Article

Information Development
2016, Vol. 32(4) 969–985
Understanding Internet of Things ª The Author(s) 2015
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(IoT) diffusion: Focusing on value DOI: 10.1177/0266666915578201
idv.sagepub.com
configuration of RFID and sensors
in business cases (2008–2012)

Yoon-Min Hwang
Korea Advanced Institute of Science and Technology (KAIST)

Moon Gyu Kim

Korea Advanced Institute of Science and Technology (KAIST)

Jae-Jeung Rho
Korea Advanced Institute of Science and Technology (KAIST)

Abstract
The Internet of Things (IoT) is a representative technological innovation for future computing and communi-
cations. IoT technologies such as Radio Frequency Identification (RFID) and sensors have garnered huge atten-
tion in both academia and industry. However, the expected rapid adoption and diffusion of IoT technologies
have not yet taken place and there is still a lack of understanding about IoT and how industries can apply IoT
properly. To understand IoT utilization, predict the diffusion trends of IoT, and provide reliable guidelines for
potential IoT adopters, this study investigated the value configuration of IoT technologies, focusing on the uti-
lization of specific technology attributes of IoT in particular business contexts. Based on 762 IoT business cases
(2008–2012), this study explored the technology attributes and business contexts of IoT usage and identified
five representative value configuration models of IoT through cluster analysis: ID-based service model, Multiple
operation management model, Service-combined inventory management model, Intelligent inventory trans-
port model, and Sensor-based multiple service model. In addition, propositions for IoT utilization in each indus-
try were provided according to the five value configuration models. The research results provide a holistic view
for understanding IoT utilization in various business areas and the value configuration framework approach
provides a more elaborate frame to understand diffusion trends of new technology.

Keywords
Internet of Things (IoT), RFID, sensor, technology diffusion, data mining, cluster analysis, value configuration

Submitted: 10 September, 2014; Accepted: 25 February, 2015.

The expected rapid adoption and diffusion of Internet of Things technologies has not yet
taken place due to lack of understanding.

Introduction
Over a decade ago, the term ‘Internet of Things (IoT)’
was developed by the Auto-ID Labs, a global research
network of laboratories studying Radio Frequency
Identification (RFID) network and sensing technolo-
gies, and ‘ambient intelligence’ and ‘ubiquitous com-
puting’, which share similar concepts with the IoT
Corresponding author:
Moon Gyu Kim, Auto-ID Lab KAIST, Department of Business and
Technology Management, Korea Advanced Institute of Science
and Technology (KAIST), 291 Daehak-ro (373-1 Guseong-
dong), Yuseong-gu, Daejeon 305-701 Republic of Korea. Tel:
þ82-42-350-6337. Fax: þ82-42-350-6339.
Email: controlme8@kaist.ac.kr
970
(Atzori et al., 2010; Chen and Chen, 2012; Zorzi et al.,
2010). According to the concept of the IoT, every
physical thing is connected to the Internet and plays
the role of a computer (International Telecommunica-
tion Union, 2005; Fleisch, 2010).
RFID technology is one of the important enablers of
the IoT (Tan and Wang, 2010). Objects have to be iden-
tified to be connected to the network and RFID makes
this possible by using radio waves. In addition, sensors
play an important role in filling the gap between the
physical world and the information world for the
realization of the IoT through gathering data from the
environment, generating information, and then deepen-
ing understanding of the data’s context (Kafetzoglou
et al., 2010). RFID and sensors are therefore seen as the
core components which connect the physical world to
the digital world (Atzori et al., 2010). RFID is expected
to be developed and converged with the wireless sensor
network (WSN) system via the identification (ID) tag
for each sensor (Sung et al., 2007).
Being a representative technological innovation for
the future of computing and communications, the IoT
has received huge attention in both academia and
industry (Tan and Wang, 2010). With the rapid devel-
opment of RFID and sensor technology, many indus-
tries have recently become interested in IoT-enabled
business models (Want, 2004; Fleisch, 2010). How-
ever, despite great interest, the expected rapid adop-
tion and diffusion of IoT technologies have not yet
taken place (Chen, 2011). In particular, the expected
mass adoptions of RFID to drive IoT diffusion beyond
a critical mass point has not yet taken place in busi-
ness fields (Chen, 2011; Thiesse et al., 2011).
There has been considerable discussion about the
reasons for the delay of IoT diffusion. In particular,
there is still a lack of understanding about the charac-
teristics and value of IoT technologies such as RFID
and sensors, and how these technologies can be
applied to respective business domains, thus disrupt-
ing the rapid diffusion of IoT in the business field
(Li et al., 2010; Wu and Subramaniam, 2011). The
technical features, utilization domains, and business
values of IoT technologies should therefore be scruti-
nized very closely through case analyses of IoT busi-
nesses in various industries, from early IoT adopters
onwards. In addition, the current IoT diffusion trend
based on the cases of early adopters should be
explored and examined to provide reliable guidelines
for potential IoT adopters at the macro level.
However, in research fields, deterministic factors
(e.g. technical maturity and organizational readiness)
Information Development 32(4)
of RFID adoption and quantitative analyses of RFID
benefits based on particular cases have mainly pro-
gressed at the micro level, rather than in the compre-
hensive investigation of various utilization and
diffusion cases of IoT technologies such as RFID and
sensors at the macro level. To bridge the gap between
research and practice, this study therefore explores
abundant IoT business cases from various industries
and examines the diffusion trends of IoT technolo-
gies. For more elaborate analysis, this study defines
technology diffusion as an aggregation of the value
configuration process, which is the configured pro-
cess of technology attributes in the specific business
context of each business case. This study therefore
explores IoT diffusion trends from the perspective
of the value configuration through cluster analysis
of data mining from 762 IoT business cases involving
attributes of IoT technologies and business contexts,
covering the period from 2008 to 2012.
The remainder of the paper is arranged as follows:
first, we review previous literature on the technology
diffusion of IoT and the value configuration. We then
design the value configuration framework of IoT tech-
nologies to identify technology attributes and business
contexts of IoT. Then, with 762 business cases of IoT,
the value configuration patterns of IoT are identified
through the use of cluster analysis. The following sec-
tion discusses the results of the analysis. The final sec-
tion concludes by presenting the implications of the
research, as well as directions for further studies.
Literature review
Technology diffusion of IoT
Previous studies related to IoT diffusion have concen-
trated on the investigation of RFID adoption factors
at the micro level. Many researchers discussed the
determinants of RFID adoption based on the Diffu-
sion of Innovations theory (DOI) or the
Technology-Organization-Environment (TOE)
framework in various industries, such as the health-
care industry, automotive industry, and retail indus-
try (e.g. Brown and Russell, 2007; Lee and Shim,
2007; Wang et al., 2010). They examined the RFID
adoption factors of firms to focus on technology
characteristics, such as related advantage, internal
and external characteristics of organizational struc-
tures like organizational readiness, and environmen-
tal characteristics like competitive pressure. Kim
et al. (2013) discussed RFID adoption based on the
Task-Technology Fit (TTF) model, which presents
Hwang et al: Understanding Internet of Things (IoT) diffusion
technology adoption as a means to focus on the adop-
tion process like the fit between task characteristics
and technology characteristics, rather than to present
several factors like TOE. In addition, the consumer
acceptance factors of RFID are investigated based
on the Technology Acceptance Model (TAM) in the
research fields (e.g. Hossain and Prybutok, 2008;
Müller-Seitz et al., 2009). However, these studies
have certain limits to comprehending the diffusion
trends of IoT at the macro level.
Few researches discuss the diffusion of IoT at the
macro level. Daim and Suntharasaj (2009) predicted
the diffusion rate of RFID in the US retail market
based on bibliometric analysis and the Bass model.
Lee et al. (2008) proposed a customer-facing diffu-
sion model of RFID in the service sector, based on
observations of three case studies. Yoon and Phaal
(2013) presented the technology roadmap of RFID
between technology layers (e.g. security tag chip, low
power active tag) and product layers (e.g. customized
RFID platform, low power tag chip) through RFID-
related patents analysis for supporting the technology
development plans of RFID system vendors. How-
ever, previous studies only discuss the utilization and
diffusion trends of RFID through small business cases
without a comprehensive framework and consider-
ation of sensor technology. To develop a comprehen-
sive framework to identify the diffusion trends of IoT
technologies such as RFID and sensors at the macro
level, this study discusses the concept of value config-
uration in business model research.
Value configuration of technology diffusion
According to Osterwalder and Pigneur (2002), ‘value
configuration’ is an arrangement of activities in the
value creation process of a business model. Values
in business are created by integrating and applying
resources in a specific context (Vargo et al., 2008).
The value of new technology adoption as an important
resource in business is also created through the com-
plex configurations of the technology in specific busi-
ness contexts. Technology diffusion is thus a result of
the complex interactions and feedback occurring
within the dynamic environment of an industry (Chen,
2011). In the context of the diffusion process, technol-
ogy diffusion can be defined as an aggregation of the
value configurations of the technology attributes in
various business contexts.
Because the business model identifies the logic of
value creation in the business environment, the
971
components of the business model inevitably describe
the value configuration of resources like technology in
the business context. The components of the business
model have been discussed by many researchers accord-
ing to purpose. Gordijn and Akkermans (2003) identi-
fied components such as value offering, market
segment and value exchange to provide guidelines for
e-commerce business model development. Afuah and
Tucci (2003) presented customer value, connected
activities, cost structure and revenue source as the main
components of Internet business models. Additionally,
Petrovic et al. (2001) discussed value model, customer
relations model, production model and revenue model
for developing e-business models. However, the com-
ponents of the business model in previous research were
developed to guide the development of the business
model. The components and structures of business mod-
els are of limited use in identifying the value configura-
tion process of technology diffusion.
Hedman and Kalling (2003) proposed the compo-
nents of the business model, along with linked levels
where value configuration appears. In their model, the
value of business is created by the process by which
human or physical resources at the resource level go
through the value chain in the activity and organiza-
tional level. Then, in the value chain, the human or
physical resources are converted into service compo-
nents or physical components at an offering level and
are then finally delivered to customers with competi-
tion at a market level. According to their components,
new technology is configured to create value in spe-
cific business contexts of each level, such as the activ-
ity and organizational level, offering level and market
level. Their comprehensive approach on the linked
levels of a business model is appropriate for identify-
ing the value configuration of IoT diffusion between
technology attributes and the business context.
Design of value configuration framework
of IoT diffusion
Based on Hedman and Kalling’s business model com-
ponents, this study designs the value configuration
framework from technology attributes in the resource
level to business contexts in the activity and organiza-
tional level, offering level, and market level (Hedman
and Kalling, 2003).
Technology attributes of IoT
In the resource level, the technology attributes of RFID
and WSN systems, which are pivotal technologies of
972
the IoT, are discussed. First, an RFID system consists
of an RFID tag, which supports data acquisition at the
contact point with customers, Radio Frequency (RF),
an RFID reader, middleware and a network for data
processing, data storage and data transmission (Finken-
zeller, 2003). An RFID tag is attached to or embedded
in an object and gives an inherent ID number to the
object for IoT. Afterwards, it transmits the data stored
in the memory of the tags to the RFID reader through
RF. There are two types of RFID tags, passive and
active. Passive tags are mainly used for short distances
without batteries while active tags are used for longer
distances with built-in batteries. In addition, low fre-
quency (LF), high frequency (HF), ultrahigh frequency
(UHF), and microwave are classifications of RF
according to frequency bandwidth (Ward et al.,
2006). RFID middleware gathers data from tags with
Electronic Product Code (EPC) IDs and stores the data
in the EPC information service. This information can
be searched and modified by clients anywhere and any
time over the network with the Object Name Service
(ONS) structure (Leong et al., 2005).
A WSN system is an integrated system wherein the
sensor and control technology and wireless communi-
cation technology are fused. It is comprised of the
sensor node, sink node, and middleware that collects,
saves, and provides the acquired data and network
(Sohraby et al., 2007; Dargie and Poellabauer,
2010). A sensor node has a sensor chip and battery
inside with an identification number, like an RFID
tag. Sensor nodes are sorted into two types according
to the type of sensing: physical sensors (e.g. location,
pressure, speed), and chemical sensors (e.g. tempera-
ture, gas, organic compound) (Hill, 2003). In wireless
transmission, Wi-Fi or Zigbee is used in periodic long
distance recognition, whereas Bluetooth or ultra
wideband (UWB) is used in periodic short distance
recognition (Lee et al., 2007) (Figure 1).
The information types of RFID and WSN systems
can be comprehended in the category of context-
awareness systems. Context-awareness systems recog-
nize changes in context information, including
information about objects and the environment sur-
rounding them, such as identity, location, and time,
and react to them properly (Ryan et al., 1998; Dey and
Abowd, 1999). As one of the main information sys-
tems for context-awareness, RFID systems can assign
ID information to entities through tags (ID), check the
location of the objects (place), and trace their physical
movement route (movement) and movement between
stages of value chain (stage). The WSN system also
Information Development 32(4)
perceives real time changes in the internal or external
state of an entity (state). Through RFID and WSN sys-
tems, context information, such as ID, place, move-
ment, stage, and state are acquired and transferred
through a reader, sensor node, middleware and net-
work, as presented in Figure 2. Through the analysis
of functional characteristics and information charac-
teristics of RFID and WSN systems, technology attri-
butes of IoT technologies such as RFID and sensors
are shown in Table 1.
Business context of the IoT
In the business context, components of activity and
organizational level, offering level and market level
should be designed according to the purpose of the
value configuration framework to understand IoT
diffusion trends, where IoT technologies have been
utilized and created values. In accordance with Hed-
man and Kalling (2003), this study defines the com-
ponents of each level of the business context
focused on the aim and scope of IoT utilization:
value chain activities for activity and organizational
level, service domains for offering level, and indus-
try for market level.
First, the value chain model is appropriate to iden-
tify the utilization areas of IoT technologies in the
activity and organizational level. The concept of the
value chain model suggested by Porter (1985) shows
how the values that firms deliver to their final cus-
tomers are created by defining all the specific activ-
ities meant to add value to their products or services
in the form of a chain. All the activities and pro-
cesses related to the created values are classified in
the value chain. The value chain model is also appro-
priate for explaining how each of the technology
attributes is adopted and utilized for each activity
across the value creation process. In this research,
five primary activities and four supportive activities
of the value chain are used to examine the IoT utili-
zation areas in firms’ activity and organizational lev-
els, as shown in Figure 3.
Secondly, to identify the aims of IoT utilization at
the offering level, this study investigates the service
domains of IoT diffusion. Through literature reviews
of representative papers, such as Auto-ID Labs’
White Paper series (e.g. Agarwal, 2001; Boushka
et al., 2002; Kelepouris et al., 2006; Lehtonen et al.,
2006; Wiechert et al., 2007) and Gartner’s reports
(e.g. Eschinger, 2008; Lehong, 2012), which intro-
duce various service areas of IoT technologies, we
Hwang et al: Understanding Internet of Things (IoT) diffusion
Figure 1. RFID system and wireless sensor network (WSN) system.
Figure 2. Information types of IoT as context-awareness system.
identified the 14 service areas of IoT utilization in a
business context shown in Figure 3.
Finally, to understand IoT diffusion areas at the
macro level, 19 industries using IoT technologies
were identified by reference to the International Stan-
dard Industrial Classification (unstats.un.org/unsd/cr/
registry/regcst.asp?Cl¼27) and literature such as ID
TechEX’s reports (e.g. Das and Harrop, 2011; Harrop
and Das, 2012) on the various industries. The 19
industries are identified in Figure 3.
The business context of IoT technologies thus con-
sists of three factors: value chain activities, service
973
domains and industries. Those three factors explain
how IoT technologies create value as well as why and
where they are utilized.
Data mining and value configuration of
IoT Diffusion
Since IoT technologies such as RFID and sensors
still remain at an exploratory stage in the various
industries and IoT diffusion is not yet theorized, a
case-based analysis is appropriate to examine the
diffusion trends (Meredith, 1998; Voss et al.,
974 Information Development 32(4)

Table 1. Technology attributes of IoT.

Components Types Characteristics

RFID and Tag Passive/Active tag, Sensor tag (Physical sensors Recognition range and
WSN such as pressure and speed, Chemical sensors type
such as temperature and gas)
Radio Frequency LF (125Khz & 134Khz:*0.5m), HF (13.56 Mhz: *1.5m), Recognition range
UHF (433Mhz: *100m/865*956Mhz:0.5*5m),
Microwave (2.45Ghz: *10m)
Wireless UWB (6 GHz to 8 GHz : *10m), Wi-Fi (2.4Ghz: *100m), Recognition range
transmission Zigbee (2.4Ghz: 10*100m), Bluetooth (2.4Ghz:
*10m)
Context awareness ID, Place, Movement, Stage, State Information type
for IoT

Figure 3. Business contexts of IoT.

2002). We collected IoT business cases and analysed value configuration factors was then conducted to
them to identify the value configuration factors, identify the value configuration patterns of IoT dif-
including technology attributes and business con- fusion. Each cluster, which is composed of similar
texts. Cluster analysis of the collected cases with technology attributes and highly-related business
Hwang et al: Understanding Internet of Things (IoT) diffusion
contexts, presents a unique value configuration fea-
ture of IoT diffusion.
To collect sufficient IoT business cases from vari-
ous industries for cluster analysis, we reviewed all
related articles in the RFID Journal from January
2008 to December 2012. The RFID Journal has con-
sistently introduced up-to-date IoT business cases
from around the world since 2002. IoT related key-
words such as ‘Internet of Things (IoT)’, ‘RFID’,
‘sensor’, ‘wireless sensor network (WSN)’, ‘real-
time locating system (RTLS)’, and ‘near field com-
munication (NFC)’ were used to search for suitable
articles for the analysis, and 762 IoT business cases
were collected in this way. The cases were analysed
to identify the technology attributes and business con-
text factors of each case according to the value config-
uration framework of IoT. In some cases, different
tags were used in multiple value chain activities or
several service domains. For example, if UHF tags
were utilized for inventory management and LF tags
were used for customer management in a certain case,
it was coded using both tags for both service domains.
The factors used for the analysis are shown in Table 2.
Cluster analysis of the collected data was con-
ducted using both hierarchical and non-hierarchical
techniques. The SPSS 21.0 program was used for the
analysis. The hierarchical technique was used to
decide the number of clusters. According to the ‘stop-
ping rule’, the appropriate number of clusters was
determined to be five (Radosevic, 2003). We then fina-
lized the five clusters by using k-means cluster analysis
(Helsen et al., 1993; Sharma, 1996). ANOVA and post-
hoc tests were conducted to verify the differences
between the groups (Calinski and Corsten, 1985). Sig-
nificant differences were found among the 39 factors
of five clusters, except for a few factors like the educa-
tion industry. Table 2 shows the ANOVA results.
The value configuration patterns of IoT diffusion
based on the five clusters are discussed in the next
section.
Discussion
Overall, the result of the analysis is different from our
general expectations. The logistics and distribution
industries were expected to be leaders in IoT diffu-
sion, and inventory management in the inbound/out-
bound activities of the value chain has aroused
much interest as a main aim of IoT adoption. How-
ever, IoT technologies have been more actively
adopted in the healthcare and leisure/sports industries
975
for various purposes such as asset management and
customer management.
Operation and service activities are the main rea-
sons for IoT adoption by industries. This can be
explained by the difference in costs between inventory
management and asset or customer management.
Inventory management needs a lot more RFID tags, the
high price of which is one of the critical barriers to IoT
adoption. On the other hand, utilization of IoT for asset
management and customer management creates value
more efficiently by preventing the robbery of expen-
sive equipment and improving relationships with cus-
tomers. This implies that the efficiency of investment
in IoT adoption is carefully considered when industries
make decisions about utilizing IoT technologies.
Based on the result of the cluster analysis, we
investigated the patterns of value configurations—
i.e., what attributes of IoT technology contribute to
value creation in a certain business context consisting
of service domains, value chain activities and indus-
tries—in each cluster, and named each of the five
clusters as follows::
 ID-based Service Model
 Multiple Operation Management Model
 Service-combined Inventory Management Model
 Intelligent Inventory Transport Model
 Sensor-based Multiple Service Model.
Cluster 1: Identification (ID)-based Service Model
Cluster 1 can be identified as the ID-based Service
Model utilizing identification information through
RFID tags attached to various objects, such as identi-
fication cards for service areas. In Table 3, Cluster 1 is
comprised of 210 business cases of IoT that mostly
use the UHF (95, 45%) tag and the HF (89, 42%) tag
for a relatively shorter range—within one meter—and
better multi-tag read rate. These tags are mostly low-
priced passive tags (184, 88%). In information types,
the ID information is mainly used for various busi-
nesses. The business contexts in which these technol-
ogy attributes are utilized are mostly related to the
service activities (206, 98%) of the value chain for
customer management (190, 90%) and personal
authentication (14, 7%) in service domains. From the
industry-wise viewpoint, in the leisure/sports industry
(63, 30%), sports facilities such as gymnasiums and
resorts use UHF tag or HF tag to identify their cus-
tomers more efficiently. In the healthcare industry
(49, 23%), many hospitals, where information
976 Information Development 32(4)

Table 2. Result of ANOVA.

Cluster 1 Cluster 2 Cluster 3 Cluster 4 Cluster 5

Factors (N ¼ 210) (N ¼ 238) (N ¼ 106) (N ¼ 104) (N ¼ 104) F-value Sig.

Industry
Healthcare 0.23 0.25 0.08 0.02 0.18 10.017 0.000***
Logistics 0.00 0.03 0.00 0.20 0.01 23.976 0.000***
Utility 0.02 0.10 0.00 0.04 0.14 7.867 0.000***
Producer goods 0.00 0.08 0.03 0.03 0.02 5.062 0.000***
Distribution 0.04 0.01 0.13 0.05 0.08 6.575 0.000***
Leisure/sports 0.30 0.05 0.02 0.00 0.04 33.401 0.000***
Military 0.00 0.03 0.01 0.11 0.01 8.448 0.000***
Agriculture/mining 0.01 0.05 0.08 0.08 0.13 5.666 0.000***
Apparel 0.02 0.01 0.28 0.14 0.02 31.736 0.000***
Airport/harbor 0.05 0.01 0.00 0.01 0.01 3.661 0.006**
Construction 0.00 0.06 0.02 0.01 0.02 3.859 0.004**
Pharmaceutical 0.00 0.00 0.06 0.04 0.04 3.951 0.004**
Electronic 0.00 0.02 0.03 0.04 0.00 2.605 0.035*
Consumer goods 0.09 0.06 0.13 0.15 0.06 3.123 0.015*
Education 0.06 0.04 0.03 0.00 0.06 2.026 0.089
Aerospace 0.01 0.03 0.02 0.02 0.00 0.937 0.442
Government 0.08 0.10 0.05 0.04 0.13 2.046 0.086
Automobile 0.05 0.03 0.03 0.03 0.03 0.522 0.719
Finance 0.01 0.03 0.01 0.01 0.03 0.763 0.549
Value chain
Inbound 0.04 0.04 0.18 0.12 0.40 32.063 0.000***
Operation 0.02 0.97 0.08 0.03 0.07 1014.998 0.000***
Outbound 0.00 0.02 0.70 0.96 0.13 438.448 0.000***
Sales 0.07 0.02 0.20 0.05 0.26 18.720 0.000***
Service 0.98 0.09 0.06 0.02 0.01 783.833 0.000***
HRM 0.03 0.08 0.03 0.01 0.22 13.330 0.000***
Service area
Payment 0.00 0.00 0.00 0.00 0.14 16.352 0.000***
Customer 0.04 0.08 0.07 0.02 0.03 442.659 0.000***
Antitheft 0.90 0.02 0.09 0.02 0.01 5.919 0.000***
Transportation 0.01 0.03 0.00 1.00 0.04 1292.129 0.000***
Asset 0.02 0.87 0.07 0.06 0.13 369.394 0.000***
Inventory 0.01 0.05 0.83 0.56 0.22 176.448 0.000***
Production 0.00 0.11 0.05 0.01 0.05 7.838 0.000***
Employee 0.04 0.10 0.03 0.01 0.22 12.395 0.000***
Environment 0.05 0.04 0.00 0.02 0.19 12.539 0.000***
Authentication 0.07 0.00 0.02 0.01 0.02 4.971 0.001**
Promotion 0.04 0.00 0.05 0.00 0.06 4.315 0.002**
Return 0.01 0.00 0.02 0.00 0.02 2.662 0.032*
Cost accounting 0.00 0.00 0.00 0.00 0.02 1.974 0.097
Track & Trace 0.04 0.01 0.05 0.02 0.05 1.798 0.127
Tag(RF)
LF 0.07 0.08 0.04 0.02 0.10 1.982 0.095
HF 0.40 0.09 0.00 0.04 0.53 55.089 0.000***
UHF 0.43 0.57 0.97 0.81 0.22 52.189 0.000***
Microwave 0.08 0.16 0.02 0.05 0.07 5.695 0.000***
UWB 0.02 0.03 0.00 0.02 0.04 0.954 0.432
(continued)
Hwang et al: Understanding Internet of Things (IoT) diffusion
Table 2. (continued)
Cluster 1 Cluster 2
Factors (N ¼ 210) (N ¼ 238)
Information
Place 0.51 0.77
Movement 0.06 0.13
Stage 0.02 0.06
State 0.10 0.17
- Significance at the level of * p < 0.05, ** p < 0.01, and *** p < 0.001.
management of patients suffering from different dis-
eases is critical, have actively adopted IoT technolo-
gies to identify patients in a systematic way.
As a representative case of the ID-based service
model, in the leisure/sports industry, a football club
in England made an RFID-enabled stadium member-
ship card. It enables quicker entrance into the stadium
and allows customers to use it to purchase food, bev-
erages and other items (Swedberg, 2008a). A ski
resort in America, which offers a more developed cus-
tomer service, is another example of the ID-based ser-
vice model. Through the individual ID tag, the resort
measures the vertical distance skied by each customer
and presents the statistics on its website as well as on
the social network services (SNS) of customers, such
as Facebook (O’Connor, 2010a). As an example of an
ID-based service model for sales activities of the
value chain, a Swiss farm store provides an RFID-
enabled self-serve shopping model through which
customers can obtain personal authentication, collect
product information, and pay with an NFC-
embedded smartphone in a clerk-free store (Curry,
2010). In the automobile industry, automakers have
begun to develop various ID-based service models for
their customer service. For instance, some auto-
makers, including Lexus, have introduced cars
equipped with RFID systems. Through the RFID sys-
tem, drivers can open the doors, check tire treads and
pressures, receive maintenance signals, and know the
location of their cars by using an NFC-enabled phone
(O’Connor, 2010b; Swedberg, 2012a). In the health-
care industry, a hospital in Canada monitors a hygiene
procedure such as hand-washing prior to a patient
visit and the cleaning of equipment by using ID infor-
mation of doctors, nurses and patients to help reduce
infections (Swedberg, 2012b).
Such examples demonstrate that utilizing ID infor-
mation of the items in specific events within various
977
Cluster 3 Cluster 4 Cluster 5
(N ¼ 106) (N ¼ 104) (N ¼ 104) F-value Sig.
0.79 0.87 0.61 17.041 0.000***
0.03 0.12 0.11 2.975 0.019*
0.14 0.57 0.05 72.226 0.000***
0.02 0.12 0.22 6.589 0.000***
service areas is essential in the value configuration
of cluster 1.
Cluster 2: Multiple Operation Management Model
Cluster 2 presents the value configuration of IoT as
the Multiple Operation Management Model for asset
and production management in the operation activity
of value chains in a business context. The Multiple
Operation Management Model is most widely used
in business fields (238 cases in Table 3). In the tech-
nology attributes of Table 3, the cases in Cluster 2 use
UHF tags (145, 61%) which cover over one meter;
microwave tags (47, 20%) for RTLS which cover over
10 meters; and the sensor tags for state information
(33, 14%). In a business context, the RFID applica-
tions in this cluster are used mostly in operation activ-
ities (232, 97%) of the value chain for asset
management (206, 87%), production management
(26, 11%), and employee management (23, 10%). In
industry fields, the firms in healthcare (60, 25%), con-
struction (14, 6%), and agriculture/mining industry
(12, 5%) efficiently manage their costly assets, such
as surgical equipment and machine tools, and ensure
the safety of their employees in hazardous working
environments, by using RFID to track their location.
RTLS with microwave tags traces the location of
costly assets or workers in wide working areas. A uni-
versity hospital in the United States opened a new 1.6
million ft2 facility equipped with an RTLS which
allows monitoring the locations of thousands of
pumps, wheelchairs and valuable mobile equipment
(Swedberg, 2012c). Public institutions of government
(24, 10%) and utility companies (23, 10%) have also
adopted RFID and sensors actively for the mainte-
nance of equipment. In an oil company or a gas man-
ufacturer, various sensors for measuring temperature,
humidity, motions and air quality have been adopted
978 Information Development 32(4)

Table 3. Descriptive analysis of each cluster (C1* ~C5).

Tag (RF) Total C1 C2 C3 C4 C5 Tag (Battery) Total C1 C2 C3 C4 C5

UHF 444 95 145 96 85 23 Passive 532 184 160 15 95 78

HF 180 89 22 – 4 65 Active 275 38 73 102 25 37
LF 61 16 20 9 3 13
MICRO 78 17 47 2 5 7 Information Total C1 C2 C3 C4 C5
UWB 25 7 10 – 2 6 ID 762 210 238 106 104 104
Place 529 108 183 84 91 63
Value chain Total C1 C2 C3 C4 C5 Movement 69 13 30 3 12 11
Inbound 75 8 10 19 12 26 Stage 97 4 15 15 58 5
Operation 254 4 232 8 3 7 State 98 20 33 2 12 31
Outbound 193 1 5 74 100 13
Service 263 206 21 6 2 28 Industry Total C1 C2 C3 C4 C5
Sales 63 14 4 21 5 19 Healthcare 138 49 60 8 2 19
HRM 50 7 19 3 1 20 Leisure/sports 83 63 13 2 – 5
Infra./R&D/ – – – – – – Consumer 70 18 15 14 17 6
Procurement Goods
Government 69 16 24 5 4 20
Service domains Total C1 C2 C3 C4 C5 Apparel 52 4 2 30 14 2
Asset mgt. 236 4 206 7 6 13 Utility 42 5 23 – 4 10
Customer mgt. 221 190 19 7 2 3 Agriculture/mining 42 2 12 9 8 11
Inventory mgt. 160 8 11 88 31 22 Distribution 38 9 2 14 5 8
Transportation 117 3 6 – 104 4 Education 31 13 9 3 – 6
Employee mgt. 53 8 23 3 1 18 Automobile 28 11 8 3 3 3
Environment mgt. 48 10 10 – 2 26 Producer goods 28 1 19 3 3 2
Production mgt. 38 1 26 5 1 5 Logistics 28 – 7 – 20 1
Payment 23 8 – – – 15 Military 21 – 8 1 11 1
Track & trace 44 3 2 5 29 5 Construction 20 1 14 2 1 2
Antitheft 20 2 5 10 2 1 Airport/harbor 16 11 3 – 1 1
Authentication 20 14 1 2 1 2 Pharmaceutical 16 1 1 6 4 4
Promotion 13 8 – – 5 – Finance 15 3 7 1 1 3
Return mgt. 4 – – 2 – 2 Aerospace 14 3 7 2 2 –
Cost accounting 3 – 1 – – 2 Electronic 11 – 4 3 4 –
Total 762 210 238 106 104 104
- *C1: Cluster 1, C2: Cluster 2, C3: Cluster 3, C4: Cluster 4, C5: Cluster 5.

to monitor pipe equipment and gas transporting cylin-
ders in refineries (Swedberg, 2010, 2011a). In addi-
tion, the automobile and electronic industries use
RFID for their complicated manufacturing process
management. An electronics manufacturer in Hong
Kong installed feeders which are fitted with RFID
tags containing unique ID numbers on component-
placement machines for circuit board assembly
(Swedberg, 2011b). This solution automatically
tracks the components, detects malfunction, and stops
the process to fix it.
Consequently, the value of Cluster 2 (Multiple
Operation Management Model) is mainly configured
by utilizing information about the movement or state
of items through RFID and sensor networks for oper-
ation activities of the value chain such as managing
Hwang et al: Understanding Internet of Things (IoT) diffusion 979

costly assets or facilities, keeping employees safe, and such as manufacturers, distributors and retailers. In
operating manufacturing processes. Table 3, Cluster 4 is composed of 104 business cases
and is similar to Cluster 3 in that it mostly uses the
Cluster 3: Service-combined Inventory Management UHF tag (85, 82%) in technology attributes. How-
Model ever, the cases in Cluster 4 are more focused on
the exchange of information about items between
Given the value configuration pattern of IoT cases
stages (58, 56%) of the value chain, each of which
belonging to Cluster 3, this cluster was named
is usually performed by different supply chain mem-
Service-combined Inventory Management Model,
bers such as manufacturer (operation activity), distri-
which is for customer service based on inventory
butor (inbound and outbound activity), and retailer
management using RFID tags in retail shops. In
(sales activity). The RFID system identifies and
Table 3, Cluster 3 is comprised of 106 business cases
checks the tag-attached items in each stage across the
of IoT which mostly use UHF (96, 91%) and active
value chain activities. In each stage, the information
tags (102, 96%) for inventory management (88,
regarding the items is shared and synchronized across
83%), antitheft (10, 9%) and customer management
the complex supply chain through a networked RFID
(7, 7%) in inbound/outbound activities (93, 88%) and
system. In addition, information on the state of objects
sales activities (21, 20%) of the value chain.
(12, 12%), which is collected by sensors, is also uti-
For instance, in the apparel industry (30, 28%), a
lized to manage an object’s condition.
Greek clothing firm manages inventory in the facto-
In the business context, the logistics industry (20,
ries and distribution centers and offers shopping sug-
19%), consumer goods industry (17, 16%), apparel
gestions to its customers through RFID technology
industry (14, 13%), and defense industry (11, 11%)
(Wessel, 2010a). Information about the customers and
use RFID to manage transportation of their products
clothes to which RFID tags are attached allows the
(104, 100%) and to track their inventory information
firm to offer customized shopping suggestions on the
(29, 28%) in each stage of the value chain. In partic-
monitor in the store. The consumer goods industry
ular, third party logistics companies can easily track
(14, 13%) and distribution industry (14, 13%) have
their RFID-attached trucks to check and share ship-
also used RFID systems for inventory management
ment situation with customers through Global Posi-
with customer service in sales and service activities.
tioning System (GPS). In addition, sensor systems
An American supermarket installed an RFID-
enable them to monitor cargo temperatures for the
enabled shopping cart system in order to provide cou-
distribution of perishable foods and check the tire
pon service according to a cart’s location and it is
pressure of trucks to prevent traffic accidents
expected that in the future the system could automat-
(Swedberg, 2009b). The apparel industry and the
ically calculate the amount customers should pay
defense industry have also adopted RFID systems
(Swedberg, 2009a). In addition, food companies in
to efficiently manage their overall supply chains.
the agriculture industry (9, 8%) provide historical
The United States military achieves real-time visi-
information on food inventory for customers to secure
bility of transportation of military equipment with
food safety by RFID-based food tracking systems
RFID systems in the Middle East (Bacheldor,
(Swedberg, 2008b).
2009). The agriculture industry (8, 8%), the phar-
In summary, the inventory management cases of
maceutical industry (4, 4%) and the healthcare
Cluster 3 show a general pattern of RFID usage with
industry (2, 2%) are also using RFID and sensors
UHF active tags in the retailing of various goods such
to track and trace their products in the overall sup-
as apparel and consumer goods. The Service-
ply chain, since safety is a paramount issue in their
combined Inventory Management Model is the most
line of work (Swedberg, 2008c; Swedberg, 2011c;
advanced inventory management model for customer
Wessel, 2010b).
service in service and sales activities as well as for
In conclusion, the IoT business cases of Cluster 4
inbound/outbound activity in the value chain.
demonstrate the value of IoT as an inventory transport
model to enhance supply chain visibility in time- and
Cluster 4: Intelligent Inventory Transport Model safety-sensitive industries such as logistics, apparel
Cluster 4 is the Intelligent Inventory Transport Model, and defense. In addition, these industries utilize sen-
which is for the transportation of ordered items by sors to more intelligently manage transportation in the
RFID and sensors between supply chain members supply chain.
980
Cluster 5: Sensor-based Multiple Service Model
Lastly, the business cases of Cluster 5 create value
through various sensors such as temperature sensors
and sound sensors for multiple service areas. This
cluster comprises 104 IoT business cases, as shown
in Table 3. The notable characteristic of this cluster
is the use of sensing data (31, 30%). Looking at the
business context where values are created, environ-
mental management (26, 25%) and inventory man-
agement (22, 21%) are the major service domains of
the IoT in this cluster.
The sensor system is mostly adopted in public
institutions of the government (20, 19%) for public
services. For instance, the Nassau County Police
Department in Long Island, New York, uses an audio
sensor-based system to identify and locate gunfire
(Swedberg, 2008d). The American space agency uses
an RFID solution with built-in sensors to detect vibra-
tions and protect against potential damage (Swedberg,
2011d). The healthcare industry (19, 18%) also uti-
lizes sensor systems to manage medical inventories.
For instance, a Belgian hospital monitors patients’
blood temperature using temperature sensors to pre-
vent temperature-sensitive items from being dam-
aged (Swedberg, 2008e). The agriculture industry
(11, 11%) applies wireless sensor systems to effec-
tively monitor livestock, crop or farm conditions
and to secure food safety for customer service
(Swedberg, 2009c).
In summary, in Cluster 5, the value of IoT technol-
ogies is configured by gathering internal and external
information on the state of objects through various
kinds of sensors and applying the information to mul-
tiple services. Even though the Sensor-based Multiple
Service Model is not yet adopted in some industries,
government institutions, hospitals and agrifood com-
panies are interested in this type of value configura-
tion model and they will lead the diffusion of this
model.
Propositions for IoT utilization
This study puts forward propositions about IoT utili-
zation in each industry based on the descriptive anal-
ysis of each cluster.
Firstly, the healthcare industry has utilized various
value configurations, such as the ID-based Service
Model, the Multiple Operation Management Model,
the Intelligent Inventory Transport Model and the
Sensor-based Multiple Service Model. For instance,
hospitals can apply the ID-based Service Model to
Information Development 32(4)
prevent the infection of doctors and nurses by check-
ing their entrance to clean rooms with RFID attached
wristbands (e.g. Swedberg, 2012b), and the Multiple
Operation Management Model to manage costly med-
ical equipment through RTLS (e.g. Swedberg,
2012c). In addition, the Intelligent Inventory Trans-
port Model can be used to deliver sensitive medical
materials like blood and the Sensor-based Multiple
Service Model to control the flow of patients and
improve the safety of doctors and nurses with
sensor-embedded medical devices (e.g. Swedberg,
2008c, 2008e; Friedlos, 2010). More innovative
sensor-based service models will soon appear in the
healthcare industry, considering the new develop-
ments in bio-sensor chips. Similarly, pharmaceutical
firms can use the Intelligent Inventory Transport
Model to check the temperature of their medicine
storage containers and to verify the authenticity of
drugs using RFID (e.g. Wessel, 2010b).
Secondly, the leisure/sports, airport/harbour, edu-
cation, and finance industries can apply IoT as the
ID-based Service Model to their customer service
areas. They can provide differentiated services such
as auto ticketing and NFC-based payment. Especially,
the ID and SNS combined model like the ski resort
service in America will bridge the gap between off-
line and online customer service and build customer
loyalty (e.g. Curry, 2010; O’Connor, 2010a).
Thirdly, the consumer goods, distribution and
apparel industries have adopted RFID for their
inventory management and transportation manage-
ment in inbound/outbound activities. In addition,
their value configurations appear as the Service-
combined Inventory Management Model, which pro-
vides differentiated information services such as
product promotion service and NFC-based payment ser-
vices (e.g. Wessel, 2010a). The Service-combined
Inventory Management Model can increase the value
of RFID used for inventory management of inbound/
outbound activities by utilizing it again for service
and sales activities. Firms that are sceptical about
adopting RFID due to high tag costs should reconsi-
der the value of the technology by extending the scope
of RFID adoption from only inbound/outbound activ-
ities to service and sales activities. Meanwhile, third
party logistics companies have used the Intelligent
Inventory Transport Model to track their trucks’
delivery routes by RFID and GPS. They can also
apply real-time monitoring systems to containers for
perishable foods by using temperature sensors (e.g.
Swedberg, 2009b).
Hwang et al: Understanding Internet of Things (IoT) diffusion
Fourthly, the utility, construction, and agriculture/
mining industry has used IoT technologies in the Mul-
tiple Operation Management Model. Because these
industries use costly working tools and manage hazar-
dous facilities in wide working areas, they need to
adopt RFID and WSN systems in order to monitor
their equipment and facilities and identify the location
of employees for their safety (e.g. Swedberg, 2010,
2011a). In addition, customers’ concerns about food
safety have become a critical issue faced by the agri-
culture industry. IoT technologies can be an important
solution for this issue. Using the Sensor-based Multi-
ple Service Model to monitor livestock, crop, and
farm conditions, the Intelligent Inventory Transport
Model to prevent perishable items through tempera-
ture or humidity sensing, and the Service-combined
Inventory Management Model to track and provide
information about the history of foods for customers,
agricultural firms can help customers assure the qual-
ity and safety of the foods they purchase (e.g. Swed-
berg, 2008b, 2009c, 2011c).
The electronics, aerospace, automobile and defense
industries mainly use the Multiple Operation Manage-
ment Model to deal with assets such as facilities and
equipment. In the electronics industry, RFID is being
used to monitor a complicated production process by
automatically reading the information on the tags
attached to input items and reacting to the material
requirement plan (e.g. Swedberg, 2011b). Some auto-
mobile companies have applied IoT technologies for
customer service in ID-based service models. If these
industries broaden their perspectives concerning the
potential of IoT, IoT technologies can create value
in both their production areas and customer service
areas (e.g. O’Connor, 2010b; Swedberg, 2012a). In
the defense industry, armed forces are also using the
Multiple Operation Management Model of IoT to
manage major military equipment as well as the Intel-
ligent Inventory Transport Model to transport military
supplies (e.g. Bacheldor, 2009).
Finally, government has made progress in the
value configuration of IoT by using the Sensor-
based Multiple Service Model. Public institutions
in government can apply various sensor models to
nationwide natural environmental management by
using temperature or humidity sensors, public facility
maintenance by using temperature or motion sensors
which detect fires and trespassers, and emergency res-
cue systems by using sound sensors for crashing
sounds, gunfire or explosions (e.g. Swedberg, 2008d,
2011d; Sullivan, 2010).
981
Conclusions
In order to understand the uses and diffusion trends of
the IoT, this study investigated the value configura-
tion of IoT technologies such as RFID and sensors,
focusing on the utilization of the technology attributes
of IoT in various business contexts.
In terms of practical implications of this study, the
value configuration analysis of the IoT business cases
will reduce the anxiety and hesitation of potential
adopters through better understanding of, and finding
answers to, essential questions regarding IoT adop-
tion, such as where and how IoT technologies can
be utilized within their business processes, what ben-
efits they can enjoy through adopting IoT technolo-
gies, and which technology attributes of IoT they
should carefully consider to develop a differentiated
business model. For system providers of IoT technol-
ogies, the five value configuration models will pro-
vide marketing guidelines for various industries.
In terms of theoretical implications, the value con-
figuration approach will broaden the theoretical
understanding of technology diffusion. At the micro
level of technology diffusion research, the value con-
figuration approach helps to comprehend the technol-
ogy attributes and major application fields of new
technology in a business case rather than the determi-
nistic factors of technology adoption. At the macro
level of technology diffusion research, the value con-
figuration framework presents a more elaborate frame
to understand diffusion trends of new technology
through an analysis of the combinations of the attri-
butes of various technologies in multiple business
contexts, whereas other macro level studies use a
quantitative model like the Bass model to forecast
technology diffusion or analyse patents to present a
technology roadmap.
In this study, there are some limitations in the data
collection process and scope of research in terms of
the technology attributes of the IoT. The 762 IoT
business cases were collected from a single journal
for data reliability. This allowed us to deal with
coherent business cases from various industries for
a period of 5 years. However, for research validity,
more business cases from other journals should be
considered in further studies. In addition, given the
beginning stage of IoT, this study concentrated pri-
marily on the diffusion of RFID and sensor technol-
ogies, which are pivotal technologies of the IoT era.
In further studies, based on the technological
advancement of IoT, new business cases of IoT
982
usage, such as bioacoustic sensing, sensor-embedded
robots, and micro-electromechanical systems could
be examined and discussed in the value configuration
framework.
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About the authors
Yoon-Min Hwang is a researcher in Auto-ID Lab Korea at
the Korea Advanced Institute of Science and Technology
(KAIST), Daejeon, Republic of Korea. He earned a BA
from Department of Management and Economics at the
Han-Dong Global University, an MS in the Department
of Management Science at the KAIST, and a PhD in the
Department of Business and Technology Management at
the KAIST, Republic of Korea. He worked as a visiting
scholar in 2007 at Auto-ID Lab at the University of
Hwang et al: Understanding Internet of Things (IoT) diffusion
Cambridge, UK. His research interests include industrial
innovation by internet of things (IoT) technologies and
big data, ICT strategy for national development, and sup-
ply chain management. He has published articles in many
journals, including International Journal of Information
Management, Information Development, Journal of Tech-
nology Management & Innovation, International Journal
of Innovative Computing, Information and Control. Con-
tact: N22, Rm 402, Department of Business and Technol-
ogy Management, KAIST, 291 Daehak-ro (373-1
Guseong-dong), Yuseong-gu, Daejeon 305-701, Republic
of Korea, Tel: þ82-42-350-6391, Fax: þ82-42-350-6339,
E-mail: ymhwang@kaist.ac.kr
Moon Gyu Kim is a researcher of Auto-ID Lab Korea
and a PhD candidate in Business and Technology Man-
agement at Korea Advanced Institute of Science and
Technology (KAIST), Daejeon, Republic of Korea. He
earned a BA from Department of Business Administra-
tion, School of Business, Ajou University, Republic of
Korea. His research interests include strategies of supply
chain management, business collaboration, business
relationship, innovation with technologies such as
RFID/USN, and ICT development for developing
985
countries. Contact: N22, Rm 406, Department of Busi-
ness and Technology Management, KAIST, 291
Daehak-ro (373-1 Guseong-dong), Yuseong-gu, Daejeon
305-701, Republic of Korea, Tel: þ82-42-350-6337,
Fax: þ82-42-350-6339, E-mail: controlme8@kaist.ac.kr
Jae-Jeung Rho is currently the director of Global Informa-
tion &Telecommunication Technology Program and an
Associate Professor of Business and Technology Manage-
ment at the Korea Advanced Institute of Science and Tech-
nology (KAIST), Daejeon, Republic of Korea. He obtained
his BS in mechanical engineering from Seoul National Uni-
versity (SNU) and an MS from Texas A&M University,
United States and PhD in industrial engineering from Uni-
versity of Houston, United States. He is also the director of
Business Division in Auto-ID Lab KAIST. His teaching
and research interests include supply chain management,
application of RFID/USN, EPC sensor network and appli-
cations of mobile technology in developing countries. Con-
tact: N22, Department of Business and Technology
Management, KAIST, 291 Daehak-ro (373-1 Guseong-
dong), Yuseong-gu, Daejeon 305-701, Republic of Korea,
Tel: þ82-42-350-6844, Fax: þ82-42-350-6339, E-mail:
jjrho@kaist.ac.kr