the internetofthings business index 2017 - EIU Perspectives

INTERNET OF THINGS BUSINESS INDEX 2017 THE

Transformation in motion

Sponsored by

The IoT Business Index 2017

Contents

1

About this report

2

Executive summary: The IoT: Transformation in motion

3

1

The Internet of Things Business Index

5

2

IoT impact and responses

9

3

Looking ahead

12

Conclusion: Building a platform for progress

14

Appendix 1: Index methodology

15

Appendix 2: Survey results

16

© The Economist Intelligence Unit Limited 2017


About this report

The Internet of Things Business Index 2017:

revenue of more than US$500m and small

Transformation in motion is an Economist

and mid-sized firms. Some of the results from

Intelligence Unit report, sponsored by ARM

this survey have been used to create the

and IBM. It is intended to gauge the current

Internet of Things business index featured in

and future use of the Internet of Things (IoT) by

this report.

the global business community. The report draws on two main sources for its research and findings:

● Alongside the survey, The EIU conducted a series of in-depth interviews with the following senior executives and experts

● In September 2016 The Economist Intelligence Unit (EIU) surveyed 825 senior business leaders, 412 of whom are C-level

(listed alphabetically by organisation): o Thomas Lesser, head of R&D, Big Ass Solutions

executives or board members. Respondents

o Paul DeLong, CEO, car2go

were drawn from around the world, with

o Martin Gaarn Thomsen, chief operating

30% based in Europe, 30% in North America, 30% in Asia-Pacific and the

officer, ISS o Juha Pankakoski, chief information

remaining 10% in Latin America, the Middle

officer and chief digital officer,

East and Africa. A total of ten industries are

Konecranes

represented in the study. Around 9% of respondents come from each of the following industries: financial services; manufacturing; healthcare,

o Jeroen Tas, CEO, connected care and health informatics, Philips Gordon Hui, vice president of strategy, Smart Design o Christian Renaud, analyst, The 451 Group

pharmaceuticals and biotechnology; IT and technology; energy and natural

The report was written by Jessica Twentyman

resources; construction and real estate;

and edited by Pete Swabey. The EIU would like

automotive; infrastructure; and outsourced

to thank all interviewees and survey

facilities management. The sample is evenly

respondents for their time and insight.

split between large firms with an annual

2



Executive summary The IoT: Transformation in motion The Internet of Things (IoT) is a key driver of the

pursuing the cost reductions, efficiency gains

digital transformation that will enable

and new insights promised by a world of

businesses to reinvent products, services,

connected devices that are able to convey

internal operations and business models. As a

data on their usage and environment and

result, the majority of executives surveyed by

can receive instructions remotely, the index

The Economist Intelligence Unit (EIU) for this

reveals.

report believe that following an IoT

But even as underlying technologies and

technology path is crucial to their long-term

high-level business models have matured,

success.

companies are discovering that there are

Many respondents say that the IoT has

considerable organisational challenges to be

already had a marked impact on their business

addressed before the IoT will become a

model, allowing them to generate greater

mass-market tool, such as the need to

revenue and sparking a new innovation wave

understand how companies must adapt their

within their organisation. One-fifth have

internal structures, as well as their go-to-

already seen a major impact on their industry,

market strategies. That will include how they

and a further 30% believe they will see

work with suppliers.

significant impacts in the near future.

had expected three years ago. So far, fewer

Other key findings from the research include the following:

than one in ten companies surveyed have

Many companies are seeing payback from

achieved “extensive” implementation of the

their early IoT efforts. One in four (25%) survey

IoT for both external and internal operations.

respondents report that their organisation’s

But while there is immense positivity across almost all sectors, many executives feel that the IoT has not progressed quite as fast as they

These are some of the findings of the

use of the IoT has “sparked a new wave of

Internet of Things Business Index 2017. The

innovation thanks to data that give us better

purpose of the index, conducted by The EIU

insights”. Almost as many (22%) say it has

and sponsored by ARM and IBM, is to measure

“unlocked new revenue opportunities from

periodically the adoption of IoT technologies

existing products and services”, while 15% say

and services by businesses throughout the

it has lowered costs. For one in five

world and across all relevant industries. The

respondents (20%) the IoT has changed

inaugural study was conducted in 2013 and

existing business models or strategies, and 16%

provides the baseline for this update, which

say it has enabled them to push into new

tracks the business uptake of the IoT over the

markets and industries.

following three years to the end of 2016, giving a firm indication of how businesses are

Executives believe in the IoT’s potential, but

progressing with their plans.

progress has not happened as fast as

Companies worldwide are eagerly

3


expected. When asked about the impact of


the IoT on business in general, one in five

Executives continue to put measures in place

respondents (21%) believe that it has already

to get the IoT used more extensively in their

had a major impact, and a further 32%

businesses. Thirty-five percent say they are

believe that while it has had a limited impact

learning from the experience of early

on business so far, it will have a major impact

adopters, while the same proportion say they

in the future. However, almost six out of ten

are seeking advice from third-party experts

(56%) agree “somewhat” or “strongly” that

and consultants. One-third (33%) say they

their progress with the IoT has not happened

have already taken steps to train existing staff

as fast as they had expected.

to work with the IoT, while 27% are conducting or sponsoring research to establish market size

The main obstacles to IoT implementation are

and demand.

practical. In 2013 the main challenges to IoT adoption cited by executives related to

There is still great optimism about the rewards

understanding and perception. Today, they

ahead, and a firm belief that the IoT holds the

are more concerned with practical matters,

key to digital transformation for many firms.

with 29% of respondents suggesting that the

More than half (55%) expect IoT technologies

high cost of required investment in IoT

to help them make internal cost savings and/

infrastructure is seen as a challenge. Concerns

or generate external revenue in the next three

about security and privacy appear in second

years. Meanwhile, 47% agree that the IoT will

place, cited by 26% of executives.

be one of the most important parts of their organisation’s digital transformation strategy. As one executive puts it: “The IoT has been a challenge in some respects, [but] there’s potentially a huge upside here for us.”

4



1

The Internet of Things Business Index

The Internet of Things is changing the way

implementation across industries and

companies create and capture customer

geographies, finds that the companies

value, as a number of high-profile examples

surveyed had expected their IoT models to

illustrate. The lighting division of electronics

have advanced more over the last three years

company Philips and the energy services

than they actually did. Almost six out of ten

company Cofely, for instance, now provide

(57%) respondents agree “somewhat” or

“light as a service” to Schiphol, Europe’s

“strongly” with the statement: “Our progress

fourth-busiest airport. The airport pays only for

with the IoT has not happened as fast as we

the light it uses, while Philips remains the owner

expected”.

of all fixtures and installations, taking joint responsibility with Cofely for the performance

worldwide were, on average, still in the

of the system and ultimately its reuse and

research stage (at point 4 on a scale of 1 to

recycling at end of life.

10) and were slightly more likely to be using

However, according to Gordon Hui, vice

the IoT for internal operations and processes

president of strategy at Smart Design, a New

than in external products or services. Fast-

York-based design and innovation

forward to 2016, and the signs are that while

consultancy, many companies have yet to

some companies have moved beyond

identify how the IoT can transform their

research, most have not progressed further

particular value chains.

than research and planning.

Back in 2014 Mr Hui wrote an article for the

The overall score of 4.43 for using the IoT in

Harvard Business Review, in which he laid out

external products and services, for example,

the scale of the challenge. “As the Internet of

shows that deployment here has progressed

Things spreads, the implications for business

to a certain extent compared with 2013, when

model innovation are huge. Filling out well-

it stood at 3.88.

known frameworks and streamlining

When it comes to using the IoT to monitor

established business models won’t be enough.

and measure internal operations, however,

To take advantage of new, cloud-based

the survey suggests only limited progress, from

opportunities, today’s companies will need to

4.25 in 2013 to 4.34 in 2016.

fundamentally rethink their orthodoxies around value creation and value capture.” Two years on, most companies have yet to

A closer look at the regional breakdowns, meanwhile, provides greater insight into the trends underlying the overall index numbers.

address this challenge. “Despite substantial

North America, Europe and Asia-Pacific have

hype and investment in the IoT over the past

all made some progress on external products

few years, many companies have struggled to

and services. The biggest surprise from the

make the IoT a reality,” Mr Hui says.

2016 study is that the North American index for

This helps to explain why the Internet of

5

Back in 2013 the index found that businesses

internal IoT adoption has slipped from 4.00 in

Things Business Index 2017, which aims to

2013 to 3.78 in 2016. This may reflect the steep

gauge the average level of IoT

drop in oil prices since 2014 that have reduced



The Internet of Things Business Index Region

Internal operations & processes

External products & services

2013 2016

2013 2016

4.00

4

3.78

4.40

3.89

4.50

2

4.35

2

4.74

4

3.88

4

4.64

6

4.39

6

6

4.27

8

3.92

8 4.34

8 4.25

10

4.43

10

3.88

10

2

KEY Extensive Early implementation In planning In research Non-existent

Global

Europe

Asia-Pacific

North America

Industry

4.90

3.99

5.44 3.46

4.69

4.44

4.57

4.12

4.48

4.21

5.02

3.68

4.61

3.61

2.89

3.86

4.06

4.36

n/a

4

n/a

6

3.73

8

n/a

8 n/a

10

2.83

10

2

Automotive*

Construction & real estate

Consumer goods & retail

Energy & natural resourses

Financial services

4.51

n/a

3.52

4

n/a

4.69

4.48

4.78

4.23

4.28

4.18

6.04 4.33

5.02

3.93

4.78

3.93

4.49

8

4.06

8 4.54

10

4.21

10

2

6 4 2

Health, pharmaceutical & biotechnology

Infrastructure

IT and technology

Manufacturing

Outsourced facilities management*

*Industries added to the index in 2016

Source: The Economist Intelligence Unit, 2016

the need for energy efficiency drives: just 1% of

behind? Compared with 2013, the industries

North American respondents identify “energy

that have made the most progress in using IoT

management” as one of the areas where the

technologies in their external products and

IoT brought about the greatest positive

services are IT and technology (with a score

change so far, compared with 16% who

rising from 4.33 to 6.04), financial services

expected this to be the case back in 2013.

(from 3.46 to 5.44), and consumer goods and

Meanwhile, Asia-Pacific has made only limited progress, with a score rising fractionally

retail (from 3.68 to 5.02). Construction and real estate, by contrast,

from 4.35 to 4.53. European businesses, by

has slipped from 3.86 in 2013 to 2.89 in 2016.

contrast, are faring better, with a regional score

But this does not mean that the development

on internal operations rising from 4.39 to 4.64.

of IoT functionality in the sector has stalled.

So which industry sectors are forging ahead with their use of the IoT, and which are lagging

6

4 2

Agriculture & agribusiness*

6

6


Instead, an article accompanying this report, which focuses on the sector, reveals that this


reflects the fact that construction and real

construction projects on building sites has yet

estate is being driven more by companies

to take off.

which manage properties than by those which build them. The outsourced facilities

Practical concerns

management sector, measured for the first

So what is holding businesses back? The

time in 2016, achieves an external IoT index

survey reveals that companies’ main concerns

score of 3.21. Companies in that sector see in

are practical ones. Top of the list of obstacles

the IoT an opportunity to provide new value to

is what respondents see as the high cost of

commercial clients, for example, by helping

required investment in IoT infrastructure, cited

them optimise office design for maximum

by 29% of respondents, followed by concerns

employee productivity.

about security and privacy, cited by 26%.

When it comes to using the IoT to measure

Back in 2013, by contrast, concerns focused

and manage internal operations, the

more on people issues, with 26% of

infrastructure sector, which includes transport,

respondents saying their employees lacked IoT

logistics and telecommunications, fares best

skills and knowledge, and 23% saying senior

with a score of 5.02, compared with 3.92 in

managers lacked knowledge of, and

2013. Next comes financial services (4.9),

commitment to, the required technologies. In

followed by energy and natural resources

this year’s survey, lack of senior management

(4.69) and outsourced facilities management

knowledge and commitment slips to third

(4.51). Once again, construction and real

place.

estate appears to be trailing the pack, with its

Security worries will almost certainly have

score slumping to 3.61 from 4.61 in 2013. This is

been exacerbated by several cyberattacks in

a sign, perhaps, that the use of the IoT to

the US in late October 2016 that caused major

measure and monitor the progress of

issues for users of Internet services, including

The challenges to IoT adoption What are the chief obstacles currently to your organisation using the IoT? Select up to two. (% respondents)

High costs of required investment in IoT infrastructure

29

Concerns about security and privacy

26

Lack of senior management knowledge/commitment

23

Weaknesses in your organisation’s technology infrastructure

16

Regulation (eg, relating to data privacy)

12

Weaknesses in public communications infrastructure available to your organisation

12

Immaturity of industry standards around the IoT

10

Products or services do not have an obvious IoT element to them

10

General economic uncertainty

8

Undeveloped consumer awareness Absence of business case / business model

6 5 Source: Economist Intelligence Unit, 2016.

7



Twitter and Spotify. The source of the distributed denial of

devices instead. Already, the source code for

service (DDoS) attacks, targeted at Internet

one example of this kind of malware, Mirai, has

infrastructure company Dyn, has been traced

been published on the Internet.

back to infected IoT devices, including

“IoT security has been bubbling up in our

Internet-connected baby monitors. Once

data and our client conversations as a major

these are compromised by malware, they

concern for some time now, and these attacks

come together to form a “botnet army”,

will make it an even bigger priority,” says

driving malicious traffic at a given target that

Christian Renaud, an analyst with The 451

overwhelms their targets, making them

Group, which provides IT research and

inaccessible to legitimate users.

advisory services in the US and internationally.

While DDoS attacks are nothing new, they

Mr Renaud believes that incidents such as

have in the past used large networks of

the Dyn breach may prompt governments to

malware-compromised personal computers to

mandate IoT security standards, which could

launch their attacks. However, a new breed of

in turn slow adoption.

malware has emerged that enables attackers

8

to expand their scale by using connected IoT



2

IoT impact and responses

High-profile companies have succeeded in

services”, while 15% say it has lowered costs.

harnessing the transformative impact of the

For just over one in five respondents (21%)

IoT on their business model. Danish facilities

the IoT has changed existing business models

management firm ISS, for example, uses

or strategies, and 16% say it has allowed them

sensors embedded in the buildings it

to enter new markets or industries.

manages to analyse occupant behaviour and facilities usage. Based on this analysis, it is

the real impact of the IoT on their industry is

able to provide new advisory services to its

yet to come: 32% of respondents report that

clients (see accompanying article). ISS’s IoT

while the IoT has had a limited impact so far,

strategy is the single largest investment in

they believe it will have a major impact in the

technology that the company has made in its

future.

115-year history. German carmaker Daimler, meanwhile,

So what measures are they taking to prepare for and capitalise on this

sees the IoT as the beginning of a revolution in

opportunity? In our survey, 35% of respondents

car ownership and use. Its car2go service,

say that they are learning from the

which uses IoT functionality to monitor and

experiences of early movers, and the same

manage cars remotely, allows customers to

proportion are seeking advice from third-

use shared cars only when they need them.

party experts and consultants and are training

This represents a radical departure for the

existing staff to work with the IoT. In other

company: Daimler now sees itself as “a

words, measures taken so far have tended to

mobility company, not a car company”, says

involve the preparatory work required in order

car2go CEO Paul DeLong.

to get knowledge and skills up to speed.

Just over one in five respondents to the IoT

More practical measures come lower down

Business Index survey report that the IoT has

on the list in 2016: conducting/sponsoring

had a “major” impact on their industry. On a

research to establish market size/demand

regional basis, those based in North America

(cited by 27% of respondents); establishing a

are more likely to characterise it in this way

cross-functional task force to explore and/or

than their counterparts in any other region. By

pursue IoT opportunities (25%); and

industry, respondents from the IT and

introducing new business models (24%).

technology, financial services and

Fewer still have raised fresh capital to

manufacturing sectors are most likely to say

explore IoT options; established joint ventures

the impact has already been major.

or alliances with other companies to exploit

One-quarter of respondents say their

IoT opportunities; hired IoT-specific talent; or

organisation’s use of the IoT has “sparked a

acquired a business (or business assets) with

new wave of innovation thanks to data that

IoT capabilities.

give us better insights”. Almost as many (22%)

9

More respondents believe, however, that

For many organisations, however, taking

say it has “unlocked new revenue

such steps will be not just desirable but

opportunities from existing products and

essential. As Jeroen Tas, CEO of connected



Making the IoT happen What measures has your organisation taken to use the IoT more extensively in the business? (% adopted)

Seeking advice from third party experts/consultants

35

Learning from the successes or failures of early movers

35

Training existing staff to work with the IoT

33

Conducting or sponsoring research to establish market size/demand

27

Establishing a cross-functional task force to explore and/or pursue IoT opportunities

25

Introducing new business models

24

Raising fresh capital to explore IoT options Hiring talent with IoT capabilities

20

Establishing joint ventures or alliances to exploit IoT opportunities

20

Establishing an IoT centre of excellence

20

Acquiring a business or assets with IoT capabilities

16 Source: Economist Intelligence Unit, 2016.

care and health informatics at Dutch

but I think it’s fair to say that not every

electronics giant Philips, puts it: “We need to

organisation with an IoT strategy is ready to

start joining the dots at last.”

create and participate in them yet.”

In other words, he explains, medical

In 2016 just one in ten respondents identify

equipment manufactured by Philips may be

the immaturity of connectivity standards

just one element of a wider picture of

around the IoT as an obstacle to adoption,

“connected care networks” that link patients,

down from 19% in 2013.

carers, family doctors and hospital clinicians.

However, keeping pace with the

These networks may also include equipment

proliferation of standards is still a strategic

and systems from other manufacturers,

imperative for companies such as Big Ass

including patient-worn devices for monitoring

Solutions. The US manufacturer of residential

conditions such as epilepsy and diabetes,

fans and lighting systems, which claims to

electronic medical record systems and

have an “almost obsessive drive to innovate

cloud-based platforms where huge volumes

and improve”, has brought products to market

of patient data can be stored and analysed.

that integrate with smart home thermostats

That means the company’s IoT strategy is

from manufacturers such as Nest and ecobee.

participating in emerging ecosystems of patients, customers, partners and suppliers. “For us at Philips, IoT goes far beyond

10

23

“We do our best to participate in as many of the industry standards organisations as we can,” says Thomas Lesser, head of R&D at Big

manufacturing connected devices,” Mr Tas

Ass Solutions. “We work very closely with the

notes. “It’s more about interoperability within

Thread Group on smart homes standards, for

ecosystems, where different organisations

example. What I try to keep front of mind is

work seamlessly together. In future, we will

that consumers today don’t care much about

definitely see far more of these ecosystems,

standards—they just want these things to



IoT investments How has your organisation’s investment in the IoT changed over the last three years and how do you expect it to change in the next three years? (% respondents)

Last three years

Next three years

35 30 25 20 15 10 5 0 Up by 51% or more

Up by between 11% and 50%

Up by between 1% and 10%

Stayed the same

Down

We have yet to make any investment in the IoT

Source: Economist Intelligence Unit, 2016.

work. But moving forward, they’ll increasingly

a rise between 1% and 10%. That’s perhaps

expect integration with other devices in their

unsurprising, given that many were starting

smart home set-ups, and so we have to

from zero back in 2013 and are now looking to

maximise our ability to integrate with other

leverage the investments of the past three

manufacturers’ products as much as

years.

possible.” The survey suggests that although investment in the IoT will be growing more

more) are financial services, IT and

slowly over the next three years, it will be more

technology, and energy and natural

broad-based than in the previous three-year

resources. Over the next three years, rises of

period. When asked about their IoT

50%-plus are most often forecast by

investments over the past three years, the

respondents from the financial services and IT

most frequently cited response is a rise

and technology sectors, followed by

between 11% and 50%, but looking forward

manufacturing.

over the next three years, respondents expect

11

On an industry basis, the sectors that saw the biggest rises in investment (up by 50% or



3

Looking ahead

The IoT Business Index reveals significant

respects, we’re alive to the fact that there’s

enthusiasm for the future of the Internet of

potentially a huge upside here for us in terms

Things. More than half (55%) of executive

of using the diagnostic and preventative

surveyed expect IoT technologies to help them

maintenance data generated by smart fans

make internal cost savings and/or generate

and smart lighting to create new customer

external revenue in the next three years.

service and support strategies,” says Mr Lesser.

This is in spite of the fact that their IoT

“Right now, I’d say we’ll have to implement

investments so far have not been quite as

new layers of employee education and

predicted. For example, in the 2013 survey 30%

technical support deployment to take

of respondents said they expected the IoT to

advantage of this, but over the long term we’ll

create new revenue opportunities by 2016.

definitely be able to scale up this aspect of

Today, only 22% say that this has come to pass.

our business.”

This suggests that, while companies’ experience of the IoT has not been as

Success factors

anticipated, this has not dimmed their

Executives see the technical capabilities that

enthusiasm so much as given them a better

underpin the IoT as the most critical success

understanding of what is required to make the

factors for IoT strategies. When asked which

IoT a success.

organisational capabilities are considered to

Big Ass Solutions is a case in point. “While the IoT has been a challenge in some

be most important to IoT success, 45% say technology innovation and 32% say data

Positive outcomes In which, if any, of the following areas has your organisation’s use of the IoT had the greatest impact? The IoT has… (% respondents)

sparked a new wave of innovation thanks to data that gives us better insights

25

unlocked new revenue opportunities from existing products/services changed our existing business model or business strategy

22 20

Which parts of your business have seen the greatest positive change from the IoT so far? (% respondents)

Data management & analysis

38

Products or services Technology infrastructure management

29 27 Source: Economist Intelligence Unit, 2016.

12



analytics, while 25% cite business model

information officer and chief digital officer at

on technology innovation and data analytics

Konecranes, sees it. The Finnish company

broadly holds true across the survey base,

manufactures cranes and heavy lifting

regardless of the IoT adoption phase that

equipment for use in ports, factories and

respondents are in.

warehouses. Many of these products now

One way in which the IoT may challenge

bristle with sensors, says Mr Pankakoski—over

firms’ existing data analytics capabilities is the

11,000 sensors in total. These provide both

format of data produced by sensors. As Jim

customers and Konecranes with data that

Hare, research director at Gartner, said at an

give real-time visibility into the operational

event hosted by the analyst firm earlier this

status of their equipment and how it is being

year: “The staple inputs for IoT analytics are

used.

streams of sensor data from machines,

“In a sense, the IoT is bringing this

medical devices, environmental sensors and

equipment to life, because embedded

other physical entities. The challenge is going

intelligence allows a crane to sense its own

to be how to manage and store those data.”

condition and report back on it,” explains Mr

Data specialists are far more accustomed

Pankakoski. That, in turn, enables Konecranes

to working with structured data drawn from

to build out digital services that support these

operational systems that fit neatly into the

assets and the companies that use them.

strict format of rows and columns offered by a

For example, a mechanical problem with a

relational database. According to Mr Hare, IoT

particular piece of machinery can be quickly

data demand that they develop expertise in

detected and a Konecranes field engineer

managing and storing data in event-stream

sent to service it, so that the customer does

processing platforms and time-series

not suffer unnecessary downtime, he explains.

databases and become adept at using more

Over time, much of this intelligence will feed

specialised analytical algorithms.

directly into how Konecranes designs and

The prospect of digital disruption, meanwhile, clearly weighs heavily on

13

That is certainly how Juha Pankakoski, chief

innovation as a success factor. That emphasis

develops future products, too. “So the IoT is at the very heart of our digital

respondents’ minds. More than half (52%)

transformation strategy,” says Mr Pankakoski.

agree “somewhat” or “strongly” that the IoT

“It’s how we intend to stand out from the

“will most likely favour new digital-native

competition, because our customers are

entrants to our markets”. In line with this, 46%

clearly very interested in how technology can

agree “somewhat” or “strongly” that the IoT is

help them use our equipment safely and

“one of the most important parts of my

productively, so they get the most from their

organisation’s digital transformation strategy”.

investments.”



Conclusion Building a platform for progress While this research suggests that many

chain management/ logistics have all seen

organisations have been forced into a “reality

positive changes, too.

check” when it comes to their IoT ambitions,

position, and while respondents acknowledge

Businesses are laying the groundwork for the

that senior leadership support and

IoT, and while many have encountered

engagement is an essential success factor in

challenges in doing so, the extensive research

getting the go-ahead for further work,

and planning they are engaged in points to

one-half (50%) agree that their IoT initiatives

an IoT built on firmer foundations than naive

now have this backing.

aspiration. Examples such as ISS and Daimler,

While many could see the transformational

which have successfully adapted their

impact of smartphones when they first

business models and organisational cultures to

emerged, it took some years before that

harness the opportunities of the IoT, offer

impact was well understood, and even longer

concrete evidence that this transformation is

before companies knew how to harness it.

not only possible but worth undertaking.

Now, though, few executives would question

Many areas of the business have changed, or are changing, as a result of companies’ early efforts—and for the positive, respondents

14

That creates a powerful bargaining

the overall message is a positive one.

whether or not they have made a lasting impact on their business. As the IoT business index 2016 reveals, most

say. Data management and analysis is where

companies are (perhaps to their frustration)

the greatest proportion (38%) have seen

still in the early phases of their IoT journey. But

progress, followed by products and services

with this level of executive backing and

(29%) and technology infrastructure

planning investment, the IoT promises to be in

management (27%). Employee productivity,

a very different—and more advanced—state

customer service and support and supply

in three years’ time.



Appendix 1: Index methodology

The Internet of Things business index is based

The response options to each question are:

on an online survey conducted by The

non-existent; in research; in planning; early

Economist Intelligence Unit in September 2016.

implementation; and extensive. Each

(See Appendix 2 for survey details.)

response option is assigned a score ranging

The index scores are generated from the responses to two questions in the survey:

from 1 (non-existent) to 5 (extensive). The responses to the questions are fed into a model which converts the scores—for the

● To what extent is your organisation using, or

entire sample and for each regional and

planning to use, the IoT in its products or

industry sub-sample—to a 1-10 scale, where:

services (eg, embedding sensors in

1-2 = non-existent (or virtually non-existent)

products, developing services utilising data generated by IoT technology)? ● To what extent is your organisation using, or planning to use, the IoT in its internal operations (eg, to reduce energy consumption, monitor status of plant and equipment)?

3-4 = in research 5-6 = in planning 7-8 = early implementation 9-10 = extensive Scores lying between these levels (for example, 2.5) indicate that businesses in the relevant sample or sub-sample are transitioning from one stage to another.

15



Appendix 2: Survey results

Percentages may not

Which of the following statements best describes the impact IoT has had on business in general so far?

add to 100% owing

Select one of the following statements, which best characterises your view. (% respondents)

to rounding or the ability of respondents

It has had a major impact

to choose multiple

It has had a limited impact so far but I expect it to have a major impact in future

responses.

21 32

It has had a limited impact so far and will continue to have a limited impact in future 20

It has had no impact so far but I expect it to have a major impact in future 12

It has had no impact so far but I expect it to have a limited impact in future 9

It has had no impact so far and I don’t expect it to have any impact in future 6

I am not aware of the Internet of things 0

Which parts of your business have seen the greatest positive change from the IoT so far? (% respondents)

Data management & analysis 38

Products or services (B2B or B2C) 29

Technology infrastructure management 27

Employee productivity 19

Customer service/support 18

Supply chain management/ Logistics 18

None 16

Asset management 11

Energy management 4

I am not aware of the Internet of things 0

Other 0

16



In which, if any, of the following areas has your organisation’s use of the IoT had the greatest impact? The IoT has… Select up to two. (% respondents)

sparked a new wave of innovation thanks to data that gives us better insights 25

unlocked new revenue opportunities from existing products/services 22

changed our existing business model or business strategy 20

allowed us to enter into new markets or industries 16

inspired new working practices or businesses processes 16

lowered our cost base 15

We have not used the IoT in any meaningful 11

lead to greater cooperation and product partnerships with our competitors 9

encouraged greater investments in technology 8

exposed us to greater competition from start-ups/entrepreneurs/new entrants to the industry 7

The IoT has not changed the way we conduct our business in a meaningful way 4

Don’t know 0

To what extent is your organisation currently using, or planning to use, the IoT in its products or services (eg, embedding sensors in products, developing services utilising data generated by IoT technology)? (% respondents)

Non-existent: we have not yet begun to consider it, or have decided not to proceed with it 21

In research: we are researching how it can be utilised in our products/services 35

In planning: we have completed research and are planning or piloting roll-outs 21

Early implementation: we have begun to introduce products/services utilising it 14

Extensive: it is utilised in several products/services and supported by marketing 8

To what extent is your organisation currently using, or planning to use, the IoT in its internal operations (eg, to reduce energy consumption, monitor status of plant and equipment)? (% respondents)

Non-existent: we have not yet begun to consider it, or have decided not to proceed with it 21

In research: we are researching how it can be utilised to support our operations 37

In planning: we have completed research and are planning to utilise it 22

Early implementation: we have begun to utilise it to support our operations 15

Extensive: it is utilised in several areas of our internal operations 6

17



What measures has your organisation taken to use the IoT more extensively in the business (either in products/services or internal operations)? And which have you not yet adopted? Please select one answer option for each measure. (% respondents) Adopted

Plan to adopt in next 3 years

Hiring talent with IoT capabilities 20

No plans to adopt in the next 3 years

35

Acquiring a business or assets with IoT capabilities 16

35

Raising fresh capital to explore IoT options 23

38

Conducting or sponsoring research to establish market size/demand 27

38

Don’t know

36

9

40

9

29

9

26

9

Seeking advice from third party experts/consultants 35

40

16

9

Learning from the successes or failures of early movers 35

40

16

9

27

9

Establishing joint ventures or alliances to exploit IoT opportunities 20

44

Training existing staff to work with the IoT 33

14

9

Establishing a cross-functional task force to explore and/or pursue IoT opportunities 25 44

44

22

9

Establishing an IoT centre of excellence 20

30

9

22

9

41

Introducing new business models 24

45

How has your organisation’s investment in the IoT changed over the last three years? And how do you expect it to change in the next three years? Last 3 years Next 3 years (% respondents)

Up by more than 100% 1 0

Up by between 51% and 100% 12 6



Stayed the same 25 20

Down by between 1% and 10% 2 2

Down by between 11% and 50% 0 0

Down by between 51% and 100% decline 0 0

We have yet to make any investment in the IoT 11 11

Don't know 0 0

18



What are the chief obstacles currently to your organisation using the IoT? Select up to two. (% respondents)

High costs of required investment in IoT infrastructure 29

Concerns about security and privacy 26

Lack of senior management knowledge/commitment 23

Weaknesses in your organisation’s technology infrastructure 16

Regulation (eg, relating to data privacy) 12

Weaknesses in public communications infrastructure available to your organisation 12

Immaturity of industry standards around the IoT 10

Products or services do not have an obvious IoT element to them 10

General economic uncertainty 8

Undeveloped consumer awareness 6

Absence of business case / business model 5

Other 0

Don’t know 2

Which of the following organisational capabilities do you consider to be most important for success in the IoT? Select up to two. (% respondents)

Technology innovation 45

Data analytics 32

Business model innovation 25

Organisational agility 23

Product design 15

Process engineering design 10

Marketing 9

Partner / supplier management 5

Other 0

Don’t know 0

19



To what extent do you agree or disagree with the following? (% respondents) Strongly agree

Somewhat agree

Neither agree nor disagree

Somewhat disagree

Strongly disagree

Our progress with the IoT has not happened as fast as we expected 24 33

Don’t know

27

10 2

Our initial focus is on using IoT technologies to improve internal operational efficiency and performance 18 42 My organisation’s IoT initiatives have engaged support from the most senior leadership 19 31

6 2 2

36

IoT is one of the most important parts of my organisation’s digital transformation strategy 14 32

11

32

The advent of the IoT will most likely favour new digital-native entrants to our markets 16 36

32

31

16

4 2

9

5 2

We expect IoT technologies to help us or our customers to meet corporate sustainability goals on emissions reductions 18 37 30 8 3

4

We expect to be making internal cost savings and/or external revenues from IoT technologies in the next three years 19 36 29 7 4

4

We are moving beyond IoT pilot programs into full scale enterprise deployment 14 27

4

32

15

Which of the following best describes your title?

What are your main functional roles?

(% respondents)

Select all that apply. (% respondents)

Board member 0

8

IT

CEO/President/Managing director

32

3

Finance

CFO/Treasurer/Comptroller

18

11

Operations and production

CIO/Technology director

17 23

Other C-level executive

Strategy and business development 14

13

General management

SVP/VP/Director

12 9

Information and research

Head of business unit

10 12

In-house facilities management

Head of department

9 15

R&D

Manager

6 14

Risk

Other

5

0

Customer service 5

Marketing and sales 4

Human resources

Where are you personally located?

4

(% respondents)

Procurement 3

North America 30

Legal

30

Supply-chain management

30

Other

APAC Europe Rest of the World 10

20

29

5


2 2 1


Roughly how often are you involved in a formal conversation or structured meeting about the IoT at your organisation? (% respondents)

Daily basis 1

Generally once week 31

At least monthly 33

Annually or semi-annually 21

It has only been mentioned to me once or twice 13

I have never discussed IoT at my organisation 0

What is the primary industry your organisation is in? (% respondents)

Agriculture and agribusiness 9

Automotive 9

Construction and real estate 9

Energy and natural resources 9

Financial services 9

Healthcare, pharmaceuticals and biotechnology 9

IT and technology 9

Manufacturing 9

Outsourced facilities management 9

Retailing 5

Consumer goods 4

Telecommunications 3

Transportation, travel and tourism 3

Logistics and distribution 2

Infrastructure 1

21



Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information,

Cover: Shutterstock

opinions or conclusions set out in the report.

22


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