It’s a megatrend for the 21st century, but too many companies are too slow to embrace it. “It” is the Internet of Things, which consultant Andres Carvallo says will deliver a smarter world with virtually unlimited growth.
Carvallo was the sole presenter at an Enlightened Speakers Series event in San Antonio.
If the Internet was first developed to let people communicate with each other via email, it has now evolved, said Carvallo. Now, people are interacting through social media – sharing pictures and videos and the Internet has become a vehicle for people to people collaboration.
But the social aspect of the Internet should not be confused with a newer concept – the Internet of Things, or IoT. IoT is a network of devices that have embedded technology to monitor internal conditions and interact with the external environment. It’s also referred to as M2M – machine to machine. What the Internet of Things is not includes most of the devices we’re used to using to communicate with others and use to find information for ourselves . . . personal computers, tablets, and smartphones are not part of the Internet of Things.
What does M2M do? In one example, at a restaurant, if a glass were half full, the sensors in the glass would tell the waiter it needs a refill. Carvallo says that kind of interaction will happen in ten years.
In manufacturing, the supply chain can be automated and all the machines can talk to each other. “Stop, go, speed up, slow down . . . they all talk to each other and there is no limit to this,” Carvallo said.
In retailing, M2M provides better point-of-sale data, as well as better shopping experiences through personalized digital signage.
“Smart” buildings can be run over the Internet of Things. “Hitachi is working on emancipating paint,” said Carvallo. “As human beings, we all heat up and throw off BTU’s. We will generate enough heat in this room that the paint will absorb the heat and translate through electrodes to light the light bulbs. When will it be available commercially? I don’t know, but it is going to happen.”
In fact, it could be said that the Internet of Things is all about connecting. It connects anything to anyone at any time, Carvallo said, and does it anywhere, on any device, over any network. “We’re heading to a point where interoperability will be the cornerstone of this happening,” he said.
The evolution of the Internet to be more about connecting and controlling things than communicating has important ramifications for business. The Gartner Group estimates that IoT product and service suppliers will generate more than $300 billion by 2020, and add more than $1.9 trillion in global economic value. The number of IoT connected devices will reach 26 billion units by 2020, a 30-fold increase from 2009. “That is significant. If you are a businessperson, you don’t want to be left out,” Carvallo said.
Being left out means a business risks the opportunity to operate more efficiently, and reduced costs. A recent report by CBS Interactive says M2M communication can be tied back to a hard return on investment. If a device can report that it has broken down, it saves a field employee the time of traveling to the unit to see why it’s not working. Instead, that employee will go only where attention is needed.
M2M reporting can generate big data that can also help a business operate more efficiently, the report said. Carvallo says businesses must use that data to develop what he calls “The Smarter Enterprise.” The Smarter Enterprise “will seamlessly blend existing and new stand-alone silo trends into a more profitable, faster growing, plentiful, and more customer driven corporate reality,” he said.
“We realized business customers, especially, were going to be creating energy and storing energy – like solar panels – and selling it back to us during peak times, so we needed to know what was going on in every building – HVAC, security, power distribution,” Carvallo said. “We did the same with homes. People are going to Best Buy, Home Depot and Lowes buying all these things like wireless products, energy storage devices, and electric vehicles and we knew we couldn’t ignore change, we had to embrace it.”
Carvallo said the utility had an epiphany. “They decided they were not in the business of building power plants or nuclear or coal or natural gas, rather, they were an electric utility. They were in the business of buying and selling energy,” he said. Once the company came to that realization, it also realized everything else could be outsourced.
“It’s not outsourcing to save costs, it’s outsourcing to gain market share,” he added. “It’s not using mobile devices because others do, it’s embracing mobility as a competitive advantage. It’s not planning for compliance, it’s planning to grow the top and bottom line. It is not a customer feedback program (because that’s old fashioned), it’s using your customers to design new products and service in real time on Twitter and Facebook – which is going on in industries like banking right now.”
Companies must develop smarter playbooks, Carvallo continued. Know who your customer is. That can be done by listening to what customers say about you on Facebook or Twitter. “The number one reason Austin Energy built a smart grid was not because somebody else was building it,” Carvallo said. “It was because our customers were telling us online and at our payment desk that our systems were slow and they wanted something faster.”
That kind of insight can be applied anywhere. Businesses nowadays must look beyond their four walls. “The customer is connecting with you through a smart phone or computer, so your walls are everywhere,” Carvallo said.
But businesses are often slow to recognize that they must change, and have trouble figuring out how to change. “How many organizations have the guy who runs technology every day – not the CFO – sitting with the management team at the board of directors meeting?” he asked. Only one person in the audience raised his hand.
“That is the number one thing that needs changing – you have to have technology at the table,” Carvallo asserted. “You have to bring that thinking into the room and if you don’t have somebody, hire them. You need someone who is a practitioner and can change a company from the inside out.”
The companies that embrace the change and become smart enterprises will survive, Carvallo said. He cited slow movers in their industries, such as Sears and Kodak, and Amazon versus Borders and Barnes & Noble – or even Walmart. “Walmart has done a good job of maintaining $450 billion in sales,” he said. “But by 2024, Amazon will surpass Walmart, going to over $2 trillion in revenues.”
Carvallo suggested ten steps to achieve smart enterprise status:
“Embrace it,” Carvallo said, “because if you don’t you’ll get wiped out.”
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