What key disruptive effects have and will the Internet of Things or physical computing have on business and our daily lives?
Internet of things (in the following: IoT), Industrial Internet, Ubiquitous Computing – these are current buzz words all trying to provide a catchable description of what we are currently experiencing: A fundamentally new quality of computerized data collection and processing, enabled by smart devices, which are fitted with sensors, processors and connectivity components making them capable of being interconnected devices with autonomous exchange of information. These devices form the IoT, a vision in which classical computers as separate devices are disappearing and smart objects merge into the physical world. This essay will elaborate upon the concept of the IoT, the underlying conditions why we are experiencing the realisation of the vision now, the value drivers and how this will affect our private lives as well as businesses.
What is a smart device?
This paragraph will provide a brief concept of the IoT and show how the term IoT was created. The term IoT comprises devices which are equipped with sensors, actuators and connectivity components. These components are embedded in physical objects connected through networks, often wireless, to computing resources and other smart devices. (Chui, et al., 2010) This concept was first proposed by Kevin Ashton when he was giving a presentation for P&G in the context of implementing the RFID technology in P&G’s supply chain. (Ashton, 2009)
Why is the IoT starting to materialise now?
This paragraph will provide some evidence why the realisation of the IoT is happening now. Key components of every single smart device are sensors, actuators, connectivity components like a WIFI chip and a battery. The development of these complementary technologies got more sophisticated over the last years, especially with respect to size and energy consumption which plays a key role for the development of reasonable, applicable devices, which other than classical computers are not connected to a source of energy. As a consequence of these maturing technologies, the prices declined to a point where it became feasible to use them to augment devices to enable them to sense their environment and then carry and transfer this information. Beside this evidence, the complementary technology of cloud-based computing power, needed to process the information gathered by the devices, also decreased in price. Interestingly enough the decline in prices follows Moores Law, an observation made by Gordon E. Moore (1965), that says that computing power (number of transistors on integrated circuits), doubles every two years, implying that prices decline over time. Another underlying technology is worth mentioning: The mobile communication technology has also developed significantly, providing wireless connectivity with sufficient bandwidth nearly everywhere.
Value drivers of the IoT – prerequisites for disruptive effects
The following paragraph will provide some insights into the value drivers of the IoT. Before elaborating on this it is worth saying that it is very hard to model the exact value drivers and their potential effect as almost all business processes in almost every industry is embedded in the real world, hence the IoT could be relevant and applied in every step of the value chain. With that being said, substituting human input within these processes by smart devices (as they, for example, can count the inventory much more accurate than humans) can lead to huge positive, but not easily predictable, effects. (Fleisch, 2010)
According to Fleisch (2010) there are seven value drivers which all have disruptive effects in common:
1. Simplified manual proximity trigger: Think about self-check-out or stock-taking in libraries, basic payment procedures, etc. Here the value comes from the fact, that a smart thing can communicate and identify itself to its environment in a very robust, fast and convenient way when it comes into the roaming space of a proximity sensor. As soon as the smart device in close enough, e.g. a transaction is automatically triggered. This kind of value driver is actually used already quite often in today businesses. Think about self-service checkout at retailers, delivering value to the business by reducing labour costs.
2. Automatic proximity triggers: The difference to the afore mentioned value driver is that two smart devices automatically initiate a transaction as soon as their proximity undercut or exceed a certain threshold. Think again about an inventory system within a warehouse. This value driver could automatically update a warehouse software in real-time without additional input by a human. Additional to that this value driver generates a more accurate level of information, which itself can be used to manage and amend the business processes to become more efficiently. This can also add value to our personal lives, e.g. a car door that unlocks automatically when the person who is carrying the key in his pocket approaches the car.