Internet of Things (IoT): How Leaders Can Create Value

To survive and thrive, every organization will need to prepare, adapt, and create value from the Internet of Things (IoT) revolution.

The connected smart devices, otherwise known as the Internet of Things (IoT) are rapidly changing how we live and work. Expert estimates that the IoT will consist of almost 50 billion objects by 2020. They could be adding tens of trillions of dollars to the GDP within ten years.

IoT goes far beyond wearables, smart meters, and connected cars and has broad implications for sustainability, providing ways for us to use resources such as water and energy more efficiently.

Although the term IoT gained popularity in recent years, a variety of smart devices have been around for decades. What has changed are their inter-connectivity, applications, and daily usages.

They open up new opportunities to collect, measure, and analyze an ever-increasing variety of meaningful data on markets, customers, employees, consumers, and partners. How this data can be utilized to create competitive advantage is putting further pressure on leaders to drive IoT enabled innovation for their organizations.

In any environment, four groups of people matter: those who work within an organization, those on the outside with whom we set up formal partnerships, those on the outside with whom we form ad hoc learning relationships, and those we aim to please with a product or service.

The IoT revolution does not change these fundamental organizational structures. In that context, to drive IoT innovation, a leader needs to focus on:

• The ‘why’, as opposed to what, how, and when
• Cultivating a cross-collaborative resource pool
• Value creation, as opposed to just value capture

THE WHY

Innovation with IoT can occur in many ways. It can enable entirely new business models, new products and services, and new modes of organizing work. The focus of ‘why’ is not so much on specific technologies as much as on the development of creative business solutions.

For example, with Home Depot Pro App, busy contractors and customers can place orders on-the-go from any iPhone or Android device and pick up most purchases in-store within two hours.

Let’s explore a few more whys:

IoT can automate and control transactions and work processes, generating higher productivity and efficiency. Employees, customers or business partners can access services with speed, convenience, and personalization. Think of customer self-service (i.e. self-checkouts at retail stores, Internet check-in for airlines), employee self-service (i.e. self-management of benefits), and online sales.

IoT can empower and transform fast, effective decision-making across the enterprise and its partnership network. Think of analytics (i.e. RFID – radio frequency identification tags placed on products to manage inventory and production). They can facilitate real-time monitoring of operations such as Amazon’s 15,000 robots in its warehouses that keep up with customers’ orders.

Take a look at the chart below from McKinsey for a few more ideas on why IoT offers vast opportunities for any organization:

CULTIVATING A CROSS-COLLABORATIVE ORGANIZATION

Innovation with IoT requires a mixture of complex multi-disciplinary skills and models – design, software, hardware, network, and business. They are all inter-connected and highly depend on one another.

It requires both left-brained (analytical) and right-brained (creative) talent and culture. Leaders will have to approach these collaboration challenges by defining cross-functional teams.

Here is an approach from one of my previous books, Everything Connects, to understanding and forming cross-functional teams:

Learning Teams that keep an enterprise from being too internally focused and trapped within their comfort zone.

Organizing Teams that serve to move the innovation lifecycle forward. Even the best ideas must continuously compete for attention, resources, and time.

Building Teams create the connections between the learning and organizing teams; they apply insights from the learning team and channel the empowerment from the organizing team to make new things happen.

Given the complexity of IoT driven innovation, organizational silos and boundaries need to fall.

VALUE CREATION

When evaluating IoT innovation possibilities, it is important to understand the difference between capturing value and creating value. Value Creation can be defined as the perceived benefit to the customer. Value Capture is the process of retaining some percentage of the value provided in every transaction.

As Gordon Hui writes on an HBR article, “In a connected world, products are no longer one-and-done. Thanks to over-the-air updates, new features and functionality can be pushed to the customer on a regular basis.”

That creates new possibilities to drive IoT-based value creation. Here are some ways to shift our thinking when it comes to both value creation and capture:

Innovation is more than just new ideas and invention. It’s a means for describing the maturation of existing products, the creation of new products, and the response to shifting economic conditions. If an enterprise simply stands pat on its processes and products, it runs the risk of becoming obsolete.

Worse, the absence of innovation means that an enterprise will lack new products and services when its current output reaches market saturation. These leadership rules do not change with the emergence of IoT – it only heightens.

[Image: flickr user Rymer Bruining]
Copyright (c) 2016 by Faisal Hoque. All rights reserved. 

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I am an entrepreneur and author. Founder of SHADOKA and other companies. Shadoka enables entrepreneurship, growth, and social impact. Author of "Everything Connects - How to Transform and Lead in the Age of Creativity, Innovation and Sustainability” (McGraw Hill, 2014) and "Survive to Thrive: 27 Practices of Resilient Entrepreneurs, Innovators, and Leaders” (Motivational Press, 2015).  Follow me on Twitter @faisal_hoque.