McKinsey IoT Report Nails It: Interoperability is Key!

Posted on 30th June 2015 in aging, agriculture, automotive, cities, collaboration, communication, data, energy, environmental, Essential Truths, government, health, home automation, Homeland Security, Internet of Things, m-health, M2M, maintenance, management, manufacturing, mobile, open data, paradigm shift, real-time regulation, retail, sensors, smart cities, smart home, SmartAging, supply chain, transportation

I’ll be posting on various aspects of McKinsey’s new “The Internet of Things: Mapping the Value Beyond the Hype” report for quite some time.

First of all, it’s big: 148 pages in the online edition, making it the longest IoT analysis I’ve seen! Second, it’s exhaustive and insightful. Third, as with several other IoT landmarks, such as Google’s purchase of Nest and GE’s divestiture of its non-industrial internet division, the fact that a leading consulting firm would put such an emphasis on the IoT has tremendous symbolic importance.

McKinsey report — The IoT: Mapping the Value Beyond the Hype

My favorite finding:

“Interoperability is critical to maximizing the value of the Internet of Things. On average, 40 percent of the total value that can be unlocked requires different IoT systems to work together. Without these benefits, the maximum value of the applications we size would be only about $7 trillion per year in 2025, rather than $11.1 trillion.” (my emphasis)

This goes along with my most basic IoT Essential Truth, “share data.”  I’ve been preaching this mantra since my 2011 book, Data Dynamite (which, if I may toot my own horn, I believe remains the only book to focus on the sweeping benefits of a paradigm shift from hoarding data to sharing it).

I was excited to see that the specific example they zeroed in on was offshore oil rigs, which I focused on in my op-ed on “real-time regulations,” because sharing the data from the rig’s sensors could both boost operating efficiency and reduce the chance of catastrophic failure. The paper points out that there can be 30,000 sensors on an rig, but most of them function in isolation, to monitor a single machine or system:

“Interoperability would significantly improve performance by combining sensor data from different machines and systems to provide decision makers with an integrated view of performance across an entire factory or oil rig. Our research shows that more than half of the potential issues that can be identified by predictive analysis in such environments require data from multiple IoT systems. Oil and gas experts interviewed for this research estimate that interoperability could improve the effectiveness of equipment maintenance in their industry by 100 to 200 percent.”

Yet, the researchers found that only about 1% of the rig data was being used, because it rarely was shared off the rig with other in the company and its ecosystem!

The section on interoperability goes on to talk about the benefits — and challenges — of linking sensor systems in examples such as urban traffic regulation, that could link not only data from stationary sensors and cameras, but also thousands of real-time feeds from individual cars and trucks, parking meters — and even non-traffic data that could have a huge impact on performance, such as weather forecasts.  

While more work needs to be done on the technical side to increase the ease of interoperability, either through the growing number of interface standards or middleware, it seems to me that a shift in management mindset is as critical as sensor and analysis technology to take advantage of this huge increase in data:

“A critical challenge is to use the flood of big data generated by IoT devices for prediction and optimization. Where IoT data are being used, they are often used only for anomaly detection or real-time control, rather than for optimization or prediction, which we know from our study of big data is where much additional value can be derived. For example, in manufacturing, an increasing number of machines are ‘wired,’ but this instrumentation is used primarily to control the tools or to send alarms when it detects something out of tolerance. The data from these tools are often not analyzed (or even collected in a place where they could be analyzed), even though the data could be used to optimize processes and head off disruptions.”

I urge you to download the whole report. I’ll blog more about it in coming weeks.

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The Internet of Things’ Essential Truths

Posted on 17th March 2015 in collaboration, communication, data, Essential Truths, Internet of Things, M2M, management, manufacturing, marketing, open data, paradigm shift, privacy, security, strategy, supply chain

I’ve been writing about what I call the Internet of Things’ “Essential Truths” for three years now, and decided the time was long overview to codify them and present them in a single post to make them easy to refer to.

As I’ve said, the IoT really will bring about a total paradigm shift, because, for the the first time, it will be possible for everyone who needs it to share real-time information instantly. That really does change everything, obliterating the “Collective Blindness” that has hampered both daily operations and long-term strategy in the past. As a result, we must rethink a wide range of management shibboleths (OK, OK, that was gratuitous, but I’ve always wanted to use the word, and it seemed relevant here, LOL):

  1. First, we must share data. Tesla leads the way with its patent sharing. In the past, proprietary knowledge led to wealth: your win was my loss. Now, we must automatically ask “who else can use this information?” and, even in the case of competitors, “can we mutually profit from sharing this information?” Closed systems and proprietary standards are the biggest obstacle to the IoT.
  2. Second, we must use the Internet of Things to empower workers. With the IoT, it is technically possible for everyone who could do their job better because of access to real-time information to share it instantly, so management must begin with a new premise: information should be shared with the entire workforce. Limiting access must be justified.
  3. Third, we must close the loop. We must redesign our data management processes to capitalize on new information, creating continuous feedback loops.
  4. Fourth, we must rethink products’ roles. Rolls-Royce jet engines feed back a constant stream of real-time data on their operations. Real-time field data lets companies have a sustained dialogue with products and their customers, increasingly allowing them to market products as services, with benefits including new revenue streams.
  5. Fifth, we must develop new skills to listen to products and understand their signals. IBM scientists and medical experts jointly analyzed data from sick preemies’ bassinettes & realized they could diagnose infections a day before there was any visible sign. It’s not enough to have vast data streams: we need to understand them.
  6. Sixth, we must democratize innovation. The wildly-popular IFTTT web site allows anyone to create new “recipes” to exploit unforeseen aspects of IoT products – and doesn’t require any tech skills to use. By sharing IoT data, we empower everyone who has access to develop new ways to capitalize on that data, speading the IoT’s development.
  7. Seventh, and perhaps most important, we must take privacy and security seriously. What responsible parent would put an IoT baby monitor in their baby’s room after the highly-publicized incident when a hacker exploited the manufacturer’s disregard for privacy and spewed a string of obscenities at the baby? Unless everyone in the field takes privacy and security seriously, the public may lose faith in the IoT.

There you have ’em: my best analysis of how the Internet of Things will require a revolution not just in technology, but also management strategy and practices. What do you think?

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Management Challenge: Lifeguards in the IoT Data Lake

Posted on 20th January 2015 in collaboration, data, Essential Truths, Internet of Things, M2M, management, manufacturing, open data, paradigm shift, strategy, supply chain

In their Harvard Business Review November cover story, How Smart, Connected Products Are Transforming Competition, PTC CEO Jim Heppelmann and Professor Michael Porter make a critical strategic point about the Internet of Things that’s obscured by just focusing on IoT technology: “…What makes smart, connected products fundamentally different is not the internet, but the changing nature of the “things.”

In the past, “things” were largely inscrutable. We couldn’t peer inside massive assembly line machinery or inside cars once they left the factory, forcing companies to base much of both strategy and daily operations on inferences about these things and their behavior from limited data (data which was also often gathered only after the fact).

Now that lack of information is being removed. The Internet of Things creates two unprecedented opportunities regarding data about things:

  • data will be available instantly, as it is generated by the things
  • it can also be shared instantly by everyone who needs it.

This real-time knowledge of things presents both real opportunities and significant management challenges.

Each opportunity carries with it the challenge of crafting new policies on how to manage access to the vast new amounts of data and the forms in which it can be accessed.

For example: with the Internet of Things we will be able to bring about optimal manufacturing efficiency as well as unprecedented integration of supply chains and distribution networks. Why? Because we will now be able to “see” inside assembly line machinery, and the various parts of the assembly line will be able to automatically regulate each other without human intervention (M2M) to optimize each other’s efficiency, and/or workers will be able to fine-tune their operation based on this data.

Equally important, because of the second new opportunity, the exact same assembly line data can also be shared in real time with supply chain and distribution network partners. Each of them can use the data to trigger their own processes to optimize their efficiency and integration with the factory and its production schedule.

But that possibility also creates a challenge for management.

When data was hard to get, limited in scope, and largely gathered historically rather than in the moment, what data was available flowed in a linear, top-down fashion. Senior management had first access, then they passed on to individual departments only what they decided was relevant. Departments had no chance to simultaneously examine the raw data and have round-table discussions of its significance and improve decision-making. Everything was sequential. Relevant real-time data that they could use to do their jobs better almost never reached workers on the factory floor.

That all potentially changes with the IoT – but will it, or will the old tight control of data remain?

Managers must learn to ask a new question that’s so contrary to old top-down control of information: who else can use this data?

To answer that question they will have to consider the concept of a “data lake” created by the IoT.

“In broad terms, data lakes are marketed as enterprise wide data management platforms for analyzing disparate sources of data in its native format,” Nick Heudecker, research director at Gartner, says. “The idea is simple: instead of placing data in a purpose-built data store, you move it into a data lake in its original format. This eliminates the upfront costs of data ingestion, like transformation. Once data is placed into the lake, it’s available for analysis by everyone in the organization.”

Essentially, data that has been collected and stored in a data lake repository remains in the state it was gathered and is available to anyone, versus being structured, tagged with metadata, and having limited access.

That is a critical distinction and can make the data far more valuable, because the volume and variety will allow more cross-fertilization and serendipitous discovery.

At the same time, it’s also possible to “drown” in so much data, so C-level management must create new, deft policies – to serve as lifeguards, as it were. They must govern data lake access if we are to, on one hand, avoid drowning due to the sheer volume of data, and, on the other, to capitalize on its full value:

  • Senior management must resist the temptation to analyze the data first and then pass on only what they deem of value. They too will have a crack at the analysis, but the value of real-time data is getting it when it can still be acted on in the moment, rather than just in historical analyses (BTW, that’s not to say historical perspective won’t have value going forward: it will still provide valuable perspective).
  • There will need to be limits to data access, but they must be commonsense ones. For example, production line workers won’t need access to marketing data, just real-time data from the factory floor.
  • Perhaps most important, access shouldn’t be limited based on pre-conceptions of what might be relevant to a given function or department. For example, a prototype vending machine uses Near Field Communication to learn customers’ preferences over time, then offers them special deals based on those choices. However, by thinking inclusively about data from the machine, rather than just limiting access to the marketing department, the company shared the real-time information with its distribution network, so trucks were automatically rerouted to resupply machines that were running low due to factors such as summer heat.
  • Similarly, they will have to relax arbitrary boundaries between departments to encourage mutually-beneficial collaboration. When multiple departments not only share but also get to discuss the same data set, undoubtedly synergies will emerge among them (such as the vending machine ones) that no one department could have discovered on its own.
  • They will need to challenge their analytics software suppliers to create new software and dashboards specifically designed to make such a wide range of data easily digested and actionable.

Make no mistake about it: the simple creation of vast data lakes won’t automatically cure companies’ varied problems. But C-level managers who realize that if they are willing to give up control over data flow, real-time sharing of real-time data can create possibilities that were impossible to visualize in the past, will make data lakes safe, navigable – and profitable.

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My #IoT predictions for 2015

Posted on 10th December 2014 in collaboration, data, Essential Truths, health, home automation, Internet of Things, m-health, M2M, management, manufacturing, open data, paradigm shift, privacy, Quantified Self, security, smart home, strategy, supply chain, voice-overs

I was on a live edition of “Coffee Break With Game-Changers” a few hours ago with panelists Sherryanne Meyer of Air Products and Chemicals and Sven Denecken of SAP, talking about tech projections for 2015.

Here’s what I said about my prognostications:

“I predict that 2015 will be the year that the Internet of Things penetrates consumer consciousness — because of the Apple Watch. The watch will unite both health and smart home apps and devices, and that will mean you’ll be able to access all that usability just by looking at your watch, without having to fumble for your phone and open a specific app.

If Apple chooses to share the watch’s API on the IFTTT – If This Then That — site, the Apple phone’s adoption – and usability — will go into warp speed. We won’t have to wait for Apple or developers to come up with novel ways of using the phone and the related devices — makers and just plain folks using IFTTT will contribute their own “recipes” linking them. This “democratization of data” is one of the most powerful – and under-appreciated – aspects of the IoT. In fact, Sherryanne, I think one of the most interesting IoT strategy questions for business is going to be that we now have the ability to share real time data with everyone in the company who needs it – and even with supply chain and distribution networks – and we’ll start to see some discussion of how we’ll have to change management practices to capitalize on this this instant ability to share.

(Sven will be interested in this one) In 2015, the IoT is also going to speed the development of fog computing, where the vast quantities of data generated by the IoT will mean a switch to processing data “at the edge,” and only passing on relevant data to the cloud, rather than overwhelming it with data – most of which is irrelevant.

In 2015 the IoT is also going to become more of a factor in the manufacturing world. The success of GE’s Durathon battery plant and German “Industry 4.0” manufacturers such as Siemans will mean that more companies will develop incremental IoT strategies, where they’ll begin to implement things such as sensors on the assembly line to allow real-time adjustments, then build on that familiarity with the IoT to eventually bring about revolutionary changes in every aspect of their operations.

2015 will also be the year when we really get serious about IoT security and privacy, driven by the increasing public concern about the erosion of privacy. I predict that if anything can hold back the IoT at this point, it will be failure to take privacy and security seriously. The public trust is extremely fragile: if even some fledgling startup is responsible for a privacy breach, the public will tend to tar the entire industry with the same brush, and that could be disastrous for all IoT firms. Look for the FTC to start scrutinizing IoT claims and levying more fines for insufficient security.”

What’s your take on the year ahead? Would love your comments!

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Perhaps Most Important Internet of Things Essential Truth: Everything’s Linked

Posted on 11th November 2014 in Essential Truths, Internet of Things, M2M, management, manufacturing, marketing, paradigm shift, strategy, supply chain

PROCEED WITH CAUTION!

You see, I’m thinking out loud (that accounts for that sound of gears grinding….) — I really am writing this post as I mull over the subject for the first time, so you’re forewarned that the result may be a disaster — or insightful. Bear with me…

I’m working on a book outline expanding on “Managing the Internet of Things Revolution,” the introduction to IoT strategy for C-level executives that I wrote for SAP. One of the things I’ve been looking for is a theme that would bring together all of the book’s parts, which include product design, manufacturing, marketing and corporate organization, among other topics.

I think I’ve got that theme, and I think it may be the most Essential Truth of all the ones I’ve written about regarding the IoT:

Everything’s Linked!

When you think about it, there have been a lot of dead-ends in business in the past:

  • we haven’t been able to know how customers used our products. We’ve actually got a lot more information about the ones that failed, because of warrantee claims or complaints, than we have about the ones that worked well, because that information was impossible to gather.
  • data that could help workers do their work better has always come from top down, filtered by various levels of management and only delivered after the fact.
  • customers can’t get the full value of our products because they operate in isolation from each other, and often were slow to react to changing conditions.
  • assembly-line machinery has frequently been hard to optimize, because we really didn’t know how it was operating — until it broke down.
  • key parts of the operation, such as supply chain, manufacturing, and distribution, have been largely independent, without simultaneous access to each other’s status.

With the Internet of Things, by contrast, everything will be linked, and that will change everything:

  • we’ll get real-time data about how customers are using our products. Most radically, that data may even allow us, instead of selling products and then severing our ties to the customer as in the past, to instead lease them the products, with the pricing dependent on how they actually use the products and the value they obtain from them.
  • everyone in the company can (if your management practices allow!) have real-time access to data that will help them improve their decision making and daily operations (hmm: still looking for an example of this one: know any companies that are sharing data on a real-time basis??).
  • products will work together, with synergistic results (as with the Jawbone UP turning on the NEXT), with their operation automatically triggered and coordinated by services such as IFTTT.
  • the assembly line can be optimized because we’ll be able to “see” into massive equipment to learn how it is operating — or if it needs repairs in time to avoid catastrophic failure.
  • access to that same data may even be shared with your supply chain and distribution network — or even with customers (again, looking for a good example of that transformation).

There’s won’t be dead ends or one-way streets where information only flows one way. Instead, they’ll be replaced by loops (in fact, I thought loops might be an alternative theme): in many cases, data will be fed back through M2M systems so things can be optimized.

If that’s the case, we’ll be able to increase the use and value of tools such as systems dynamics software, that would help us model and act on these links and loops. Instead of massive oscillations where we’re forced to make sudden, major corrections when data finally becomes available, machinery will be largely self-regulating, based on continuous feedback. We’ll delight customers because products will be more dependable and we’ll be able to fine-tune them by adding features based on actual knowledge of how the products work.  Workers will be more efficient, and happier, because they’ll be empowered. We’ll tread lightly on the earth, because we’ll use only what we need, precisely when we need it.

By George, I think I’ve got it! I’m excited about this vision of the Internet of Things linking everything. What do you think?? Please let me know! 

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Why It’s So Hard to Predict Internet of Things’ Full Impact: “Collective Blindness”

Posted on 9th September 2014 in design, Essential Truths, government, health, home automation, Internet of Things, m-health, M2M, maintenance, management, manufacturing, marketing, mobile, paradigm shift, Quantified Self, retail, smart home, SmartAging, strategy, supply chain, transportation, wearables

I’ve been trying to come up with a layman’s analogy to use in explaining to skeptical executives about how dramatic the Internet of Things’ impact will be on every aspect of business and our lives, and why, if anything, it will be even more dramatic than experts’ predictions so far (see Postscapes‘ roundup of the projections).

See whether you thing “Collective Blindness” does justice to the potential for change?

 

What if there was a universal malady known as Collective Blindness, whose symptoms were that we humans simply could not see much of what was in the world?

Even worse, because everyone suffered from the condition, we wouldn’t even be aware of it as a problem, so no one would research how to end it. Instead, for millennia we’d just come up with coping mechanisms to work around the problem.

Collective Blindness would be a stupendous obstacle to full realization of a whole range of human activities (but, of course, we couldn’t quantify the problem’s impact because we weren’t even aware that it existed).

Collective Blindness has been a reality, because vast areas of our daily reality have been unknowable in the past, to the extent that we have just accepted it as a condition of reality.

Consider how Collective Blindness has limited our business horizons.

We couldn’t tell when a key piece of machinery was going to fail because of metal fatigue.

We couldn’t tell how efficiently an entire assembly line was operating, or how to fully optimize its performance.

We couldn’t tell whether a delivery truck would be stuck in traffic.

We couldn’t tell exactly when we’d need a parts shipment from a supplier, nor would the supplier know exactly when to do a new production run to be read.

We couldn’t tell how customers actually used our products.

That’s all changing now. Collective Blindness is ending, …. and will be eradified by the Internet of Things.

What do you think? Useful analogy?

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Internet of Things interview I did with Jordan Rich

Posted on 17th July 2014 in aging, health, home automation, Internet of Things, m-health, M2M, management, manufacturing, marketing, mobile, privacy, Quantified Self, retail, security, seniors, smart home, SmartAging, strategy, supply chain, wearables

Didn’t realize this had run several weeks ago, but here’s an introduction to the IoT (based on my SAP “Managing the Internet of Things” i-guide) that I did with Jordan Rich of WBZ Radio, who’s also my voice-over mentor.  The examples include the GE Durathon battery plant, “smart aging,” Shodan, the SAP prototype smart vending machine and Ivee. Enjoy!

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IoT will streamline supply chain, reduce environmental impact

Posted on 21st August 2013 in energy, environmental, Internet of Things, M2M, manufacturing, supply chain

There’s a new Deloitte white paper that echoes a theme I’ve been repeating since 1990: smart businesses eliminate inefficiency by eliminating environmental waste.

I predict that the Internet of Things will speed that trend by allowing real-time data sharing throughout the supply chain, further increasing its efficiency.

The white paper, “The Evolving Supply Chain: Lean and Green,” says that:

“Leading companies are now finding that a green supply chain doesn’t just improve the public’s perception of their company and brand; it can save money by using resources more efficiently and reducing waste. It can also help to manage risk by insulating a company from shortages and price shocks, and by reducing the chances that a supplier will do something that gets them in hot water.”

It continues by identifying five key factors to reduce:

“Leading companies create value by modifying their supply chains to manage five key inputs and outputs: energy, carbon, water, materials and waste. These five resources are ubiquitous throughout the supply chain and thus offer vast potential for improved efficiency and cost reduction. Energy is expensive to use; carbon, in the form of emissions, represents dollars gone up in smoke; scarcity and commodity inflation are driving up the price of water and materials; and waste is a potential profit thrown away.”

In my speeches on the “Zero-Waste Economy,” I used to suggest that executives that were contemptuous of tree-hugging environmentalists and could care less about generating wastes should just substitute the work inefficiencies for waste. What hard-nosed company could justify inefficiency?

It’s great to see that the message is finally getting mainstream acceptance, and I really do think that the IoT will boost supply chain efficiency and thereby reduce environmental impacts by allowing everyone in the supply chain who needs operating data to share it simultaneously and in real time.

So there’s really no excuse any more for not practicing smart environmentalism, is there?

PS: To get the specifics about how to translate smart environmentalism into profits, check out Gil Friend’s Natural Logic. He’s got the operating manual.

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