’s sourcing, manufacturing, and logistics teams with more sophisticated data from IoT-enabled equipment, companies can prevent errors, correct missteps more quickly, identify and alleviate bottlenecks, and ensure they’re not leaving valuable scraps on the factory floor.

For B2B firms in particular, three trends within the universe of IoT appear most relevant. First, there is incremental opportunity to improve existing systems, such as embedding sensors in baggage and cargo carts at the world’s busiest airports. Second, there is optimization, which can help seaports handle more cargo in a particular location, for instance. And finally, there are entirely new business models, such as the case of a major logistics provider that is looking at ways to confirm whether packaged medications already hold certification assurance, which would provide valuable intelligence to both regulators and drug manufacturers.

“There is a lot of hype around the Internet of Things — with people focusing too much on the gadgets or end user devices,” said Duncan Stewart, Head of Technology, Media, and Telecommunications Research for Deloitte Canada. “That is not where the real value resides; instead, it is in enhancing and controlling the flow of information itself."

The IoT is revolutionizing the way companies think about information. The increasing arsenal of data on physical objects, employees, customers, and other stakeholders can now travel across devices, influence the way people act, and enable a growing range of autonomous actions. While the value of these insights is clear to marketers and product developers, there are concerns regarding stewardship and transparency of the information. According to the University of Chicago economist Richard Thaler, “If a business collects data on consumers electronically, it should provide them with a version of that data that is easy to download and export to another website.”

Private companies looking at potential avenues for innovation within the IoT also need to stay abreast of privacy rules, as there are times when data cannot be shared at all. To add a level of complexity, both federal and provincial laws can apply. All businesses should become familiar with the "Personal Information Protection and Electronic Documents Act (PIPEDA). While in many cases, most notably in Alberta, British Columbia and Quebec, overlapping provincial laws are substantially similar. Depending on your province, you’ll face individual laws covering specific types of information related to personal health or financial information.

More broadly, there are challenges in adapting certain ecosystems for an IoT-powered future. For technology, media, and telecommunications companies, the formerly standalone device is now a potential target for hackers. Likewise, dropping sensors into existing systems such as utility meters may expose weak links within older systems with less robust security features. Instead of retrofitting, companies should consider how new technologies specifically equipped for IoT can avoid security lapses.

In addition, there still are no uniform standards governing security and enforcement within the IoT. Therefore, it is largely up to business and technology leaders to develop rules to combat security risks in this emerging field.

Despite these concerns, IoT technologies can empower private companies to potentially change lives. The battle against chronic disease is one example. Consider that about half of American adults have one or more chronic health conditions, according to the Centers for Disease Control and Prevention. Wearables, monitors and implantable devices can maximize the likelihood of a positive outcome when patients and health care providers are able to interpret and use the information they extract from the technology. Potential benefits increase as this ecosystem expands to include payers, but with the trade-off of higher regulatory hurdles, potential risk, and barriers to adoption.

The typical car today has 70 computing systems and up to 100 million lines of code.

The IoT is helping people modify their own behaviours across a range of activities through social proof, where people feel more confident making decisions that mirror their peers. For instance, one Software-as-a-Service (SaaS) provider is partnering with utility companies to provide graphical- and emoticon-filled alerts on energy usage. Users can see how their consumption compares to that of their neighbours, and even get suggestions on how to cut back on energy costs.
The IoT is also helping change behaviours in automotive- related industries. The typical car today has 70 computing systems and up to 100 million lines of code.To use that data for the collective benefit of motorists, some Canadian insurance companies are drawing on telematics to offer premium discounts based on usage.

74 percent of business leaders who implemented initiatives such as sensor- based logistics saw increases in revenue.

Yet another area for opportunity, IoT is emerging through improvements in supply chain management. For example, a large household appliance manufacturer switched to radio frequency identification (RFID) tags instead of paper tags to help managers track parts in one of its factories, improving an earlier process that required workers to read paper tags. The company reported that the new system exceeded expectations for ROI through the reduction in cost of the paper tags alone. In another example, shipping companies are arming their customers with real-time updates on orders. The tools monitor potential roadblocks such as postal strikes, route closures, natural disasters, and other incidents. Some of the tools can adjust the timing or mode of shipments to minimize the disruption from such events.

According to a global survey of business leaders, 74 percent of those who implemented initiatives such as sensor-based logistics saw increases in revenue, demonstrating how the IoT can improve efficiency and increase differentiation in supply chains. Some companies are using the sensor-based systems to get around delays, further evidence of the impact of the IoT.

In spite of apparent and often compelling benefits, understanding of the IoT remains uneven. For example, more than one in 10 adult Americans now owns a fitness tracker, demonstrating consumer eagerness to put the power of connected devices to use in their daily lives. However, more than half of U.S. consumers who have owned an activity tracker no longer use it.

Meanwhile, Canadian adoption of consumer IoT is likely to lag what we see in the US. According to the Deloitte 2015 Global Mobile Consumer Survey, Canadian ownership of connected devices like fitness bands and smart thermostats is about half the level seen in the US, at only 2 to 3%.

By itself, the IoT is no silver bullet. But private companies can play an important role in exploring how IoT-related technologies can transform the way we work, manage our communities, and play.

There is a lot of hype around the Internet of Things — with people focusing too much on the gadgets or end-user devices. That is not where the real value resides; instead, it is in enhancing and controlling the flow of information itself.

Duncan Stewart
Head of Technology, Media, and Telecommunications Research
Deloitte Canada

For private companies, the IoT can transform conventional processes into a true competitive advantage.

Author

Matthew Kenny
Partner Consulting Leader
makenny@deloitte.ca