A Practical Framework to Turn IoT Technology Into Operational Capability
I NTRODUCTION M OTIVATION
There will be an estimated 34 billion devices
connected by 2020 1 , depending on which
analyst or research organization is
referenced. The exact number of connected
devices may be uncertain, but the impact on
individuals and businesses will be significant.
McKinsey & Company 2 estimates that linking
the physical and digital worlds could
generate up to $11.1 trillion a year in
economic value by 2025. A July 2017 survey by McKinsey & Company 3
uncovered a number of serious capability
gaps that could limit the potential of IoT in
the enterprise. Some of these relate to
technical and data extraction capabilities,
but 70% of respondents cited “integrating
IoT solutions into existing business work
flows” as a major capability challenge. “For
instance, 70 percent of respondents stated
that companies have not yet integrated IoT
solutions into their existing business work
flows – in other words, they are not using
enterprise IoT to optimize day-to-day tasks”.
The real challenge for Industrial Internet of
Things (IoT) is not technological, but rather
about managing and integrating change in
organizations that need to operate in new
and different ways.
As technology advances and economies of
scale bring sensor prices down, many of the
initial engineering issues around IoT are
solved. Organizations that started their IoT
journey with Proof of Concept (PoC) projects
demonstrated it is possible to connect their
machines and sensors to the internet and
extract data from it. But this is just the tip of
the iceberg in creating new operational
capabilities that leverage IoT technology at
enterprise scale. A survey conducted by
Cisco 4 in May 2017 with 1845 IoT decision
makers shows that 60 percent of IoT
initiatives stall at the PoC stage.
Furthermore, only 26 percent of companies
have had an IoT initiative that they
considered a complete success. It is one
thing to demonstrate 5 pumps in a
In this article we present a framework that
focuses on leveraging IoT technology to
deliver real business value and to manage
the move from a technology perspective to a
business outcomes perspective. It is
presented as a practical collaboration tool
with an example of a Fortune 10 Oil & Gas
organization that realized savings of $8
million in 6 months using the IoT to
Operational Capability (I2OC) framework
described in this article.
1
http://www.businessinsider.com/bi-intelligence-34-billion-connected-devices-2020-2015-11/
2 http://aegex.com/images/uploads/white_papers/Unlocking_the_potential_of_the_Internet_of_Things___McKinsey__Compan
y.pdf
3 https://www.mckinsey.com/global-themes/internet-of-things/our-insights/taking-the-pulse-of-enterprise-iot
4 https://newsroom.cisco.com/press-release-content?articleId=1847422
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March 2018