As the Internet of Things (IoT) has gained popular attention in the five years since we first published on the topic,1 it has also beguiled executives. When physical assets equipped with sensors give an information system the ability to capture, communicate, and process data—and even, in a sense, to collaborate—they create game-changing opportunities: production efficiency, distribution, and innovation all stand to benefit immensely. While the consumer’s adoption of fitness bands and connected household appliances might generate more media buzz, the potential for business usage is much greater. Research from the McKinsey Global Institute suggests that the operational efficiencies and greater market reach IoT affords will create substantial value in many industries. (For more, see the video “What’s the one piece of advice for a business leader interested in the Internet of Things?” And to see how experts believe the Internet of Things will evolve, see “The Internet of Things: Five critical questions.”)
There are many implications for senior leaders across this horizon of change. In what follows, we identify three sets of opportunities: expanding pools of value in global B2B markets, new levers of operational excellence, and possibilities for innovative business models. In parallel, executives will need to deal with three sets of challenges: organizational misalignment, technological interoperability and analytics hurdles, and heightened cybersecurity risks.
Opportunities beckon . . .
IoT’s impact is already extending beyond its early, most visible applications. A much greater potential remains to be tapped.
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