Right now, many companies are merely considering the Internet of Things (IoT) despite being aware of its future impact and the need to get involved with it. Some even think that waiting for technological advances may be beneficial. What impact will the IoT's further spread have on companies? Can they put off working on it? Let's consider the impact the IoT will have on companies and what measures should be implemented today.
- Author profile
- Group Leader
Digital Marketing Group, Fujitsu Laboratories Ltd.
- Ikeda has been working for Fujitsu Limited and Fujitsu Research Institute; he mainly engages in consulting with manufacturer customers in areas such as business management, operational reforms, and new business development. He has designed and developed a solution that aims to integrate new data obtained using the IoT with in-house transaction data and to promote use of such information alongside Fujitsu; this solution is now commercially available.
* This article was published in Chisounomori 2017, volume 5 on June 27, 2017.
Chisounomori is an information magazine published by Fujitsu Research Institute (FRI).
* The company name, department, and position of the author and the content are from the time of publication.
Impact of the IoT on Companies
"Although we have to work on the IoT, it is still unclear what exactly we should do about it." "The IoT will greatly impact the future. We hope to utilize it for our business, but all we have done so far is an in-house study." Most surveys and questionnaires conducted in Japan show such trends, and online search engines return many such reports. In addition, answers such as "we have great expectations for it" and "we are considering deployment" have increased in number over the years, whereas the number of companies that have actually deployed the IoT has probably increased only slightly.
Now, should you work on the IoT right away? Will failing to make efforts now adversely affect you in the future?
First, imagine a world in which the IoT has spread more and what impact that will have on your company. Consider the impact of the external environment on your company using five factors in line with the five forces analysis. These five factors are buyers (your company's customers), sellers (suppliers), your current competitors, new entrants, and substitutes.
(1) Impact of Buyers (Your Company's Customers)
In the manufacturing industry, the deployment and utilization of the IoT is relatively advanced. Although systems to improve productivity and quality by monitoring and analyzing manufacturing equipment operations have been in place for some years, the current trend is to collect and accumulate data from multiple factories and to optimize production as a business group. Some companies now already disclose IoT data on their factories to partners free of charge. This is based on the expectation that partner companies (including your company) will utilize such data to make various improvements for customers, including reducing procurement costs, raising quality, and shortening lead times. If this trend spreads among client companies, your company may have to adopt the IoT. Although one cannot generalize because the degree of IT integration, including of the IoT, varies depending on the customer's industry, there will be more opportunities to obtain data generated on the customer's side after offering products and services to the customer, whether or not you desire this. Thus, it has become necessary to make use of your company's own IoT systems and data to meet customer expectations.
(2) Impact of Sellers (Your Company's Suppliers)
From the perspective opposite that of buyers, more and more suppliers' products and services are likely to be connected to the IoT. For example, if your company discloses production and demand data, suppliers may provide services to automate procurement provision. Just as many office photocopiers are networked, thus improving failure response and supply delivery services, post-purchase services for other devices and equipment will also be improved. In addition, suppliers' use of IoT data for product development and production will lead to better conditions for your company to make purchases, including in terms of quality, costs, lead times, and specs. From the perspective of buyers, it seems that all they have to do now is to wait because they will eventually benefit simply by selecting and adopting the value that suppliers have enhanced by using the IoT. However, it may be necessary to manually collect, process, and provide data on your company's manufacturing plants in order to receive such services from suppliers. If your competitors can make full use of such services but your company cannot due to reasons such as that your company has not fully integrated the IoT and your business processes have not been computerized, your company may end up losing to your competitors.
Thus, as ever greater numbers of customers and suppliers deploy the IoT, your company will be affected and ultimately have no option but to adopt the IoT. In addition, companies will impact each other; more data used in order placement and acceptance processes, including Electronic Data Interchange (EDI), will be computerized; and demand for digitizing inter-business interactions besides order placement and acceptance by means such as computerization and Application Programming Interface (API) support will increase.
(3) Impact of Your Company's Competitive Advantage
Before analyzing the impact from your competitors, let's examine the impact on competitive advantage in a world that has further embraced the IoT. Many Japanese manufacturers have focused on improving QCD (higher Quality, lower Costs, and faster Delivery). Naturally, unique products and services as well as strong brands are becoming another source of competitive advantage, but Japanese manufacturers have been pursuing QCD as an important factor. In addition, distribution and hospitality businesses have also been pursuing QCD, as can be seen in a major restaurant chain's slogan of "delicious, fast, and cheap."
Now, what impact will the IoT have on such QCD? As described above, manufacturers are working to improve QCD by deploying the IoT in manufacturing plants, monitoring operations, and analyzing data. Utilization of the IoT will also make it easy to coordinate with customers and suppliers as well as to improve QCD for the entire supply chain. The more the IoT spreads worldwide, the easier it becomes for your company to pursue QCD in coordination with external services and partners; this also applies to your competitors. In particular, there is a limit to how much costs can be reduced, and the IoT's spread will probably reduce differences in QCD and dampen the impact of such competitive advantage. Even restaurant chains such as beef bowl chains--which have gained favor with consumers by employing their ingenuity to reduce costs and lower prices--have recently shifted their approach to providing high added value, which shows that there is a limit to price competition. The IoT accelerates this shift. The IoT's impact will probably lower QCD's impact on competitive advantage in various industries.
(4) Impact of New Entrants and Substitutes Enabled by the IoT
The IoT may facilitate the entry of new businesses and the appearance of substitutes in various industries. Examples include equipment manufacturers that have used the IoT to enter the maintenance service business, companies that have used the IoT to enhance productivity and quality and entered the agricultural industry from another industry, and companies that have entered the car sharing business, which utilizes sensors and mobile devices. In addition, services that substitute for training gyms are being offered using a combination of sensors as well as mobile devices that measure users' physical conditions (e.g., smartwatches). Just as the spread of the Internet increased the number of new retail entrants and substitute services, utilization of the IoT may cause unexpected companies to become your company's rivals and substitutes. Cloud services that have features for IoT deployment and development tools that even non-experts can use are coming into wide use, and it is increasingly easy to offer new services that utilize the IoT.
Meanwhile, there are examples such as the ability to connect construction machinery to the IoT in order to offer new services. Such utilization of the IoT can lock in existing customers and raise the barrier for new entrants. To support and automate entire construction processes, Komatsu, a construction machinery manufacturer, makes advanced use of the IoT, including measuring construction sites with drones and converting measured data into 3D models. This is an example of transforming a business model to create an ecosystem using the IoT.
The First Step toward Embracing the IoT
As there are only a few successful, familiar examples of IoT utilization, your company may recognize the need to embrace the IoT but not feel very compelled to act promptly. Still, imagine the various effects on your company discussed above; waiting and being passive will limit your benefits. So, what should you do first? Successful patterns can serve as useful references. The aforementioned example started by connecting construction machinery to the IoT and offering services, which then evolved into new services that analyze collected and accumulated data, prevent failures, and optimize parts supply. This then expanded into total support for construction. As another example, vending machines have evolved to recognize buyers' faces, provide recommended items suitable for each buyer, and analyze the combined purchase data accumulated by various vending machines and other marketing data in order to develop new products. Manufacturing plants are working to utilize smartwatches to enhance productivity by sharing anomalies and instructions as well as to optimize production and reduce costs by analyzing combinations of accumulated data and other data, thereby attempting to achieve total optimization, including coordination with other factories.
Many successful examples in addition to those just mentioned involve applying the IoT to existing products and business processes: start from the most needed areas, analyze and utilize the accumulated data, and then expand on this to create new value. Although the IoT helps create new business models and opportunities to build ecosystems with multiple partner companies, starting with a large investment or coordination of many partners is likely to fail. If you currently feel the need to start deploying the IoT but are unsure of what to do first, try applying the IoT to your existing products and operations as shown in Step 1. This first step is:
- (1) to imagine the impact of the surrounding external environment (companies) on your company,
- (2) to apply the IoT to influential, familiar issues on a trial-and-error basis, and
- (3) to digitize (computerize) more business processes in your company and to prepare for data utilization in preparation of the IoT's full-scale spread.
Utilizing the IoT for business often does not proceed as expected, so the concepts of design thinking and agile development, including a trial-and-error approach and verification of user needs, are useful. In addition, effective utilization of data collected and accumulated via the IoT requires that existing in-house data be organized and ready for such utilization.
Going forward, merely waiting for the spread of the IoT will not only eliminate opportunities to secure the full benefits but also lead to losing out to companies that are not currently considered to be rivals. Imagine the near future, draw the big picture, create a story that leads there, and utilize the IoT by starting small.