Back in 2013, The Economist Intelligence Unit launched the inaugural Internet of Things (IoT) Business Index to measure commercial adoption of the then-emerging technology. Unsurprisingly, companies were in the nascent stages of IoT integration at that time. More surprising was the first follow-up study in 2017: despite considerable discussion, the business adoption of the IoT had advanced only marginally in the intervening years.
The index, which is based on a global and cross-industry executive survey, is now in its third edition, providing a rare longitudinal measure of IoT implementation. This edition shows that between 2017 and 2020, a step-change in IoT adoption took place.
This report, which is sponsored by Arm, examines the results of the IoT Business Index survey and draws on in-depth interviews with executives who have led or advised on IoT initiatives within companies or founded IoT-based businesses.
The key findings of the study include:
- Since 2017, both internal and external-facing IoT adoption have advanced substantially. The score for the application of IoT to products and services jumped from 4.43 (“in planning”) in 2017 to 5.96 (just shy of “early implementation”), meaning the average company is now on the cusp of early implementation of IoT-powered products and services. The score for IoT adoption in internal operations (such as monitoring the status of plant and equipment, tracking energy consumption, etc) jumped even further, from 4.34 to 6.82, firmly in the “early implementation” bracket.
- This progress reflects increased investment. Of the executives surveyed, 82% say their organizations grew their IoT investment in the past three years, up from 62% who said the same in 2017. One in five businesses (20%) grew that investment by 50% or more. For 10% of manufacturers, it more than doubled. This investment is delivering returns, respondents say: most agree either “somewhat” (38%) or “strongly” (19%) that their use of IoT has delivered “more than its expected return on investment”.
- A “path to business value” for the IoT has emerged. Companies’ first forays into the IoT typically focus on single, application-specific projects that provide a clear return on investment. But value increases as IoT data are merged with other data sets, incorporated into predictive or prescriptive analytics, and used to integrate processes that cross-divisional and organizational boundaries. Successful companies are those that plan a multi-year path towards these higher-value capabilities.
- The next frontier of progress will be to use IoT data strategically. More than two-thirds of respondents agree that understanding the value of data helps them articulate the business case for IoT investments. However, only 16% “strongly” agree that “the use of the IoT at my organization has been informed by an overarching data strategy”. Correspondingly, most implementations to date have focused on monitoring products or operations rather than prediction and design.
- Artificial intelligence (AI) is viewed as vital to realizing the value of IoT data. Just over a quarter of survey respondents (26%) say that IoT data are pivotal to their current or planned use of AI, with 56% identifying IoT as “one of many important sources” for AI initiatives. Furthermore, 64% agree that “the value of IoT data to my organization has increased as we have developed our AI capabilities”. Many interviewees view IoT and AI as two components of an advanced analytics capability. Reportedly, algorithms trained on data sources including IoT provide the greatest value and competitive differentiation.
- Security concerns still hamper IoT adoption. Forty-five percent of respondents believe that security concerns have held back consumer adoption, although respondents from the consumer goods and retail industry were the least likely to agree. Thirty-seven percent say these concerns have discouraged their companies from pursuing an IoT strategy. More positively, the survey reveals that security capabilities grow as companies progress with adoption: 55% of respondents whose organizations have reached “extensive” IoT adoption say they have the internal expertise and resources that IoT security requires.
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