The Next Wave: The Internet of Things First came the internet, followed by mobile. Now an exploding universe of interconnected devices is spawning new disruption, new challenges and new opportunities.

A deserted-looking grocery store in Seattle resembles a subway station. Customers enter by scanning their smartphones; once they’ve picked items from the shelves, they stroll out. What appears to be shoplifting is, in fact, a real-life example of the internet of things (IoT) at work. This futuristic Amazon Go store allows seamless shopping by employing multiple sensors that communicate with one another. Hundreds of tiny cameras track the items customers select, and pressure sensors detect when items are taken off shelves or placed back on them. As customers leave, all this data is accumulated; bills are generated on smartphones and charged to Amazon accounts.

Electric-car maker Tesla’s Autopilot feature is another example of the internet of things. Eight cameras (with 250-meter vision and 360-degree visibility) and a radar sensor navigate the car autonomously, even through heavy rain and fog, selecting lanes based on traffic and adjusting the driving speed to the route.1

The IoT is no longer an abstract idea of the future. It has invaded our daily lives and will penetrate further. The fixed-line internet wave of the 1990s connected 1 billion users, the mobile wave of the 2000s tied together 2 billion more — and the IoT has the potential to link ten times as many devices. By 2020 we will have 20 billion reasons to care about the IoT as devices ranging from watches to cars to homes will be working together.

The first two waves of the internet era brought astounding changes to the economy. They produced winners like e-commerce and IT-enabled companies and losers like brick-and-mortar stores and print media, which failed to adapt in time. Before the internet era, IBM and Hewlett-Packard sold their products through conventional channels. But as the initial internet wave crested, Dell emerged as a winner by selling its goods online. Ironically, a decade later, Dell lost out as mobile devices displaced personal computers.

Getting More Connected

With the advent of the IoT, manufacturers are already rushing to make “smart” versions of their products. More than 63 million U.S. households have smart TVs.2 More than 27.2 million connected cars are traveling roads worldwide. Smart watches are replacing traditional watches, with sales expected to reach 141 million units this year.3 Slowly and steadily, the internet of things is displacing or evolving everyday products. Understanding the changing IoT space is imperative for companies to better position themselves and potentially capitalize on this wave.

The IoT is the concept of connecting everyday devices to the internet, thereby allowing them to exchange information. This includes not just cell phones and computers but relatively mundane devices like coffee makers, thermostats, washing machines, lamps and water faucets. As the cost of technology and internet access falls, more and more devices will join the list, spawning the densely networked reality captured in the meme “Anything that can be connected on the internet will be connected.” In 2015 about 15.4 billion devices were connected. According to research firm Gartner, more than 26 billion devices will be connected by 2020. IDC predicts that by 2020 global spending on the IoT will reach $1.29 trillion. This kind of growth will force us to be more cognizant of the security and privacy implications of this new technology.

The impact of the IoT is already visible in the following key areas:

Smart Homes

"Alexa, please tell Geneva to preheat the oven to 400 degrees."

Though this may sound like a normal request from a family member, Alexa and Geneva are not people. Alexa is Amazon’s virtual assistant, and Geneva is a General Electric–manufactured oven. Welcome to a smart home, where your appliances communicate with one another and simple voice commands can make them work for you.

A smart home is a living space in which interconnected devices and appliances perform actions that save money, time and energy. The global smart-home market is forecast to reach a value of more than $40 billion by 2020.4 The U.S. currently has the highest smart-home penetration rate, followed by Japan and Germany.

Today, home-automation systems permit the integration of various smart devices and appliances, and their control through smartphones. A vast network of smart objects work together in collecting and analyzing data, and autonomously performing certain actions. This is perhaps the most exciting and relatable application of the IoT: The coffee maker switches on when you switch off your alarm; the refrigerator monitors its contents and places orders to the store when food items run low; home heating and air-conditioning systems change temperature based on information about your skin and body temperature, which are in turn detected and transmitted by wearable devices.

According to Consumer Intelligence Research Partners (CIRP), Amazon and Google combined have sold more than 20 million virtual home assistants.5 Amazon’s Echo is a popular device that’s able to play music, read the news, hail a ride from Uber and even order pizza — all in response to voice commands.

Smart Cars

A driver in California was recently arrested by the highway patrol for sleeping behind the wheel in the middle lane of San Francisco’s Bay Bridge. The driver explained that his Tesla vehicle was on autopilot, so he could kick back and take a nap, and his car would figure out where to go.

Autonomous cars are already here, albeit controversially. Tesla’s Autopilot system is a good example of automobile IoT disrupting traditional routines and ideas. Still, while full autonomous transport may be the next phase of automobile IoT, connected cars have been around for some time, and a number of automakers, including Tesla, General Motors and Toyota, have made significant strides. Sales of cars containing connectivity technology are expected to reach 190 million units by 2021, with $81 billion in revenue.6

Automakers are rapidly embedding hardware and connections that allow drivers to link to their cars via smartphone, enabling global positioning, navigation tools and entertainment systems. Carmakers are ramping up efforts for a number of reasons — most notably, that car buyers want to be connected. Internet connectivity in vehicles allows car companies to release software updates in real time. The companies can use data from the vehicle to analyze its performance and obtain valuable information on how drivers use their cars. This increased connectivity also provides more ways for automakers to cross-sell products and services to customers.

Smart Wearables

The number of connected wearable devices worldwide is expected to exceed 830 million by 2020. Basically, a wearable device is anything you can wear on your body, including traditional accessories like watches, glasses and clothing. The IoT is replacing the everyday items we wear. Samsung’s Smart Suit, for example, connects to your mobile phone and unlocks it as you take it out of your pocket. Smart watches are replacing traditional watches, with unit sales expected to reach 141 million this year.7 All the major mobile companies, including Apple, Samsung and LG Electronics, have invested in smart-watch product lines.

Fitbit is another example of how the IoT can become an essential part of your life: Your phone analyzes data generated by this wearable to help you maintain your fitness level. “The Human Cloud: Wearable Technology from Novelty to Productivity,” a new study from Rackspace Hosting, a managed-cloud-computing company, reports that 18 percent of the people in the U.S. and U.K. are using wearable technology, and that most of those users (82 percent of Americans, 71 percent of Britons) say these devices are making their lives better.8 Gartner estimates 2017 revenue from wearable devices at just over $30 billion.9  

Smart Factories and Agriculture

The association of manufacturing with dark, gloomy factories may soon be a thing of the past. Thanks to the IoT, the smart factory, at least as a concept, is not far off.

At the heart of the smart factory lies a physical network of connected smart devices, collaborative and industrial robots, vehicles and other machinery that collect data to be used in collaboration with one another. These devices are equipped with remote sensors and controllers across industrial infrastructures that allow for integration and information exchange with the physical world via computer-based systems. Manufacturers can use the vast amount of data produced by the IoT to more completely monitor and oversee manufacturing activities, and to improve efficiencies along industrial supply chains.

A PwC survey predicts that by 2020 smart factories should bring average cost reductions across industries of 3.6 percent annually, totaling $421 billion each year.10 Machine-to-machine communication will transform the conventional automation process. For example,  Smart Structures, a leading producer of embedded wireless data collectors,  mixes sensors with cement; the sensors become part of the structure and provide vital information about concrete strength and durability. Airbus, meanwhile, is applying IoT technologies not only to its products but also to tools used by its workers; robots complete manufacturing tasks while sending production statistics to the manager.

According to the Food and Agriculture Organization of the United Nations, the world will have a population of around 10 billion by 2050, which equates to a 70 percent increase in the amount of food we need to produce.11 The IoT is set to push farming to the next level. Farmers have already begun employing high-tech agricultural techniques to improve the efficiency of their day-to-day work. For example, sensors placed in fields allow farmers to obtain detailed maps of both the topography and the resources in the area, as well as variables such as acidity and soil temperature. They can also access climate forecasts to help predict future weather patterns. And farmers can use smartphones to remotely monitor equipment, crops and livestock,  to obtain statistics on livestock feeding and produce. In addition, agricultural drones have become an invaluable tool for surveying land and generating crop data.

Data Generation

One of the by-products of the internet of things is the massive amount of data it generates — data that had not previously been available. Usage data from smart cars and TVs helps manufacturers customize features for future products. Companies can use IoT data to cross-sell: Manufacturers of fitness trackers can link up with shoe sellers and send alerts after a certain cumulative distance, suggesting that it’s time for users to change their running shoes.12 Data on food consumption from smart refrigerators can provide a leading indicator for sales volumes. Data from sensors at various points of industrial automation can lead to useful insights about production and quality.

Traditionally, data was aggregated by companies and provided during conference calls or quarterly earnings, after a significant lag. Because the IoT allows such data to be collected far in advance, companies need to start contemplating their data-commercialization strategies. Depending on the value of the data generated, they might be able to tap into additional revenue. Google already successfully monetizes users’ search, location and personal information by sending targeted ads. Walmart gives suppliers its entire sell-through data in real time, by store.

Security and Privacy Challenges

Just as the growth of smartphones depended on the miniaturization of chips and the reduction of hardware costs, the IoT is enabled by significant technological shifts that have come together and set the stage for exponential growth. Wireless connection capabilities make up the backbone of the IoT. Wireless technology has already reached 77 percent of the world’s population, far beyond the penetration of first-wave, landline-limited internet.13 The cost of sensors has also dropped in the past decade and continues to fall. In 2004 the average cost of a sensor was $1.30; it is expected to decline to $0.38 by 2020.14 Decreasing sensor prices make it possible to collect more data and make more intelligent decisions at a lower cost. Internet costs have also declined over the past two decades. Internet transit prices fell from $1,200/megabits per second in 1998 to $1.20/mbps in 2015, and they continue to drop.15 The growth of smartphones is largely attributed to this cost efficiency. As processing power increases exponentially, processing costs decrease.

Security remains a critical challenge, however. With the internet wave, we only had to worry about protecting our computers; in the mobile wave, we had to protect our smartphones as well. With the IoT wave, we will have to protect our cars, homes, appliances and wearables. With an increase in the number of devices, the chances of user-data theft also rise. Because IoT devices are so integrally connected, a virus could spread throughout the system more easily. To deal with this challenge, IoT deployments must have built-in security protocols and closed communication lines. The cost of this kind of security may limit the large-scale deployment of IoT.

User-data privacy is another unique challenge. Because IoT devices collect data in an environment where users are not consciously controlling them, private data could be at risk of exposure, or worse. A smart TV, for example, can listen to conversations for control commands and transmit data to the cloud for voice processing — and the entire conversation might be available to third parties. Regulation and legal boundaries will be required to protect user privacy.

In spite of these challenges, the internet of things has the potential to transform our lives. There is no doubt that the IoT wave will continue to penetrate various aspects of our lives. The transition from watch to smart watch, from car to smart car and from home to smart home appears to be inexorable. Together, these connected devices will form a growing ecosystem that seems certain to slowly but surely envelop us.

ENDNOTES

1. Danielle Muoio, “Tesla’s New Autopilot Is Getting a Big Update This Weekend — Here’s Everything You Need to Know,” Business Insider, June 16, 2017.

2. “Number of People Living in Households that Own a Smart TV (Internet Capable Television) in the United States from Autumn 2015 to Spring 2017 (in Millions),” Statista.

3. “Smartwatch Unit Sales Worldwide from 2014 to 2018 (in Millions),” Statista.

4. “Smart home — Statistics & Facts,” Statista.

5. Barb Darrow, “Amazon Echo Is the King of Home Assistants. Here’s More Proof,” Fortune, September 18, 2017.

6. “Connected Car Market Report,” Statista,

7. “Wearable technology — Statistics & Facts,” Statista.

8. “Wearable Tech Will Drive the Rise of the ‘Human Cloud’ of Personal Data, Says Rackspace Study,” Business Wire, June 5, 2013.

9. “Wearable Technology Statistics and Trends 2018,” Smart Insights, November 15, 2017.

10. “Smart Factor Statistics in 2017 — Industry 4.0 in Numbers,” Exmos.

11. “UN: Farmers Must Produce 70% More Food by 2050 to Feed Population,” the Associated Press, November 28, 2011.

12. Venkat Viswanathan, “Understanding the Information of Things,” Latentview, July 14, 2016.

13. “What Are the Historical Transit Pricing Trends?” DrPeering International.

14. Mario Honrubia, “Industrial IoT Is Booming Thanks to a Drop in Sensor Prices,” Ennomotive, August 17, 2017.

15. GSM Association, “Coverage Maps & Statistics.”

 

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