internet of things ecosystem: the quest for value

The Internet of Things ecosystem: The quest for valuePresenters: Craig Wigginton, Vice Chairman and U.S. Telecommunications leader, Deloitte & Touche LLPJohn Hagel, Co-Chairman, Deloitte LLP’s Center for the Edge

Host: Eric Openshaw, Vice Chairman and U.S. TMT leader, Deloitte LLP

Copyright © 2014 Deloitte Development LLC. All rights reserved.

Internet of Things (IoT) Definition and Projections

IoT Business Value Framework

Strategies to Unlock IoT’s Business Value

Overcoming the Security and Privacy Challenge

Agenda


• 26 billion connected devices by 2020(1)

• $1.9 trillion global economic value-add by 2020(1)

• $9 trillion in annual sales by 2020(2)

• 75% of executives exploring/adopting IoT(3)

Everyday objects’ network connectivity to each other and/or to humans, allowing them to send and receive data and perform a corresponding action.

What is Internet of Things (IoT)?

Sources:1) Gartner, Nov. 20132) IDC, Oct. 20133) The Economist, Oct. 2013x


• The desired outcome is an ecosystem where everyone benefits– Standards– Security– Interoperability– Breakdown of silos – Horizontal layers– Data commons with open access

The IoT ecosystem is in its early stages of evolution and is characterized by a high degree of complexity

IoT Ecosystem

Network Service

ProvidersCloud

Service Providers

(CSP)

Hardware Makers

Device Manu-

facturers

IT services vendors

Middlewarevendors

Softwarevendors

Standards Bodies

Industry Groups

Regulators/Govt.

IoT Provider Ecosystem


The projected adoption of IoT technologies and solutions will depend on executives finding ways to monetize on the investments

IoT Business Value Framework

Focus on Financial Metrics

Focus on OperatingMetrics

Transition from “Transaction” to “Relationship”

• Increase in revenues• Decrease in cost/expenses• Reduction and improvement in asset

utilization

• Improvements in:– Facilities/asset lifecycle– Product lifecycle– Customer lifecycle

• Holistic approach to past and future transactions with an entity with focus on the relationship


• To date, the primary value driver – 65% of use cases focused on

cost reduction(1)

• Transaction-based• Facility/asset lifecycle focused• Examples:

– Process inefficiencies– Human errors– Lost/stolen assets

Case Study: Cost Reduction

Asset Tracking in the Oil Fields• Oil rental equipment provider• Sensors on machinery send

alerts with data for technicians to troubleshoot/fix remotely

• Results– 50% decrease in site visits– Reduced labor, vehicle and fuel

costs– Decrease in time required for

diagnostics and repair, less machine downtime

Sources:(1) Deloitte analysis based on information from 20 IoT providers and 89 IoT implementations


• To date, the primary value driver – 22% of use cases focused on

risk management(1)

• Transaction-based• Facility/asset lifecycle focused• Examples:

– Workforce safety in remote locations

– Track/restrict movements of assets

– Preempt/lower fraud

Case Study: Risk Management

Fleet Maintenance• Crane and heavy truck fleet

operator• Sensors on tires measure and

alert for changes in tire pressure• Results• Preemptive maintenance • Decrease in accidents related to

malfunctioning fleet • Increase in workforce safety



• Nearly 75% of companies express interest in new business opportunities/fortify existing products but only 13% of use cases are focused on revenue generation(1)

• Revenue/innovation value driver has the largest potential with increasing returns over time

• Potential for “relationships” rather than transactions

• Product and customer lifecycle focused

• Disruptive potential

Case Study: Revenue and Innovation

Quantified Self Movement • Individuals (not health care

providers) capture, analyze and share data through wearables

• Results: – Health and wellness providers

offer more personalized treatments based on the data

– Individuals connect with a diverse ecosystem of wellness providers and get more value and insight

– Role of traditional health care providers changes significantly



Explore revenue and innovation potential

Focus on product and/or customer lifecycles

Target early deployment to maximize impact

Use data (data mash-ups) to build relationships

Maximize transparency to enhance human trust

Develop security that is both preventative and responsive

Select Strategies to Unlock Value in IoT

1

2

3

4

5

6


Elevate the conversation and include a broad range of stakeholders in addition to the CIO

Revenue and innovation focus

• From an economic perspective, what does IoT technology do for the enterprise?

• How can real-time monitoring and predictive analytics lead to product or process innovations?

• How can assets be better deployed to expand business into new customer segments or regions?

• How can connection and real time context support more effective marketing?

• How can connectivity between a mobile workforce shorten the sales cycle?

1


Inputs• Customer visits• Buying behavior• Payment modes • Inventory

Move beyond facility lifecycle management to product and customer lifecycle management

Customer and product lifecycle focus 2

Outputs• Increased sales• Improved customer

loyalty• Improved

merchandise/inventory management


Focus on “Metrics That Matter”Target early deployments 3

Ecos

yste

m

Organization

Employe

es

Manag

ers

Execu

tive

Financial metrics

Operating metrics

Frontline metrics


• Real-time data• “Mash-ups” for context• Predictive analytics• Visualization

Use readily available sensor data to understand the context and build a relationship

Use data to build relationships 4


Define: • Minimum set of information needed to deliver customer value • Allow users to select that data they want to share• Define how and when different apps get access to what information —

based on the needs of the app provider and resulting benefits to users

Maximize data transparency

Scale

Com

plex

ityH

ig h

HighLow

E-mailText

Messages

Social Media Interactions

M2M/IOT InteractionsMovies/

Videos

Customer Calls

Digital Images

Search Engine

Data

Traffic Data

Customer Location

Data

Weather Data

Company Financial

Data

Procurement System Data

Point-of-Sale Data

Stock Market Transactions

Retail DataTravel

Bookings

Credit Card Transactions

Employee Data

Bank Account Data

In data analytics, different categories of data have varying complexities and require different levels of access and controls — and M2M/IOT is one of the most complex categories

5


• Number and types of 3rd parties were found to be the #1 top vulnerability — and IoT by definition is made up of numerous 3rd parties

• Privacy is another people-related challenge exacerbated by mobile and cloud. Yet, only 64% of TMT organizations currently have a privacy program in place

“Last year, security-related regulatory compliance was one of the top three security initiatives. This year, compliance did not even make the top 10. Organizations now recognize how crucial information security is to heir business success and are investing in it because it’s smart business, not just because regulations require it.”

Preventive and responsive security

Impact of the information security breaches in past 12 months

Top vulnerabilities

6


• Number and types of 3rd parties• Intra-company vs. Inter-company security considerations • Rapid proliferation of number, types and capabilities of IoT connected

devices• Geographic disparity, device disparity, operating system disparity,

number of devices, different data types• Lack of awareness of, and capabilities within security for many smaller

IoT startups• Non-computing devices becoming computing and communications

devices (e.g., cameras, refrigerators, washing machines) — something they were never intended to be

• Focus on solution and capability first, security…tenth??

“With more than 30 billion devices expected to be wirelessly connected to the IoT by 2020, imagine again what the lack of a robust security infrastructure would mean for that M2M-enabled car you might be driving” — ZDNet, 2014

Security and Privacy Challenges in IoT 6


Category Sample S&P ConcernsHealth Monitoring

• HIPPA compliance• Opt-in, Opt-out criteria• Hacking biomedical devices

(e.g., pacemakers)

POS/Vending • Payment transaction security

• External, distributed physical links to internal corporate systems

Smart Grid & Utilities

• Power grid attacks, vulnerability

• National security implications

Category Sample S&P ConcernsTelematics • Vehicle/Location tracking

• Unauthorized vehicle access

• Self-driving vehicles (and impacts of malicious intent)

Home Automation

• Unauthorized home access• Privacy issues if video links

are misused/hacked • Baby monitor hacking

Insurance • Privacy of loss history • Anonymization of data for

statistical analysis

Examples of S&P Concerns in IOT 6


The Internet of Things Ecosystem: Unlocking the business value of connected devices

The Internet of Things (IoT) has the potential to offer business value that goes beyond operational cost savings. Providers in the IoT ecosystem have a largely unexplored opportunity to develop compelling IoT solutions that explore how the ability to collect and analyze disparate data, in real-time and across time, might transform the business. These developments will play out within and across enterprises, offering opportunities for sustained value creation and even disruption for those who can imagine possibilities beyond the incremental.

Learn more: www.deloitte.com/us/iot_ecosystem

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http://www.deloitte.com/view/en_US/us/Industries/technology/fae342b71ffa6410VgnVCM2000003356f70aRCRD.htm



http://www.deloitte.com/us/iot_ecosystem


John [email protected]

@jhagel

Craig [email protected]

@craigwigginton

Eric [email protected]

@eopenshaw

Contact info

mailto:[email protected]



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Copyright © 2014 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu Limited

internet of things ecosystem: the quest for value

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