THE CONNECTED WORLD REPORT: Business in the IoT age

Source: Patrick Lux/Getty Images

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Introduction

An increasingly connected world will transform entire industries

Even though it’s a hot topic of conversation, the Internet of Things (IoT) right now is largely just that – a conversation. Its true impact is yet to be felt, but it will come rapidly and reshape households and entire industries when it does.

The scale of what’s predicted is vast. A recent report by BI Intelligence estimated that more than 34 billion devices will be part of the IoT network globally by 2020.

The IoT refers to devices that are connected to the internet and embedded with electronics, sensors and software which allows them to collect and exchange data. This ranges from cars to machines on a production line and monitors on remote industrial equipment to sensors on home appliances.

The connectivity is a game changer, because it allows devices to communicate in two ways – to receive instruction from a user, and to provide real time feedback. IoT devices can provide instant feedback on location, performance and other key data thus allowing better decision-making.

For example, Cisco claims there are oil rigs working in the Mexican Gulf with a million connected sensors on them. They monitor all aspects of the rigs’ activities – from machinery load and performance to productivity levels. This eliminates the need for specialist machine maintenance staff on the rig, meaning they can be flown out to address issues as they emerge.

One definition of what we’re dealing with comes from the Internet of Things Global Standards Initiative:

“The Internet of Things (IoT) is the network of physical objects or “things” embedded with electronics, software, sensors, and network connectivity, which enables these objects to collect and exchange data.”

The IOT moves us from anytime, anywhere connectivity to anything, anytime, anywhere.

The Brookings Institution includes in its definition of IoT driverless cars (or autonomous vehicles), virtual assistants (such as Amazon’s Alexa and Google Home) and connected devices such as fridges and coffee machines.

Source: Dr Mazlan Abbas, MIMOS Berhad

Global consulting firm McKinsey has set out a list of potential uses for the internet of things (IoT) and where the IoT could add value:

Source: McKinsey Global Institute analysis

For all the attention this emerging technology has received, McKinsey believes the hype may actually understate the long-term potential of IoT systems. They estimate that by 2025, IoT will have a potential total economic impact of as much as $US11.1 trillion per year. In fact, they argue IoT will be the biggest source of value of all disruptive technologies, ahead of mobile Internet, knowledge-work automation, cloud computing, and advanced robotics.

BI Intelligence estimated there will be up to 22.5 billion IoT devices in 2021, up from 6.6 billion at the end of 2016, representing $US4.8 trillion in investment from businesses and consumers.

This report considers the application of IoT technology for several industries, ranging from retail and mining to agriculture and real estate, and how executives with deal with the challenge of investing in the IoT efficiently. For some perspective, this chart shows McKinsey & Co. thinks IoT will have a bigger economic impact than the mobile internet.

Source: McKinsey Global Institute analysis

Some of the benefits have yet to be realised and, doubtless, others have not even been dreamed of yet. However, what follows gives some insights into the potential impact on a range of industries of the key emerging technologies, ranging from IoT to autonomous vehicles, in a smarter, more connected world.  

The Retail Sector

Augmented Reality apps could revitalise the high street

Augmented reality shopping apps can provide consumers with richer experiences and greater value that can in turn lead to increased store footfall and conversion rates for brick-and-mortar retailers, according to research from Warwick Business School.

The study, “Enabling smart retail settings via mobile augmented reality shopping apps”, also found that AR apps can help to reduce return rates at traditional retailers – one of the major issues they face.

Brick-and-mortar retailers face increasing pressure from online competitors, but the study suggests that AR is able to provide consumers with experiential benefits ranging from greater shopping efficiency to entertainment that can increase the likelihood of store visits and in-store purchases.

In addition, the research found that mobile AR apps can boost the likelihood of consumers visiting a retail store again, and the likelihood of them referring a retailer to a friend.

“Augmented reality mobile applications for shopping can boost retailer performance by many measures: increased market share, sales and profitability,” said Scott Dacko, Associate Professor of Marketing and Strategic Management at Warwick Business School, who authored the research.

Some retailers, such as J.C. Penny and Bloomingdales, have been testing the use of AR in the form of “virtual dressing rooms” which let customers “try on” outfits that appear when they are looking at themselves on a screen. Some beauty retailers have plans to offer customers new ways to try out make-up with the help of a mobile “3D augmented reality make-up and anti-ageing mirror”.

In the USA, Amazon also launched its virtual reality feature recently. The feature, dubbed AR view, is available through the Amazon app and allows customers to overlay virtual versions of products such as armchairs, sofas and lamps into their homes to see how they would look. The app also rotates products to give shoppers a full 360-degree view.

According to Gartner research, 100 million consumers will be shopping using AR, VR and AI by 2020.

The study also finds that AR shopping app users believe the added benefits of using these apps include:

  • Getting more complete information on products (56.6%)
  • Being more certain they are buying what they wanted (42.2%)
  • Having the opportunity to “try out” a product before buying it (27.3%)
  • Seeing demonstrations of products before purchasing them (26.9%)
  • Buying a product that is more personalised (23.5%)

However, the research found that having to give out too much personal information is the most frequently cited (31.4%) drawback among consumers who used AR shopping apps.

“Consumers are fearful of the Big Brother aspect, of being bombarded with marketing messages and of identity theft if their information is stored or hacked,” said Dr Dacko.

Additional drawbacks include:

  • Not integrated enough with all my shopping (27.8%)
  • Not fast enough to use regularly (26.9%)
  • Not reliable enough to use regularly (21.6%)
  • Time consuming to learn (20.1%)

Ultimately, 65.5% of users expected the apps to go “mainstream” in five years or less, with some users (39.6%) indicating that will happen as early as in one or two years.

Increasingly prevalent in-store internet access and availability of high-speed internet access in many homes will facilitate the increased ease of AR app use in the retail industry.

Customer tracking and targeted promotions

The IoT can revolutionise the shopping experience and the retail industry by building up deeper and more granular customer insights and delivering real-time promotions tailored to individual shoppers.

In-store promotion opportunities can now be targeted to individual consumers. Advancements with beacons and in-store video tracking allow retailers to deliver targeted customer-specific messaging based on their exact location and proximity to products within the store.

A simple example of this in action would be that first, the consumer opts into the retailer’s app. As the customer passes end-of-aisle displays or other areas of potential interest, the store can generate an instant promotion based on their profile and purchase history and deliver the message or coupon to their mobile device. Real-time analytics can assess (based on the consumer profile) what promotions to present, and at what frequency and timing, as the customer moves through the store. While the “creep factor” associated with having every move tracked may be a hurdle for some consumers, the benefits reported from some early pilots suggest that retailers will continue to expand deployments.

Then there’s improved measurement systems that will allow retailers to execute promotions more efficiently and with better localisation, as well as aid the more effective deployment of staff efforts in stores.

Hoxton Analytics is a British firm that uses sensors to count footfall and movement of customers in physical retail spaces and has been developing a non-intrusive way of tracking customer movement in conjunction with technology giant Cisco.

Owen McCormack, the company’s founder and CEO, explained in a blog post published by Cisco:

“We were studying how facial recognition can provide information for retailers and I thought, well, facial recognition’s quite invasive, can we put the cameras right down at floor level and just gather information based on the footsteps and the shoes that customers wear. We’ll use a Cisco camera, and we’ll put it on the wall and we’ll run our software and our algorithms on a Cisco server in global retailers shopping centers, transport hubs and airports. The people counts that we provide to the retailer is an absolutely key statistic in understanding how well they’re performing and how they should improve the business.”

Cisco itself has developed systems that allow retailers to connect to customers mobile devices via in-store Wi-Fi. The retailer can use buying history and loyalty programs to target specific offers to the customer. Customers can use their device to search for items or to interact with a virtual assistant or even to call for a store associate to come and assist them.

Cisco says its system benefits range from being able to recognise customers and giving them context-relevant information in real time and customising experiences to increase sales, loyalty, and customer satisfaction to providing expert service on demand.

More broadly in the retail industry, the IoT will be a useful tool when it comes to monitoring supply chains. Tracking deliveries down to their physical location is likely to become increasingly commonplace, providing information to customers as well as supply chain data to retailers that can help drive efficiency.
Solving a problem at the very last point of the delivery chain

A new offering from Amazon in the USA – the Amazon Key program – will allow deliveries to be left inside your home when nobody’s there. To participate, customers need to be Amazon Prime members and own some special equipment, including a compatible smart lock and a security camera specially made for the program. The Amazon Key app will let customers watch their delivery, lock or unlock their door, or watch a clip of the delivery.

Source: Amazon

Here’s how it works:

  • After setting up the in-home delivery kit, place an Amazon order as normal, but select “Amazon Key” delivery at checkout. Only items eligible for Prime delivery can be delivered in-home.
  • On the day of delivery, customers will be given a four-hour window for when the delivery will arrive. As they are arriving, the app will send an “arriving now” notification. At this point, customers can watch the delivery via the app if they choose to.
  • The driver will attempt knocking before requesting access via their Amazon handheld scanner.
  • After verifying that the driver is near the place of delivery and a package is due to be delivered to that address, Amazon unlocks the door remotely, which also activates the camera. There are no codes or keys exchanged.
  • The package is then placed just inside, and the driver steps back outside to request that the door be locked again. Customers get another notification when delivery is complete.

Customers can block access via a button in the app at any time, in which case the delivery driver will follow normal delivery protocol.

Transport

Connected Vehicles

A NSW Transport autonomous vehicle currently being trialled. Source: Transport for NSW

Autonomous or “driverless” vehicles are rapidly becoming a reality. At Sydney’s Olympic Park, the NSW Government’s Smart Innovation Centre is conducting a two-year trial of the Smart Shuttle.

The vehicle being tested is the Arma, made by French company Navya. It uses LIDAR (Light Detection and Ranging) sensors, cameras and GPS to navigate and negotiate roads and the surrounding environment. It can accommodate up to 15 passengers and travel at a top speed of 45 kilometres per hour. On a fully charged battery, the bus will run from between 5 and 13 hours, depending upon configuration and traffic conditions.

The trial began operating in Sydney Olympic Park in late 2017, with live operation expected in early 2018. In the live phase, the general public will have the opportunity to travel on the Smart Shuttle.

Another concept in development in government and infrastructure circles is the idea of driverless vehicles being used as a “last mile” solution for public transport. Rather than driving to the station and parking your car, in the future commuters might be able to summon an autonomous vehicle to pick them up at home and drop them at the station. This will make costs fall through a reduced need for car ownership, and improve utilisation, as it will reduce the number of cars sitting parked, unused, for most of the day.

Gary Seabury, Executive General Manager, Rail John Holland, said the Singapore government was actively looking at this concept. Seabury said Singapore was looking at building underground “parking” at metro stations where the vehicle will drop you and then wait for incoming passengers to do the next trip, or a system where the vehicles will continually circulate moving on to the next pick up.

Connected cars can make a city run more efficiently

Deloitte describe how an IoT connected car could make a city run more efficiently while also improving convenience for the driver.

They ask us to imagine: a vehicle in an urban environment, constantly communicating with other vehicles, traffic controls, and transit systems to pre-empt, predict, or avoid accidents and traffic jams. As the vehicle nears a retail area, the driver’s GPS-enabled mobile device—aware of his recent shopping and purchase information— transmits offers for products in the stores to the in-car interactive dashboard, suggests a restaurant with openings or a show about to begin, and identifies available parking spaces. Or perhaps it cross-checks the driver’s calendar and task list against traffic and events to propose a route that would accomplish two errands and still get him to his next appointment on time.

Thus, connected devices, context awareness, and knowledge of the individual over time could improve the user experience, as well as the consumer’s ability to accomplish the necessities and luxuries of daily life, while making the entire city function more effectively.

Shop while you drive

General Motors (GM) has introduced an interface that will allow drivers to shop while driving. The platform is called Marketplace, and GM is adding it to its Buick, Cadillac, Chevrolet, and GMC vehicles for their 2017 and later models with compatible features, according to the company’s website.

Drivers can access Marketplace from their car dashboards, where they will be able to buy food, find gas stations, receive discounts on GM products and services, and make reservations for parking spots, restaurants, and hotels, among other services. Participating businesses include Dunkin’ Doughnuts, IHOP, TGI Fridays, Priceline, Shell, and ExxonMobil; GM plans to add more in 2018.

The ethics of autonomous vehicles

The German government set up a commission to look into the ethical issues around Automated and Connected Driving. The difficulties involved in the ethical considerations involved can be seen from the lack of conclusion from the commission.

“A different decision may have to be taken if several lives are already imminently threatened and the only thing that matters is saving as many innocent people as possible,” the commission said.

“In situations of this kind, it would appear reasonable to demand that the course of action to be chosen is that which costs as few human lives as possible. Here, the Commission has not yet been able to bring its discussions to a satisfactory end, nor has it been able to reach a consensus in every respect. It thus suggests that in-depth studies be conducted.”

The commission considered various scenarios. These included ensuring that avoiding injury to humans or animals takes precedence over the likelihood of property damage. They also considered whether it was desirable or even possible to introduce rules into the technology to try and cover all potential situations. While people have the ability to make moral judgements and act accordingly in different situations, this is beyond programming and probably even beyond machine learning.

The commission also considered the impact on privacy from data collection which is a necessary part of autonomous vehicles and road systems. They were concerned that individuals should have some control over what data is collected and stored by the various participants (car companies, IT vendors, road owners).

Key findings of the German government commission

  • Automated and connected driving is an ethical imperative if the systems cause fewer accidents than human drivers (positive balance of risk).
  • Damage to property must take precedence over personal injury. In hazardous situations, the protection of human life must always have top priority.
  • In the event of unavoidable accident situations, any distinction between individuals based on personal features (age, gender, physical or mental constitution) is impermissible.
  • In every driving situation, it must be clearly regulated and apparent who is responsible for the driving task: the human or the computer.
  • It must be documented and stored who is driving (to resolve possible issues of liability, among other things).
  • Drivers must always be able to decide themselves whether their vehicle data is to be forwarded and used (data sovereignty).

Australia’s road rules should be revised by mid-2018 to pave the way for driverless cars, because the country is “unprepared” for vehicle automation, motoring groups and transport operators say.

NSW’s National Roads and Motorists’ Association, public transport operator Keolis Downer and professional services group PwC have urged governments to “fast-track” changes to road rules that assume humans control vehicles. They say road rules should be changed to separate the concept of controlling the motion of a vehicle from the concept of ensuring a vehicle complies with the road rules, and to allow automated driving systems to be in control. They also believe traffic fines should be permitted to be levied against entities that make and operate vehicles, rather than people sitting inside the vehicle if the automated driving system fails.

Jim Scanlon, Executive General Manager of construction company John Holland, believes public trust is all-important to the acceptance of autonomous vehicles. He told BI Research that “legislative reform is less of a constraint to the adoption of autonomous vehicles than consumer attitudes. Once consumers are comfortable with the technology it will progress rapidly.”

Car Insurance and the IoT

Some insurers were among the early adopters of emerging connectivity tools and business models. Progressive, for instance, launched Snapshot in 2008, a usage-based-insurance program that offers consumers discounts of up to 30 percent, depending on when and how well they drive. More than three million people have signed up for the service, enabling the company to collect a trove of driving data from onboard diagnostics devices installed in customers’ vehicles.

Such information, when combined with other data, can be used to assess personal or regional risks—for example, identifying a high frequency of accidents at a particular location for a specific time of day and during certain weather conditions.

Smartphone apps, for example, provide a natural mechanism for insurers to interact with customers and to gather important information that will make it easier to share the most relevant offers, products, and services with customers. In this way, insurers can increase customer loyalty and reduce churn.

There are also benefits for car manufacturers in being able to track the performance of vehicles once they are in the hands of their owners, and over time being able to use data to enhance vehicle performance and longevity.

A smarter, more connected health sector

In a recent report on how better use of health statistics could improve hospital safety and health outcomes, Australia’s Grattan Institute noted that sectoral data is often kept in silos. Data on patients with heart problems is kept by one group, while data on patients with diabetes is kept in another area. Sharing this data could improve health outcomes and safety for patients who might suffer from both conditions. The report also notes that state governments monitor safety data on public hospitals but not private hospitals despite many medical procedures in Australia being performed in private hospitals.

The Productivity Commission in a recent report titled “Shifting the dial” found that only 18% of GPs receive a notification when one of their patients is seen in an emergency department of a hospital. This limits their ability to follow up and monitor their patients. This is another example of where sharing data appropriately could improve outcomes. Most patients would likely be happy for their GP to be informed and it could lead to better treatment of any ongoing health issues in the future.

Governments and the private sector are becoming more adept at collecting data but perhaps the focus needs to be on how to use that data to improve outcomes across society, because this will be even more important as the volumes and quality of data on people’s lives surges in a connected world.

A new wave of connected devices points to a future where many health-related interventions can be accomplished in the home rather than at the clinic, and aid in the detection of disease risk among different segments of the population.

A range of products are in development that could dramatically improve the convenience and effectiveness of personal healthcare.

Innovations like electronic pills that track medication compliance, sleep monitors, personal electrocardiogram devices and other standalone digital sensors will be far more useful now that they’re able to report what they sense in real time.

A report by PWC notes that digital health wearables and apps are commonplace, and are becoming an important part of an organisation’s strategy. For example, private health insurers have integrated wearables into their solution offerings, with incentives for their customers to use them.

In addition to dedicated monitoring devices, today’s smartphones typically include a range of environmental sensors that, through software, can be used to measure and report on a range of health factors.

The PWC report also notes that if more specialist sensors are required, they can usually be connected to and monitored via the user’s smartphone, lowering the cost of access. In the future, wearable sensors built into clothing, shoes and eyewear are likely, but there is still some debate around the potential extra benefits these might bring.

The PWC report states that a likely initial use for IoT connected devices is for specialised monitoring devices installed in the homes of people with particular diseases who may be relatively self-sufficient but still need round-the-clock monitoring. This would allow them to stay in their home with the assurance that their physical activity and vital signs are being monitored — and that help will be promptly dispatched when needed.

In addition, the report says devices like movement sensors would be able to monitor, for example, the aged and infirm. With the help of sophisticated computerised analysis, such a system could quickly identify when a patient’s safety was in jeopardy so that a clinician could attend in person. The impact of this is that it can both improve health outcomes while also reducing demand for acute healthcare services.

The US government has estimated that 40 million adults aged over 65 will be living alone in the coming decades. The IoT could assist in many ways. Wireless sensors throughout the home could monitor activity levels, sleeping patterns and even medication schedules. If anything abnormal is noted, the sensors could automatically send a message to the health care services or family members.

Mining

One scenario for the mining industry considered by consulting firm PWC is where big spending on mining-specific R&D results in a future dominated by robotics and drones. In this scenario for the future, drones have replaced humans for many dangerous or monotonous jobs across all aspects of exploration, planning, operations and reporting. They are more cost effective and versatile than many of the machines currently in use, including helicopters, and they also emit less pollution than conventional mining vehicles. Drones are already used to quickly map new mine areas, analyze mineral samples in real time, and optimise haul routes. They detect erosion, track changes in vegetation, and search for defects in mining infrastructure that may endanger the environment.

The benefit of using these in an IoT world are twofold –the machines can carry a range of sensors but also work in mines that themselves benefit from being fitted out with thousands of sensors monitoring the environment.

Drones can be used for many of the high-risk jobs, such as transporting hazardous waste to dedicated storage facilities or checking for chemical contamination. Drones are deployed in emergencies, transporting medicines and rescue equipment and monitoring the health of injured workers until help arrives. They even ferry spare parts to machines operating at the far reaches of a mine.

Equipping field technicians with connected devices such as Augmented Reality (AR) equipped smart glasses, equipment manufacturers could assist with diagnosing and fixing problems without having to travel to a remote mine site.

A report by McKinsey and Co. notes that: “Complex mining tasks such as geological modeling, on-the-day scheduling, and predictive maintenance are increasingly in the domain of smart statistical and optimization algorithms”. While noting the cost of robotics has fallen while labour costs have risen, the report highlights that “the use of tele-remote and assisted-control equipment is becoming common, and deployment of fully autonomous equipment is taking hold in haulage, drilling, and other processes.”

Rio Tinto’s mine of the future

The centrepiece of Rio Tinto’s “mine of the future” is the Perth control centre and its 500 highly qualified staff. With its giant monitors, it has been described as a cross between a NASA control room and a trading floor. It monitors operations which employ 11,000 people. Former Rio Tinto CEO Sam Walsh once said: “There is nothing like it in the world. Oil and gas have remote operations centres but they control one or two rigs. We are controlling 14 mines, 1500 kilometres of rail, three ports, three power stations. It is all being controlled from the one centre some 1500 kilometres from the action and we get to see the total picture.”

Source: Rio Tinto

In October 2017, Rio Tinto successfully completed the first fully autonomous rail journey at its iron ore operations in the Pilbara region of Western Australia as the company progresses toward full commissioning of the AutoHaul project in late 2018. The pilot run – almost a 100km journey – was completed without a driver on board, making it the first fully autonomous heavy haul train journey ever completed in Australia. Rio Tinto Iron Ore chief executive Chris Salisbury said: “This successful pilot run puts us firmly on track to meet our goal of operating the world’s first fully-autonomous heavy haul, long distance rail network, which will unlock significant safety and productivity benefits for the business”.

Agriculture

Agriculture is an industry that is not generally associated with being at the forefront of technological advancements, but the IoT is an exception and brings a wealth of opportunities to the sector.

Historically, when farmers have recorded data, it was limited to a pencil and a crop map. But the tracking possibilities can span fertiliser, pesticide, water, and seeds for each individual paddock, and for every crop rotation.
Andrew Despi, Commonwealth Bank’s emerging technology manager, said:

“For farmers that rely on a single harvest a year for their income, every crop and every paddock matters. With new IoT technology, it will be possible to monitor the precise fertiliser, pesticide and water input, and plant growth, in any individual paddock.
Combining this data with financial records will allow farmers and their financial managers to make better decisions by understanding the investment and potential return in each individual paddock. This could lead to a better understanding of risk, which could enhance financial management in an industry that has high cashflow variability.”

With satellite imagery, combined with remote IoT sensors to collect data on environmental conditions in individual paddocks, and then adding in the power of machine learning, farmers will be able to more accurately predict yield, better assisting with financing decisions.

One Australian company working in this area is Agronomeye – a Sydney-based start-up that uses drones to scan crops to help identify any problems. It has developed a sophisticated tool that could help revolutionise crop management. They build custom drones fitted with multi-spectral sensors and supported by software developed with UNSW to accurately capture data.

“Our drones can analyse large areas – up to 600 hectares a day – and generate high-resolution maps to identify crop problems for treatment, like nutrient deficiency, pest and weed infestation, dehydration, as well as expected yield”, says one of the company’s co-founders, Stu Adam. “It means rather than treating an entire crop with expensive products, isolated problems can be quickly pinpointed and fixed. This means major cost savings on fertilisers, pesticides, soil management and other works. On top of the productivity gains, there are also enormous environmental benefits.”

Infrastructure

Solving cities’ parking problems

Wireless sensors in parking stations can guide cars to free spaces and could potentially communicate pricing and automatically charge to an account. Residents can identify and reserve the closest available space, traffic wardens can identify non-compliant usage and municipalities can introduce demand-based pricing. The system is smart enough to adjust pricing for time of day and demand and alert drivers to the charge before they park. Barcelona has already instituted smart parking solutions that use city-wide sensors and in-app digital payments. Several other cities around the world are following this lead and implementing smart parking.

Poland’s ‘Virtual Warsaw’ experiment

To ensure accessibility and inclusiveness for the visually impaired, the City of Warsaw launched “Virtual Warsaw”, a virtual smart city based on IoT technology that gives virtual eyes to people who have trouble seeing. The city is deploying a network of hundreds of thousands of beacon sensors equipped with next-generation Bluetooth connectivity to help visually impaired residents move independently about the city, avoiding hazards with assistance from their smartphones.

Source: OECD.

Although the focus for the present and near future is on improving lives for the visually impaired, this is just the beginning. The beacons being deployed around the city are multi-functional, and Warsaw has plans to leverage the citywide network for other purposes, including as guides for tourists, gauges for air quality and even for 20,000 meter-less parking spaces. Warsaw leaders believe there could be up to 200,000 monthly users for this system once it is fully operational.

Smart Buildings

Sensors can be used to automate office environmental controls according to occupancy, people movement and temperature improving the building’s overall efficiency. The US Environmental Protection Agency notes that energy use by commercial and industrial buildings is responsible for 50% of the nation’s greenhouse gas emissions. This can reduce overall energy usage and reduce company energy bills.

Smart Homes

Industry commentators have likened a smart home to a human central nervous system. A central platform, or “brain,” will be at the core. Individual “homebots” of different computing power will radiate out from this platform and perform a wide variety of tasks, including supervising other bots. Some homebots will be companions or assistants, others wealth planners and accountants. Industry experts believe we will have different homebots as coaches, window washers, and household managers.

Consulting firm McKinsey notes that we are already entering this new era. In two years, they expect to see more items in our living space become interconnected—the formative first stage of a new home ecosystem. In five years, they believe that numerous tools and devices in the home will be affected. And in ten years, smart homes will become commonplace and will regularly feature devices and systems with independent intelligence and apparent emotion.

The overwhelmingly determinative factor for consumer acceptance that emerged from McKinsey’s research was trust. Trust is initially based on the bot’s ability to perform its task, as might be expected. That does not always go as planned. But once trust is established, people are willing to cede more responsibilities to devices and systems powered by AI. One key to creating that trust will be creating bots that are more than mere automatons. After all, humans are wired for emotions. The research confirmed that consumers are satisfied when a bot gets a task done, but they are delighted when there is a more personal, emotional element to how the bot does it.

Source: McKinsey & Company

Security in a more connected world

A report by the think tank Chatham House notes that as more smart devices with weak or no security connect to the internet, the world will become more exposed to attacks like the ransomware that hit Britain’s NHS.

McKinsey and Co. have noted: “There are some industry working groups, but IoT security standards are still largely nonexistent. Even if there were standards in place, the technical competence to implement them—a mix of operational technology and IT security knowledge—is in short supply”.

One worrying area of vulnerability is self-driving cars. Hannah Bryce from Chatham House asks us to imagine if your car could be effectively hijacked through its operating software. It could potentially change your destination, your speed and direction, or simply lock you out of your vehicle.

An 11 year old boy, Reuben Paul, told the International One conference in the Netherlands in May 2017 that smart cars, fridges, lights and even teddy bears could be used to spy on or harm people. Reuben, a sixth-grader in an Austin school, stunned the audience of security experts at a conference in the Netherlands by hacking into their Bluetooth devices to manipulate a robotic teddy bear, showing in the process how interconnected smart toys can be “weaponised”.

Baby monitors have also been subject to hacking. There have been several reports in the USA of hackers accessing Wi-Fi enabled baby monitors and speaking to the child or even activating the camera to film the child.

With billions of devices being connected together, what can people do to make sure that their information stays secure? Will someone be able to hack into your connected fridge and thereby get access to your entire network?

Deloitte highlights that security and privacy are vital in a connected world:

“Significant obstacles remain. Executives worried about security and interoperability are unsure of the economic rewards relative to the risks of implementing IoT solutions. Consumer-facing use cases, in particular, raise additional privacy and security concerns.”

Beyond homes, the IoT creates more security risk for companies using connected technology, the solutions for which have necessarily only recently been designed.
Then we have the issue of privacy and data sharing. This is a hot-button topic even today, so one can only imagine how the conversation and concerns will escalate when we are talking about many billions of devices being connected. Protocol, policy and governance – as well as an understanding of what data is being captured and how it is managed – will be all-important for executives and boards.

Conclusion

There are many challenges to overcome before the IoT can be fully incorporated into the global economy, and day-to-day life, but the opportunities for businesses of the future are more apparent than ever before.

Initially, businesses must use the IoT to gather data. This will help with analytics that will allow them to better understand how and why their customers use their product or service, with the ultimate aim of more efficient processes and better engagement with long term, loyal customers.

Source: Bain IoT Customer Survey 2016, n=533

As Commonwealth Bank’s Andrew Despi notes:

“Connecting our physical world with the digital… has the potential to be meaningful to the financial wellbeing of people and businesses. As the IoT grows and networks merge and evolve, we believe businesses will be more connected with their customers, their assets and each other. If IoT data can be shared securely it will create a multiplier effect and help break down industry borders.”

PWC estimates that in 2014 there was $US180 billion of revenue from internet connected devices. By 2020, they estimate this will grow to over $US1 trillion. This is based on an estimated 8 billion IOT devices installed in 2020 compared to “only” 2 billion in 2014. The work by PWC estimates that home and consumer uses will be the biggest source of revenue for IOT devices – making up around 40% of the total market.

With this in mind for businesses, insights from the multitude of new data sources available in an IoT connected world should allow them to better meet the needs of those customers by personalising their experiences.

Global consulting firm Deloitte believe companies need to develop IoT solutions focused on “driving new revenue growth, opening up new markets, providing better products and services through greater insight and management of product and customer lifecycles”.

There are also potential cost-saving strategies companies can take advantage of, with Deloitte outlining the following:

“Delays in response time; lost, stolen, or misdeployed assets; process inefficiencies; and human error all drive higher operating costs for businesses. The right combinations of connected devices, infrastructure, data analytics, and processing—specific to the industry—can help companies reduce these types of costs.”

Many of the benefits of the IoT, however, rely on a businesses ability to properly capture, analyse and action the insights from the data it produces. This remains an enormous challenge for businesses of all sizes.

Not only is up to 90 percent of the data created by IoT devices not captured properly or analysed, but more than half of it isn’t stored correctly either, according to IBM. This means businesses are losing the ability to analyse this data later, when algorithms may have advanced. Guido Bartels, General Manager IBM Nordic, believes without collecting the massive amounts of data that connected devices provide to businesses, they are missing out on the opportunity to learn and react to invaluable lessons about the environment they operate within. Bartels adds that “these insights can help formulate new delivery models and fundamentally change how a business operates.”

While some of the technology behind and the use of the IoT is yet to be fully realised by global business, they still believe strongly in its potential to change the world.

“We are still early in the adoption of the IoT. Yet, belief is widespread—among analysts, investors, IoT technology providers, and enterprises large and small—that we are on the cusp of an explosion in the potential and adoption of IoT. Economic and technological barriers are receding, and with the proliferation of connected devices and evolving analytics capabilities, the possibilities for IoT seem boundless.”
– Deloitte


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