Generating Value in IoT – What Types of Opportunities Create the Greatest Value?

IoT and specifically analytics with IoT has the potential to generate significant value for businesses in a wide variety of industries and applications.

Understanding the landscape of potential value creation across industry segments and use cases is important to help align expectations and create plans for IoT application development.

IoT applications can be categorized into 3 major market segments – Industrial, Enterprise, and Consumer. The value inherent in the applications can be further segmented into three layers:


As shown in the above diagram, there are three tiers of value with the highest value generated at the top of the graphic.

The bottom tier of value is about Safety and Security.  This absolutely critical in all 3 market segments of IoT – whether you are talking about cyber-security, fraud detection, or personal health.  While these use cases are important, they tend in general to be focused on value preservation vs. new value creation, so the relative amount of value tends to be modest.

The middle tier of value is about Operational Efficiency and Cost Savings.  These “hard savings” tend to be of greater value than the bottom tier, and include examples such as:

  • Predictive Maintenance that preserves value of equipment by avoiding downtime and more expensive urgent or emergency repair works
  • Asset Optimization in which a particular piece of equipment or high value manufacturing machine is analyzed and configured to operate more efficiently

In these use cases, large companies often find that even a 1% improvement in operational efficiency can translate into billions in operational cost savings.

The top tier is where the greatest value is generate and is primarily focused on revenue generation.  These use cases are driven by new business models and new services. Some examples are:

  • New customer service models and offerings in which the end buyer has access to a much larger pool of usage data and can self-manage their own equipment or operational patterns
  • Predictive 1-1 Marketing –  A wide array of consumer and B2B companies are taking advantage of the power of Predictive marketing to individuals using IoT analytics.  Retail store location, weather, purchase frequency and many other variables can be blended to predict and then offer consumers what they might want at the right moment in time.

While there is no doubt that generating new revenue is the highest value for new IoT applications, it is still relatively rare in this early stage of IoT.

A recent Capgemini study found that only 30% of large European and US companies have created IoT applications that generate revenue. There are many opportunities to grow more in this tier of IoT application development.

Time-to-Action is Critical

One common theme across all of these use cases and tiers is that they are time critical.  For example:

  • You would want to stop a cybersecurity attack at its onset because an attack can bring down a smart grid or transportation network.
  • You would want to repair critical manufacturing or utilities generation equipment before it fails.
  • You would want to engage the customer in the right context and at the right time.

IoT demands that you both analyze and act in a short time window to capture and generate the value in the above use cases.  We’ll talk more about that topic in one of our future blogs.

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