The Internet of Things (IoT) has been classed as a megatrend for several years and is only continuing to grow in importance. As can be seen in Figure 1, a market of up to €4 trillion will have been created by the IoT field by 2020 alone.

Figure 1: Overview of relevant effects of IoT development by 2020

Despite the attention afforded to this trend and the associated opportunities, there is often still no uniform understanding of what the Internet of Things really means. According to Gartner’s definition, it includes the following:

“The Internet of Things (IoT) is the network of physical objects that contains embedded technology to communicate and sense or interact with their internal states or the external environment”

The original idea of the Internet of Things has been around for some time: the RFID (radio-frequency identification) and NFC (Near Field Communication) applications that became popular around the turn of the century have contributed significantly to its development and to the coinage of the term. Viewed in terms of a timeline of Internet development, the IoT is a third wave:

  • First: Cable-bound Internet, which was responsible for networking about 1 billion desktop users in the 1990
  • Second: The advent of mobile Internet, which connected some 2 billion users in the 2000s
  • Third: The Internet of Things, which will network several billions of people and “things” in the coming years

As can be seen in Figure 2, an explosive development in networked things has taken place over recent years. It is this that will serve as a key driver of future economic development within the framework of the intelligent networking of people & “things”.

Figure 2: Explosive development of IoT

In addition to the above definition of IoT, it is important, in our experience, to understand that the Internet of Things is not a particular technology, but rather the interplay of different technologies and applications. In combination with other technologies, the IoT gives rise to the development of completely new ecosystems made up of its various applications, which are packaged repeatedly into new business models with promising applications for B2C and B2B. However, the goal pursued is often the same: the networking of smart devices for the purpose of simplifiying everyday human life.

This interplay – and the emergence of new areas of application – is essentially based on the following seven aspects of the Internet of Things:

Figure 3: Seven relevant aspects of the Internet of Things

  • Data – that is, access to a variety of information from devices and sensors that are available and thus – among other things – make a significant contribution to the stock of big data. Data forms an important basis within the framework of the DIKW model. Take an example: data (D) (e.g. raw data reported by a sensor flashing red) is utilised as information (I) (e.g. significance: the traffic light on the main road turns red). These can then be processed into knowledge (K) (e.g. context: the traffic light 50 metres from the driver is red) before finally becoming a recommendation for use (e.g. driver should brake)
  • Communication – that is, communication between things in the sense of a data flow. It is only when the data is transmitted between the things that the possibility arises for applications to be developed
  • Things – that is, all types of connectable devices and sensors
  • Automation –  that is, the automated (intelligent) interaction of available data and circumstances
  • Connectivity – that is, the connection of things through networks like the Internet
  • Intelligence – that is, smart analytics, in which the interplay of available data, artificial intelligence and machine learning gives rise to application solutions
  • Ecosystem – that is, the interlinkage of above-described aspects of the IoT in use-oriented business models

In order to understand the advantages associated with the Internet of Things, it is best to look at examples from different applications and industries. Generally, it makes sense to differentiate between the two different application perspectives of industrial IOT (e.g. production, logistics, retail, etc.) and consumer IoT (e.g., smart home, NFC payment). This notwithstanding, however, there are also overlapping application perspectives and examples of these (e.g. wearables, connected cars, etc.). Figure 4 shows a selection with different examples.

Figure 4: Selection of possible IoT applications

 

As already shown in Figure 1, the expectations associated with the Internet of Things are great. Despite the supposed potential of a comprehensive, in-depth networking, however, we should not dismiss the associated challenges and risks, particularly the fields of security and data protection. While these concerns have been relevant since the inception of the Internet, they have taken on a new dimension in view of ever further-reaching networks.

The extent to which your company can be a winner in this era of networking depends ultimately on its ability to adapt according to the opportunities and risks described. Our project experience shows that a systematic analysis of the opportunity and risk profile along the value chain of a company is a useful first step in evaluating the topic of IoT. On the basis of such a status quo analysis, concrete fields of action can then be identified and placed in the overall context of a company-wide digital transformation strategy. We’ll help you to analyse the topic in regard your company and to identify the most attractive fields of action. Don’t hesitate to get in touch!

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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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Markus Fost

Managing Partner
Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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