Internet of things ecosystem: The quest for value

The Internet of Things ecosystem:
The quest for value
Presenters:
Craig Wigginton, Vice Chairman and U.S. Telecommunications leader, Deloitte & Touche LLP
John 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. 2013
2) IDC, Oct. 2013
3) 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
Providers
Cloud
Service
Providers
(CSP)
Hardware
Makers
Device
Manu-
facturers
IT services
vendors
Middleware
vendors
Software
vendors
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 Operating
Metrics
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
Sources:

• 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
Sources:

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
Ecosystem
Organization
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
ComplexityHig
h
HighLow
E-mail
Text
Messages
Social Media
Interactions
M2M/IOT
InteractionsMovies/V
ideos
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 Data
Travel
Booking
s
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 Concerns
Health
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 Concerns
Telematics • 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
Want more? Download our new report

John Hagel
jhagel@deloitte.com
@jhagel
Craig Wigginton
cwigginton@deloitte.com
@craigwigginton
Eric Openshaw
eopenshaw@deloitte.com
@eopenshaw
Contact info

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Internet of things ecosystem: The quest for value

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