Professional Documents
Culture Documents
Guide To The Internet of Things
Guide To The Internet of Things
An executives
guide to the Internet
of Things
Jacques Bughin, Michael Chui, and James Manyika
There are many implications for senior leaders across this horizon
of change. In what follows, we identify three sets of opportunities:
expanding pools of value in global B2B markets, new levers of
operational excellence, and possibilities for innovative business
models. In parallel, executives will need to deal with three sets of
challenges: organizational misalignment, technological interoperability
and analytics hurdles, and heightened cybersecurity risks.
1 See
Michael Chui, Markus Lffler, and Roger Roberts, The Internet of Things, McKinsey
2 For
the full McKinsey Global Institute report, see The Internet of Things: Mapping the
value beyond the hype, June 2015, on mckinsey.com. We analyzed more than 150 IoT use
cases across the global economy, and using detailed bottom-up economic modeling, we
estimated the economic impact of these applications across a number of dimensions.
Opportunities beckon . . .
IoTs impact is already extending beyond its early, most visible
applications. A much greater potential remains to be tapped.
QWeb 2015
MGI Internet of Things
Exhibit 11of 2
Exhibit
Developing economies
Settings
Human
89
Homes
77
23
Offices
75
25
Retail
environments
71
Vehicles
63
37
Cities
62
38
Factories
57
43
Outside
56
44
Transportation/shipping spending
higher in advanced economies
Work sites
54
46
Overall
estimate
62
11
29
38
Optimizing operations
Investing in IoT hardwarefrom sensors embedded in
manufacturing equipment and products to electronically tagged
items along the supply chainis only the starting point of the value
equation. The biggest competitive gains come when IoT data inform
decisions. Our work shows that most of the new business value will
arise from optimizing operations. For example, in factories, sensors
will make processes more efficient, providing a constant flow of data
to optimize workflows and staffing:
S
ensor data that are used to predict when equipment is wearing
down or needs repair can reduce maintenance costs by as much as
40 percent and cut unplanned downtime in half.
I nventory management could change radically, as well. At autoparts supplier Wurth USA, cameras measure the number of
components in iBins along production lines, and an inventorymanagement system automatically places supply orders to refill
the containers.
I n mining, self-driving vehicles promise to raise productivity by
25 percent and output by 5 percent or more. They could also cut
health and safety costs as much as 20 percent by reducing the
number of workplace accidents.
IoT systems can also take the guesswork out of product development
by gathering data about how products (including capital goods)
function, as well as how they are actually used. Using data from
equipment rather than information from customer focus groups or
surveys, manufacturers will be able to modify designs so that new
models perform better and to learn what features and functionality
arent used and should therefore be eliminated or redesigned. By
analyzing usage data, for example, a carmaker found that customers
were not using the seat heater as frequently as would be expected
from weather data. That information prompted a redesign to allow
easier access: the carmaker updated the software for the dashboard
touchscreen to include the seat-heater command. This illustrates
another capability of connected devices: with the ability to download
new features, these products can actually become more robust and
valuable while in service, rather than depreciate in value.
Despite this value, most data generated by existing IoT sensors are
ignored. In the oil-drilling industry, an early adopter, we found
that only 1 percent of the data from the 30,000 sensors on a typical
oil rig are used, and even this small fraction of data is not used for
optimization, prediction, and data-driven decision making, which
can drive large amounts of incremental value.
QWeb 2015
MGI Internet of Things
Exhibit22of 2
Exhibit
1.3
0.7
0.7
0.5
0.4
0.3
0.3
0.1
<0.1
The authors wish to thank McKinseys Dan Aharon and Mark Patel for their
contributions to this article.
Jacques Bughin is a director in McKinseys Brussels office; Michael Chui is a
partner at the McKinsey Global Institute, where James Manyika is a director.
Copyright 2015 McKinsey & Company.
All rights reserved.