Opinion: How to profit from the Internet of Things: 4 quick successes and 4 bigger ideas

Investors will see the Internet of Things transform industries

During the past few years, much has been made of the billions of sensors, cameras, and other devices being connected exponentially in the “Internet of Things” (IoT)—and the trillions of dollars in potential economic value that is expected to come of it. Yet as exciting as the IoT future may be, a lot of the industry messaging has gone right over the heads of people who today operate plants, run businesses and are responsible for implementing IoT-based solutions. Investors find themselves wondering what is real, and what is a hyped-up vision of a future that is still years away.

Over the past decade, I have met with dozens of organizations in all corners of the globe, talking with people about IoT. I’ve worked with traditional industrial companies struggling to change outmoded manufacturing processes, and I’ve worked with innovative young startups that are redefining long-held assumptions and roles. And I can tell you that the benefits of IoT are not in some far-off future scenario. They are here and now—and growing. The question is not whether companies should begin deploying IoT—the benefits of IoT are clear—but how.

So, how do the companies get started on the IoT journey? It’s usually best to begin with a small, well-defined project that improves efficiency and productivity around existing processes. I’ve seen countless organizations, large and small, enjoy early success in their IoT journey by taking one of the following “fast paths” to IoT payback:

Connected operations. By connecting key processes and devices in their production process on a single network, iconic American motorcycle maker Harley Davidson HOG, +0.95% increased productivity by 80%, reduced its build-to-order cycle from 18 months to two weeks, and grew overall profitability by 3%-4%.
Remote operations. A dairy company in India began remotely monitoring the freezers in its 150 ice cream stores, providing alerts in case of power outages. The company began realizing a payback within a month and saw a five-fold return on its investment within 13 months.
Predictive analytics. My employer Cisco CSCO, +0.03% has deployed sensors and used energy analytics software in manufacturing plants, reducing energy consumption by 15% to 20%.
Predictive maintenance. Global mining company Rio Tinto RIO, +1.64%RIO, +0.03% RIO, +1.21% uses sensors to monitor the condition of its vehicles, identifying maintenance needs before they become problems—and saves $2 million a day every time it avoids a breakdown.

These four well-proven scenarios are ideal candidates to get started on IoT projects. Armed with an early success, companies can then build momentum and begin to tackle more transformative IoT solutions. Here, IoT provides rich opportunities across many domains, including:

New business opportunities and revenue streams. Connected operations combined with 3D printing, for example, are making personalization and mass customization possible in ways not imagined a few years ago.
New business models. IoT enables equipment manufacturers to adopt service-oriented business models. By gathering data from devices installed at a customer site, manufacturers like Japanese industrial equipment maker Fanuc 6954, +0.13% can offer remote monitoring, analytics and predictive maintenance services to reduce costs and improve uptime.
New business structures. In many traditional industries, customers have typically looked to a single vendor for a complete end-to-end solution, often using closed, proprietary technologies. Today IoT, with its flexibility, cost, and time-to-market advantages, is driving a shift to an open technology model where solution providers form an ecosystem of partners. As a result, each participant provides its best-in-class capabilities to contribute to a complete IoT solution for their customers.
New value propositions for consumers. IoT is helping companies provide new hyper-relevant customer experiences and faster, more accurate services than ever before. Just think of the ever-increasing volume of holiday gift orders placed online on “Black Monday.” IoT is speeding up the entire fulfillment process, from ordering to delivery. Connected robots and Radio Frequency Identification (RFIUD) tags in the warehouse make the picking and packing process faster and more accurate. Real-time preventive maintenance systems keep delivery vehicles up and running. Telematic sensors record temperate and humidity throughout the process. So, not only can you track your order to your doorstep, your packages are delivered on time—and they arrive in optimal condition.

So, yes, IoT is real today and is already having a tremendous impact. It is gaining traction in industrial segments, logistics, transportation, and smart cities. Other industries, such as healthcare, retail, and agriculture are following closely.

We are just beginning to understand IoT’s potential. But if you are an investor wondering where the smart money is going, one thing is certain: 10 years from now, you’ll have to look hard to find an industry that has not been transformed by IoT.

Maciej Kranz is vice president, Strategic Innovation Group, at Cisco Systems. He is the author of “Building the Internet of Things: Implement New Business Models, Disrupt Competitors, Transform Your Industry.”