How IoT Will Drive — and Require — Digital (Industrial) Transformation

In my previous role as a mobile and digital strategist working with large enterprise customers, I often had the opportunity to speak with business leaders about a set of emerging technology forces that I called the “4th wave of mobile disruption.” Without going into too much detail here, the essential premise was that technologies such as IoT, wearables, augmented/virtual reality, and mobile transactions were following on previous waves (e.g. big data, cloud, social media) that would impact businesses across all industries.

What I liked to say to those audiences is that “disruption” can be seen as both a positive and negative force. The positive side is that new technologies can be used to change the status quo externally in markets to enable new products, services and business models. The negative aspect, of course, is that technology disruption dramatically changes the status quo internally, requiring changes to the existing people, process, and technology within organizations. These positive and negative disruptions are what, I believe, is at the heart of the term “transformation” — as in “digital transformation.” In other words, in order to transform your business externally, it needs to be transformed internally as well.

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So how can we think about IoT in the context of digital transformation? After all, IoT is where the digital world meets the physical world: what could be more transformative than that? As I explained in a previous post, IoT represents the intersection of IT and OT (operations technology). So, in a sense, IoT becomes about digital industrial transformation. And I think there will be several types of transformations occurring within the IoT realm.

Transformation #1: Business Value Transformation

This is the most important reason why IoT is becoming top-of-mind for so many organizations: the promise that IoT holds for creating new business value. ESG’s recent 2016 IT Spending Intentions Survey of 633 IT and information security professionals revealed that companies are expecting IoT to generate business value in the form of operational efficiencies (45% of companies asked), better and differentiated customer service (39%), creation of new products and services (38%), and development of new business models (26%).

To realize these benefits, organizations will not only need to consider the potential impact to the breadth of their existing business processes, but will need to establish an innovation approach to discover new products and services. Furthermore, IoT doesn’t exist in a vacuum, but also intersects with other emerging technologies that are moving targets.

Transformation #2: Enterprise Technology Transformation

I won’t spend a lot of time on the implications for enterprise IT here, only because it warrants more space and time, and I’ll expound on it in future posts. That doesn’t mean it’s insignificant; quite the opposite. IoT will force technology leaders must rethink their traditional IT approaches. Ironically, “traditional IT” approaches have already begun shifting, largely due to the impact of cloud, analytics, and mobility. But IoT has large implications across the entirety of the enterprise IT landscape, including infrastructure, applications, security and analytics/data management. And the intersection of IT and OT has a significant implication.

On one hand, it means that enterprise IT must transform to be reliable for mission-critical operations such as manufacturing processes, coordinating network of trains, or helping maintain a jet engine. And on the flip side, it increasingly means that IT becomes embedded in these operations technologies as well with the ultimate objective of transforming physical objects into digital identities.

Transformation #3: Ecosystem Transformation

The crux of this third aspect is this: in order to help enterprises capitalize on the business opportunities of IoT and deal with the IT complexity it creates, vendors within the ecosystem need to transform themselves. Indeed, the entire ecosystem needs to transform. For traditional IT vendors, this requires rethinking how products historically used within the four walls of the enterprise can be extended further to the edge of the network. Additionally, the wireless and mobility ecosystem — operators, device, chipset, networking, etc — are now part of an expanded “ICT” (Information Communications Technology) value chain that must work in concert to deliver cohesive IoT solutions for customers.

And finally, industrial technology companies will increasingly become digital companies (GE as a prime example), as the lines between OT and IT blur. For all of these companies, staking a claim in the IoT market will necessitate transforming products, innovation processes, organizations structures, market messaging, and go-to-market channels.

This is just an initial glimpse on a theme that I will continue to explore in this space and within my IoT research here at ESG. Check back for an upcoming report brief on this topic in the coming weeks.

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Topics: Internet of Things Digital Transformation