A new survey of IoT executives may show the path to connected success.
Leveraging the Internet of Things (IoT) can be complex, and while this emerging environment opens up doors to new business opportunities, it’s likely best to stick with what you’re most familiar. One of the takeaways from a recent survey by McKinsey finds those companies achieving scale in IoT often did so not by entering unfamiliar territory — such as a manufacturer becoming a software company, but by playing to their strengths.
McKinsey researchers surveyed 300 IoT executives to understand the common denominators of IoT success, and identified the best practices that the more successful ventures have adopted. There are “substantial differences in how well companies apply IoT in their businesses,” state Michael Chui, Brett May and Subu Narayanan, the study;’s authors. “Targeting IoT applications correctly and managing them effectively is far from easy, leaving many companies stuck and unable to move beyond pilots.”
The McKinsey team found that while a number of IoT best practices play a role in successes, three are particularly relevant for enterprises looking to see greater value for their efforts:
- Begin with what you already do, make, or sell: The most successful IoT companies — the group getting the most economic benefit from IoT — “were nearly three times more likely to add IoT connectivity to existing products they sell than the laggards were,” the McKinsey team observes. “Conversely, laggards–those in the bottom quintile of economic returns–were significantly more likely to focus on developing new IoT products or services.” They found that “the most successful companies often played to their strengths—rather than betting on unfamiliar markets or new products.”
- Climb the learning curve with multiple use cases. While any and all business technology primers recommend starting small and building from there, IoT may require a larger scale to demonstrate its effectiveness. A single use case won’t reflect the potential of IoT to the entire organization, Chui and his co-authors found. “Leading companies in our survey implemented on average 80 percent more IoT applications than laggards. More widespread usage, it seems, forces a cultural shift.”
- Embrace opportunities for business-process changes. Here, a tried-and-true rule of business technology implementations does hold, and is even more important: get the business involved and leading the effort. “IoT has often been portrayed primarily as a technical-implementation challenge, with the drive for adoption spearheaded by specialists in the CIO function,” the McKinsey team states. “Yet time and again we see that deriving real business gains from IoT efforts requires changes to a business process — the hard job of modifying the way a company does things. Connecting production equipment to the internet, for example, will allow a company to manage usage more effectively and predict when maintenance is needed. However, if the surrounding business processes aren’t modified and optimized, then value won’t be maximized.”
Business leadership and collaboration are vital to IoT efforts. “If the CEO and top team aren’t focused on potential IoT gains, providing visible encouragement and adequate resources for the efforts, they are likely to stall,” Chui and his co-authors emphasize. In addition, even seemingly successful IoT companies “shouldn’t think they can go it alone,” they add. “Technical IoT ecosystems are growing — and improving — by the day. Collaboration, often with smaller players that have high levels of expertise in areas such as software development, will provide a solid source of competitive advantage. That will help companies accelerate their programs and better position themselves to become IoT leaders.”