Internet of Things: which things really should phone home?

Needed: clear-headed thinking on where IoT can and should make a difference.
Written by Joe McKendrick, Contributing Writer

There has been no end to discussion about the budding relationship between IT and marketing chiefs. Certainly, marketing executives have been involved in a lot of their own technology initiatives in recent years, and IT executives need to support them.

But the CIO-CMO nexus may eventually pale in comparison to another alliance (or competition) soon to emerge within organizations: IT executives and product VPs.  It's all being driven by the so-called Internet of Things (IoT), in which software and sensors are becoming part of many products now going out the door.

The IoT,of course, means many things to many people. But to IT leaders and professionals, it means getting more involved than ever before with the product development side of the house. More products -- and not just refrigerators and automobiles -- are being shipped with software and sensors embedded within them, requiring that IT departments be able to monitor and evaluate potentially every product that goes out the door, long after its been in customers' hands.

Michael E. Porter and James E. Heppelmann write about these considerations in a recent Harvard Business Review article, noting that before embracing the Internet of Things (IoT), there are a lot of things an enterprise needs to consider -- here are some of them:

Pick the products that really can help the business benefit from smart, connected capabilities. There's a risk of overdoing it, attempting to capture data from everything, Porter and Heppelmann warn. "Companies may be tempted to add as many new features as possible, especially given the often low marginal cost of adding more sensors and new software applications, and the largely fixed costs of the product cloud and other infrastructure." However, it's best to be selective and strategic in picking out the connections that make sense for the business. Likewise, the authors add, it's important to remember that adding connectivity or monitoring software to products creates overhead, and possibly cut into their performance. 

Secure the data. Porter and Heppelmann observe that collecting massive streams of data from across the globe means protecting that information, as well as determining who rightfully owns it. If it's low-level or aggregated data, the security costs may be minimal. But these costs will go up as the value or sensitivity of the data increases.  In addition, data gathering may have legal implications -- for example, does it belong to the product owner, or to the manufacturer gathering it? This needs to be hashed out through contractual agreements, they argue.

Monetize the data. Once the ownership and access rights to data are hammered out, the information could potentially be of value to organizations beyond the manufacturer and customer of a connected product. "Data about the performance of a product’s components, for example, could be valuable to suppliers of those components,"  Porter and Heppelmann state. 

Decide whether to build or buy. A home-grown system to monitor and analyze products can be a major challenge to build and manage, Porter and Heppelmann point out. Keep an eye on the IoT market. "Just as Intel has specialized in microprocessors and Oracle in databases, new firms that specialize in components of the smart, connected products technology stack are already emerging, and their technology investments are amortized over many thousands of customers," they relate. Likewise, enterprises need to determine whether they want to go with an open versus a closed system. A closed system may provide some competitive advantage, but an open system is more flexible and adaptable as solutions come on the market.

Transform the business. The business will change on many levels as IoT approaches raise the level of awareness and connectness with customers. There may be less of a need for service partners and intermediaries, for example. When a device phones home, it will talk right to the original manufacturer. There's a notable opportunity to reconstruct a company's business model as well, to be more focused on the customer experience, Porter and Heppelmann state. And, in the end, that's what really matters.

(Thumbnail photo: Joe McKendrick.)

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