The Value of The Internet of Things is Like Schrödinger’s Cat

cat in a boxThere is a scientific thought-experiment known as Schrödinger’s Cat. In order to highlight the paradox of the quantum behavior of sub-atomic particles, Erwin Schrodinger’s thought-experiment imagined placing a vial of poison, a radioactive source, and a cat into a closed box. When a sensor in the box detected the state of a radioactive particle, it would break the vial of poison, killing the cat. Schrödinger wondered whether, by not actually looking in the box to observe the experiment, the cat’s state – mirroring the quantum state of the radioactive particle — would be both alive and dead at the same time. This is the paradox of Schrodinger’s cat.

Is IoT’s Value Really Understood By Most?

The same can be said about the value of the Internet of Things. The value is both well understood but not understood at the same time. Conceptually everyone understands that if you live in a world where everything is connected, that’s good and it adds value. In fact, Cisco has placed a value of $19 trillion on IoT in the next eight years.

However, while many of the technology and business leaders I’ve interviewed regarding IoT understand this at a high level, there seems to be a lack of understanding of exactly where IoT value actually comes from. From the research I’ve done, here are the main areas of value for IoT:

  • Lower Costs: This varies quite a bit from vertical to vertical. For example, through the use of smart meters, BC Hydro in British Columbia, Canada, saved over $300 million from being able to do remote metering and over the air upgrades. They realized another $224 million in savings from self-service tools. The cost savings for any kind of field service company will be significant, as remote workers no longer need to be deployed. For the general enterprise, energy saved by connecting facilities equipment to a common network can ring up big savings. For example, in many buildings, systems such as elevators, air conditioners, badge readers, and other facilities equipment are on separate networks. The AC units are likely programmed to come on at a certain time whether people are on the office or not, which obviously wastes money. What if the systems stayed off and only the AC unit in a certain area come on when a worker swiped his or her badge to come in? Connecting building systems and using the infrastructure more efficiently can save businesses a significant amount of money.
  • Automation of Processes: IoT enables businesses to use real-time analytics to make faster, better business decisions. Data can be gathered from sensors and then analyzed to improve processes by reducing the amount of human latency involved. As an example, in a hospital, patient equipment with sensors allows for the remote monitoring of patients. When a patient alarm is triggered, a clinician can be automatically alerted, triggering a series of events. Without IoT the hospital staff must listen for an audible alarm, locate the best person to address the issue and then possibly search for equipment to address the alarm. IoT-enabling a hospital removes all of the human latency from the process, saving precious time and reducing errors.
  • New Revenue Streams: The creation of new revenue streams will vary greatly by vertical, but IoT creates an almost unlimited number of ways for businesses to generate new sources of revenue. Data can be gathered from sensors, mobile devices, mobile applications, and social streams to create rich contextual information that can be used to enable personalized services. The retail vertical is the most obvious benefactor of this trend as stores can use IoT to completely transform the shopping experience. However, other verticals such as state and local government, higher education, and entertainment can also use rich contextual information to generate new sources of income.
  • Optimized Asset Utilization: Connected sensors give organizations the ability to track almost any asset. Computers, automobiles, trains, machinery, and other equipment can be monitored when connected to a common network. Real-time visibility and analytics can used to gain insight into the valuable assets of a company. For example, a manufacturer could run periodic diagnostics on its equipment and then automatically order new parts when required. This can streamline maintenance cycles, improve the longevity of equipment and optimize asset utilization. IoT enabling non-computer related assets, though increases the need to integrate IT and OT operations.

IoT has tremendous potential to create value for every organization. While I’ve highlighted some of the larger, generic categories of value creation, there’s really no limit to the number of ways businesses can leverage the Internet of Things. The key is that IT and businesses leaders must open their minds and consider the possibilities when the unconnected becomes connected.

Image credit: Alisdair McDiarmid (flickr) / CC-BY

About the author
Zeus Kerravala
Zeus Kerravala
Zeus Kerravala is the founder and principal analyst with ZK Research. He provides a mix of tactical advice to help his clients in the current business climate and with long term strategic advice. Kerravala provides research and advice to the following constituents: End user IT and network managers, vendors of IT hardware, software and services and the financial community looking to invest in the companies that he covers.