The Internet of Things meets artificial intelligence: How early adopters are gaining competitive advantage
Over the past decade, the Internet of Things (IoT) has evolved from a futuristic business buzzword that most people only vaguely understood, to a cutting-edge business strategy, to practically status quo.
Worldwide spending on the IoT could reach $772.5 billion in 2018, a 15 percent increase over 2017. Much of that spending will come from enterprises. Sixty-six percent of executives are now incorporating IoT into their operating models, according to a recent study by the IBM Institute for Business Value.
For the study, “Intelligent connections: Reinventing the enterprise with Intelligent IoT,” researchers interviewed 3,158 C-level leaders about their companies’ current and future use of IoT. The data shows that most organizations are at least beginning to incorporate the technology, and a few innovative trailblazers have already taken the next step: leveraging the combined power of IoT technology and artificial intelligence (AI).
What is intelligent IoT?
IoT refers to the rapidly growing network of physical devices that are capable of sending and receiving data across the internet without human interaction. This includes wearables and mobile devices, connected medical devices, smart home appliances, sensors that are built into vehicles, environmental sensors that monitor factory equipment and sensors that control lights, doors, farming machines or any other physical “thing.”
These connected things can also be interconnected into an ecosystem in which they interact with one another and with decision agents via the internet or a private network. But the real opportunity for innovation comes when things are intelligently connected — when the data is fed into an AI-based algorithm for autonomous decision-making and machine learning.
By applying AI to IoT, forward-thinking leaders are optimizing processes, gaining new insights from all their interconnected things, enabling new services, improving customer relationships and creating “cognitive” engines that can reason and interact more naturally with human beings than traditional digital systems.
How the Internet of Things gets smart: Best practices from early adopters
For the “Intelligent Connections” study, researchers evaluated the sophistication of each organization’s IoT capabilities, strategies and enterprise agility, and identified four archetypes:
The Reinventors have the highest levels of IoT adoption and a clear vision for how AI can provide real-time insights and automate processes and decision-making — and this seems to be paying off. Seventy-seven percent of Reinventors report high revenue growth and high profitability. By comparison, 58 percent of Tacticians report high revenue growth, and 55 percent report high profitability.
So, what do Reinventors do better than Tacticians? And what do the most advanced Reinventors do differently than everyone else?
Reinventors are more collaborative
Reinventors believe collaboration is critical to innovation. They encourage collaboration and knowledge sharing among team members, and eight in 10 empower their teams to decide on the best course of action — something only half of Tacticians do. Reinventors excel at using data to understand customer needs, anticipate their wants and continually improve the customer experience. In fact, 81 percent have used data to identify undefined and unmet customer needs. Only 66 percent of Tacticians have done so. Reinventors have better collaborations with vendors and technology experts. Seventy-five percent say they have the right network of partners, suppliers and distributors to execute their business strategy, compared to only 57 percent of Tacticians. Seventy-two percent of Reinventors even collaborate (selectively) with competitors when there is a valuable opportunity for innovation.
Reinventors invest in platforms and emerging technologies
Tacticians have made great strides toward putting foundational IoT devices and networks in place. However, Reinventors are more likely to have built robust, highly scalable IoT infrastructures that include:
- Cloud infrastructure
- Device connectivity management software
- IoT Platform-as-a-Service
- IoT data storage/data lakes
Reinventors are also investing significantly more than Tacticians into emerging technologies that leverage AI algorithms and IoT data, such as robotic process automation, physical robots and virtual and augmented reality.
Reinventors have a vision of combining AI with IoT across their organizations
Two-thirds of Reinventors strongly agree that the full potential of IoT can only be realized with the introduction of AI technologies, as compared to only one out of 10 Tacticians. Reinventors are also more likely to understand the benefits of Intelligent IoT, including:
Improve quality and operational efficiency, with less human and financial risk (70 percent of Reinventors versus 14 percent of Tacticians)
Enable new services, business models and revenue streams (68 percent of Reinventors versus 11 percent of Tacticians)
Enable new patterns, opportunities and actionable insights (63 percent of Reinventors versus 13 percent of Tacticians)
Enable new classes of IoT products and services that sense, reason and learn (60 percent of Reinventors versus 12 percent of Tacticians)
Trailblazers have the strategy and resources in place to execute the vision
Overall, Reinventors are best positioned to deploy Intelligent IoT solutions, but only 30 percent of Reinventors (5 percent of all study participants) are actively embracing these solutions. These trailblazing Reinventors have developed, tested and refined their strategies, along the way gaining extensive input from the operational side of the business and from end users. They’re also preparing their workforces for human-machine interaction, training them to train machines and helping them understand how their roles will evolve as AI becomes more sophisticated over time. To help their teams remain competitive, more than 90 percent of these trailblazing Reinventors are investing in continuously improving employees’ skills.
Bottom line: Applied AI is when things start to get interesting in the Internet of Things. Intelligent IoT is no longer a futuristic concept. It’s happening right now, but only at about 5 percent of organizations. Now, that’s a competitive advantage. It’s also a huge opportunity for anyone else who can catch up.
For more best practices from IoT Reinventors, read the full report, “Intelligent connections: Reinventing the enterprise with Intelligent IoT.”