IBM Report: Iot business index 2017

THE INTERNETOF THINGS
BUSINESS INDEX 2017
Transformation in motion
Sponsored by

© The Economist Intelligence Unit Limited 20171
The IoT Business Index 2017
About this report 2
Executive summary: The IoT: Transformation in motion 3
1 The Internet of Things Business Index 5
2 IoT impact and responses 9
3 Looking ahead 12
Conclusion: Building a platform for progress 14
Appendix 1: Index methodology 15
Appendix 2: Survey results 16
Contents

The Internet of Things Business Index 2017:
Transformation in motion is an Economist
Intelligence Unit report, sponsored by ARM
and IBM. It is intended to gauge the current
and future use of the Internet of Things (IoT) by
the global business community.
The report draws on two main sources for its
research and findings:
● In September 2016 The Economist
Intelligence Unit (EIU) surveyed 825 senior
business leaders, 412 of whom are C-level
executives or board members. Respondents
were drawn from around the world, with
30% based in Europe, 30% in North
America, 30% in Asia-Pacific and the
remaining 10% in Latin America, the Middle
East and Africa. A total of ten industries are
represented in the study. Around 9% of
respondents come from each of the
following industries: financial services;
manufacturing; healthcare,
pharmaceuticals and biotechnology; IT
and technology; energy and natural
resources; construction and real estate;
automotive; infrastructure; and outsourced
facilities management. The sample is evenly
split between large firms with an annual
revenue of more than US$500m and small
and mid-sized firms. Some of the results from
this survey have been used to create the
Internet of Things business index featured in
this report.
● Alongside the survey, The EIU conducted a
series of in-depth interviews with the
following senior executives and experts
(listed alphabetically by organisation):
o Thomas Lesser, head of R&D, Big Ass
Solutions
o Paul DeLong, CEO, car2go
o Martin Gaarn Thomsen, chief operating
officer, ISS
o Juha Pankakoski, chief information
officer and chief digital officer,
Konecranes
o Jeroen Tas, CEO, connected care and
health informatics, Philips Gordon Hui,
vice president of strategy, Smart Design
o Christian Renaud, analyst, The 451 Group
The report was written by Jessica Twentyman
and edited by Pete Swabey. The EIU would like
to thank all interviewees and survey
respondents for their time and insight.
About this
report

The Internet of Things (IoT) is a key driver of the
digital transformation that will enable
businesses to reinvent products, services,
internal operations and business models. As a
result, the majority of executives surveyed by
The Economist Intelligence Unit (EIU) for this
report believe that following an IoT
technology path is crucial to their long-term
success.
Many respondents say that the IoT has
already had a marked impact on their business
model, allowing them to generate greater
revenue and sparking a new innovation wave
within their organisation. One-fifth have
already seen a major impact on their industry,
and a further 30% believe they will see
significant impacts in the near future.
But while there is immense positivity across
almost all sectors, many executives feel that
the IoT has not progressed quite as fast as they
had expected three years ago. So far, fewer
than one in ten companies surveyed have
achieved “extensive” implementation of the
IoT for both external and internal operations.
These are some of the findings of the
Internet of Things Business Index 2017. The
purpose of the index, conducted by The EIU
and sponsored by ARM and IBM, is to measure
periodically the adoption of IoT technologies
and services by businesses throughout the
world and across all relevant industries. The
inaugural study was conducted in 2013 and
provides the baseline for this update, which
tracks the business uptake of the IoT over the
following three years to the end of 2016, giving
a firm indication of how businesses are
progressing with their plans.
Companies worldwide are eagerly
pursuing the cost reductions, efficiency gains
and new insights promised by a world of
connected devices that are able to convey
data on their usage and environment and
can receive instructions remotely, the index
reveals.
But even as underlying technologies and
high-level business models have matured,
companies are discovering that there are
considerable organisational challenges to be
addressed before the IoT will become a
mass-market tool, such as the need to
understand how companies must adapt their
internal structures, as well as their go-to-
market strategies. That will include how they
work with suppliers.
Other key findings from the
research include the
following:
Many companies are seeing payback from
their early IoT efforts. One in four (25%) survey
respondents report that their organisation’s
use of the IoT has “sparked a new wave of
innovation thanks to data that give us better
insights”. Almost as many (22%) say it has
“unlocked new revenue opportunities from
existing products and services”, while 15% say
it has lowered costs. For one in five
respondents (20%) the IoT has changed
existing business models or strategies, and 16%
say it has enabled them to push into new
markets and industries.
Executives believe in the IoT’s potential, but
progress has not happened as fast as
expected. When asked about the impact of
Executive summary
The IoT: Transformation in motion

the IoT on business in general, one in five
respondents (21%) believe that it has already
had a major impact, and a further 32%
believe that while it has had a limited impact
on business so far, it will have a major impact
in the future. However, almost six out of ten
(56%) agree “somewhat” or “strongly” that
their progress with the IoT has not happened
as fast as they had expected.
The main obstacles to IoT implementation are
practical. In 2013 the main challenges to IoT
adoption cited by executives related to
understanding and perception. Today, they
are more concerned with practical matters,
with 29% of respondents suggesting that the
high cost of required investment in IoT
infrastructure is seen as a challenge. Concerns
about security and privacy appear in second
place, cited by 26% of executives.
Executives continue to put measures in place
to get the IoT used more extensively in their
businesses. Thirty-five percent say they are
learning from the experience of early
adopters, while the same proportion say they
are seeking advice from third-party experts
and consultants. One-third (33%) say they
have already taken steps to train existing staff
to work with the IoT, while 27% are conducting
or sponsoring research to establish market size
and demand.
There is still great optimism about the rewards
ahead, and a firm belief that the IoT holds the
key to digital transformation for many firms.
More than half (55%) expect IoT technologies
to help them make internal cost savings and/
or generate external revenue in the next three
years. Meanwhile, 47% agree that the IoT will
be one of the most important parts of their
organisation’s digital transformation strategy.
As one executive puts it: “The IoT has been a
challenge in some respects, [but] there’s
potentially a huge upside here for us.”

The Internet of Things is changing the way
companies create and capture customer
value, as a number of high-profile examples
illustrate. The lighting division of electronics
company Philips and the energy services
company Cofely, for instance, now provide
“light as a service” to Schiphol, Europe’s
fourth-busiest airport. The airport pays only for
the light it uses, while Philips remains the owner
of all fixtures and installations, taking joint
responsibility with Cofely for the performance
of the system and ultimately its reuse and
recycling at end of life.
However, according to Gordon Hui, vice
president of strategy at Smart Design, a New
York-based design and innovation
consultancy, many companies have yet to
identify how the IoT can transform their
particular value chains.
Back in 2014 Mr Hui wrote an article for the
Harvard Business Review, in which he laid out
the scale of the challenge. “As the Internet of
Things spreads, the implications for business
model innovation are huge. Filling out well-
known frameworks and streamlining
established business models won’t be enough.
To take advantage of new, cloud-based
opportunities, today’s companies will need to
fundamentally rethink their orthodoxies
around value creation and value capture.”
Two years on, most companies have yet to
address this challenge. “Despite substantial
hype and investment in the IoT over the past
few years, many companies have struggled to
make the IoT a reality,” Mr Hui says.
This helps to explain why the Internet of
Things Business Index 2017, which aims to
gauge the average level of IoT
implementation across industries and
geographies, finds that the companies
surveyed had expected their IoT models to
have advanced more over the last three years
than they actually did. Almost six out of ten
(57%) respondents agree “somewhat” or
“strongly” with the statement: “Our progress
with the IoT has not happened as fast as we
expected”.
Back in 2013 the index found that businesses
worldwide were, on average, still in the
research stage (at point 4 on a scale of 1 to
10) and were slightly more likely to be using
the IoT for internal operations and processes
than in external products or services. Fast-
forward to 2016, and the signs are that while
some companies have moved beyond
research, most have not progressed further
than research and planning.
The overall score of 4.43 for using the IoT in
external products and services, for example,
shows that deployment here has progressed
to a certain extent compared with 2013, when
it stood at 3.88.
When it comes to using the IoT to monitor
and measure internal operations, however,
the survey suggests only limited progress, from
4.25 in 2013 to 4.34 in 2016.
A closer look at the regional breakdowns,
meanwhile, provides greater insight into the
trends underlying the overall index numbers.
North America, Europe and Asia-Pacific have
all made some progress on external products
and services. The biggest surprise from the
2016 study is that the North American index for
internal IoT adoption has slipped from 4.00 in
2013 to 3.78 in 2016. This may reflect the steep
drop in oil prices since 2014 that have reduced
The Internet of Things Business Index
1

the need for energy efficiency drives: just 1% of
North American respondents identify “energy
management” as one of the areas where the
IoT brought about the greatest positive
change so far, compared with 16% who
expected this to be the case back in 2013.
Meanwhile, Asia-Pacific has made only
limited progress, with a score rising fractionally
from 4.35 to 4.53. European businesses, by
contrast, are faring better, with a regional score
on internal operations rising from 4.39 to 4.64.
So which industry sectors are forging ahead
with their use of the IoT, and which are lagging
behind? Compared with 2013, the industries
that have made the most progress in using IoT
technologies in their external products and
services are IT and technology (with a score
rising from 4.33 to 6.04), financial services
(from 3.46 to 5.44), and consumer goods and
retail (from 3.68 to 5.02).
Construction and real estate, by contrast,
has slipped from 3.86 in 2013 to 2.89 in 2016.
But this does not mean that the development
of IoT functionality in the sector has stalled.
Instead, an article accompanying this report,
which focuses on the sector, reveals that this
KEY
10
8
6
4
2
10
8
6
4
2
10
8
6
4
2
10
8
6
4
2
10
8
6
4
2
10
8
6
4
2
10
8
6
4
2
Global Europe Asia-Pacific North America
Agriculture &
agribusiness*
Automotive* Construction &
real estate
Consumer goods
& retail
Energy & natural
resourses
Financial services
Health,
pharmaceutical
& biotechnology
Infrastructure IT and technology Manufacturing Outsourced
facilities
management*
2013 2016 2013 2016
The Internet of Things Business Index
Region
Industry
External products & services Internal operations & processes
Extensive
Early
implementation
In planning
In research
Non-existent
3.88
4.43
4.25
4.34
n/a
2.83
n/a
3.73
n/a
4.36
n/a
4.06
3.92
4.27
4.39
4.64
3.88
4.74
4.35
4.50
3.86
2.89
4.61
3.61
3.68
5.02
4.21
4.48
4.21
4.54
4.49
4.06
3.93
4.78
3.93
5.02
4.33
6.04
4.28
4.18
4.23
4.78
4.69
4.48
n/a
3.52
n/a
4.51
4.12
4.57
4.44
4.69
3.46
5.44
3.99
4.90
3.89
4.40
4.00
3.78
*Industries added to the index in 2016 Source: The Economist Intelligence Unit, 2016

reflects the fact that construction and real
estate is being driven more by companies
which manage properties than by those
which build them. The outsourced facilities
management sector, measured for the first
time in 2016, achieves an external IoT index
score of 3.21. Companies in that sector see in
the IoT an opportunity to provide new value to
commercial clients, for example, by helping
them optimise office design for maximum
employee productivity.
When it comes to using the IoT to measure
and manage internal operations, the
infrastructure sector, which includes transport,
logistics and telecommunications, fares best
with a score of 5.02, compared with 3.92 in
2013. Next comes financial services (4.9),
followed by energy and natural resources
(4.69) and outsourced facilities management
(4.51). Once again, construction and real
estate appears to be trailing the pack, with its
score slumping to 3.61 from 4.61 in 2013. This is
a sign, perhaps, that the use of the IoT to
measure and monitor the progress of
construction projects on building sites has yet
to take off.
Practical concerns
So what is holding businesses back? The
survey reveals that companies’ main concerns
are practical ones. Top of the list of obstacles
is what respondents see as the high cost of
required investment in IoT infrastructure, cited
by 29% of respondents, followed by concerns
about security and privacy, cited by 26%.
Back in 2013, by contrast, concerns focused
more on people issues, with 26% of
respondents saying their employees lacked IoT
skills and knowledge, and 23% saying senior
managers lacked knowledge of, and
commitment to, the required technologies. In
this year’s survey, lack of senior management
knowledge and commitment slips to third
place.
Security worries will almost certainly have
been exacerbated by several cyberattacks in
the US in late October 2016 that caused major
issues for users of Internet services, including
Source: Economist Intelligence Unit, 2016.
The challenges to IoT adoption
What are the chief obstacles currently to your organisation using the IoT?
Select up to two.
(% respondents)
High costs of required investment
in IoT infrastructure
Concerns about security and privacy
Lack of senior management
knowledge/commitment
Weaknesses in your organisation’s
technology infrastructure
Regulation
(eg, relating to data privacy)
Weaknesses in public communications
infrastructure available to your organisation
Immaturity of industry standards
around the IoT
Products or services do not have
an obvious IoT element to them
General economic uncertainty
Undeveloped consumer awareness
Absence of business case / business model
29
26
23
16
12
12
10
10
8
6
5

Twitter and Spotify.
The source of the distributed denial of
service (DDoS) attacks, targeted at Internet
infrastructure company Dyn, has been traced
back to infected IoT devices, including
Internet-connected baby monitors. Once
these are compromised by malware, they
come together to form a “botnet army”,
driving malicious traffic at a given target that
overwhelms their targets, making them
inaccessible to legitimate users.
While DDoS attacks are nothing new, they
have in the past used large networks of
malware-compromised personal computers to
launch their attacks. However, a new breed of
malware has emerged that enables attackers
to expand their scale by using connected IoT
devices instead. Already, the source code for
one example of this kind of malware, Mirai, has
been published on the Internet.
“IoT security has been bubbling up in our
data and our client conversations as a major
concern for some time now, and these attacks
will make it an even bigger priority,” says
Christian Renaud, an analyst with The 451
Group, which provides IT research and
advisory services in the US and internationally.
Mr Renaud believes that incidents such as
the Dyn breach may prompt governments to
mandate IoT security standards, which could
in turn slow adoption.

High-profile companies have succeeded in
harnessing the transformative impact of the
IoT on their business model. Danish facilities
management firm ISS, for example, uses
sensors embedded in the buildings it
manages to analyse occupant behaviour
and facilities usage. Based on this analysis, it is
able to provide new advisory services to its
clients (see accompanying article). ISS’s IoT
strategy is the single largest investment in
technology that the company has made in its
115-year history.
German carmaker Daimler, meanwhile,
sees the IoT as the beginning of a revolution in
car ownership and use. Its car2go service,
which uses IoT functionality to monitor and
manage cars remotely, allows customers to
use shared cars only when they need them.
This represents a radical departure for the
company: Daimler now sees itself as “a
mobility company, not a car company”, says
car2go CEO Paul DeLong.
Just over one in five respondents to the IoT
Business Index survey report that the IoT has
had a “major” impact on their industry. On a
regional basis, those based in North America
are more likely to characterise it in this way
than their counterparts in any other region. By
industry, respondents from the IT and
technology, financial services and
manufacturing sectors are most likely to say
the impact has already been major.
One-quarter of respondents say their
organisation’s use of the IoT has “sparked a
new wave of innovation thanks to data that
give us better insights”. Almost as many (22%)
say it has “unlocked new revenue
opportunities from existing products and
services”, while 15% say it has lowered costs.
For just over one in five respondents (21%)
the IoT has changed existing business models
or strategies, and 16% say it has allowed them
to enter new markets or industries.
More respondents believe, however, that
the real impact of the IoT on their industry is
yet to come: 32% of respondents report that
while the IoT has had a limited impact so far,
they believe it will have a major impact in the
future.
So what measures are they taking to
prepare for and capitalise on this
opportunity? In our survey, 35% of respondents
say that they are learning from the
experiences of early movers, and the same
proportion are seeking advice from third-
party experts and consultants and are training
existing staff to work with the IoT. In other
words, measures taken so far have tended to
involve the preparatory work required in order
to get knowledge and skills up to speed.
More practical measures come lower down
on the list in 2016: conducting/sponsoring
research to establish market size/demand
(cited by 27% of respondents); establishing a
cross-functional task force to explore and/or
pursue IoT opportunities (25%); and
introducing new business models (24%).
Fewer still have raised fresh capital to
explore IoT options; established joint ventures
or alliances with other companies to exploit
IoT opportunities; hired IoT-specific talent; or
acquired a business (or business assets) with
IoT capabilities.
For many organisations, however, taking
such steps will be not just desirable but
essential. As Jeroen Tas, CEO of connected
IoT impact and responses
2

care and health informatics at Dutch
electronics giant Philips, puts it: “We need to
start joining the dots at last.”
In other words, he explains, medical
equipment manufactured by Philips may be
just one element of a wider picture of
“connected care networks” that link patients,
carers, family doctors and hospital clinicians.
These networks may also include equipment
and systems from other manufacturers,
including patient-worn devices for monitoring
conditions such as epilepsy and diabetes,
electronic medical record systems and
cloud-based platforms where huge volumes
of patient data can be stored and analysed.
That means the company’s IoT strategy is
participating in emerging ecosystems of
patients, customers, partners and suppliers.
“For us at Philips, IoT goes far beyond
manufacturing connected devices,” Mr Tas
notes. “It’s more about interoperability within
ecosystems, where different organisations
work seamlessly together. In future, we will
definitely see far more of these ecosystems,
but I think it’s fair to say that not every
organisation with an IoT strategy is ready to
create and participate in them yet.”
In 2016 just one in ten respondents identify
the immaturity of connectivity standards
around the IoT as an obstacle to adoption,
down from 19% in 2013.
However, keeping pace with the
proliferation of standards is still a strategic
imperative for companies such as Big Ass
Solutions. The US manufacturer of residential
fans and lighting systems, which claims to
have an “almost obsessive drive to innovate
and improve”, has brought products to market
that integrate with smart home thermostats
from manufacturers such as Nest and ecobee.
“We do our best to participate in as many
of the industry standards organisations as we
can,” says Thomas Lesser, head of R&D at Big
Ass Solutions. “We work very closely with the
Thread Group on smart homes standards, for
example. What I try to keep front of mind is
that consumers today don’t care much about
standards—they just want these things to
Making the IoT happen
What measures has your organisation taken to use the IoT more extensively in the business?
(% adopted)
Seeking advice from third party
experts/consultants
Learning from the successes or
failures of early movers
Training existing staff to work with the IoT
Conducting or sponsoring research
to establish market size/demand
Establishing a cross-functional task force
to explore and/or pursue IoT opportunities
Introducing new business models
Raising fresh capital to explore IoT options
Hiring talent with IoT capabilities
Establishing joint ventures or alliances
to exploit IoT opportunities
Establishing an IoT centre of excellence
Acquiring a business or assets
with IoT capabilities
35
35
33
27
25
24
23
20
20
20
16

work. But moving forward, they’ll increasingly
expect integration with other devices in their
smart home set-ups, and so we have to
maximise our ability to integrate with other
manufacturers’ products as much as
possible.”
The survey suggests that although
investment in the IoT will be growing more
slowly over the next three years, it will be more
broad-based than in the previous three-year
period. When asked about their IoT
investments over the past three years, the
most frequently cited response is a rise
between 11% and 50%, but looking forward
over the next three years, respondents expect
a rise between 1% and 10%. That’s perhaps
unsurprising, given that many were starting
from zero back in 2013 and are now looking to
leverage the investments of the past three
years.
On an industry basis, the sectors that saw
the biggest rises in investment (up by 50% or
more) are financial services, IT and
technology, and energy and natural
resources. Over the next three years, rises of
50%-plus are most often forecast by
respondents from the financial services and IT
and technology sectors, followed by
manufacturing.
IoT investments
How has your organisation’s investment in the IoT changed over the last three years and how do you
expect it to change in the next three years?
(% respondents)
Up by 51%
or more
Up by between
11% and 50%
Up by between
1% and 10%
Stayed
the same
Down We have yet to
make any
investment in
the IoT
0
5
10
15
20
25
30
35
Last three years Next three years

The IoT Business Index reveals significant
enthusiasm for the future of the Internet of
Things. More than half (55%) of executive
surveyed expect IoT technologies to help them
make internal cost savings and/or generate
external revenue in the next three years.
This is in spite of the fact that their IoT
investments so far have not been quite as
predicted. For example, in the 2013 survey 30%
of respondents said they expected the IoT to
create new revenue opportunities by 2016.
Today, only 22% say that this has come to pass.
This suggests that, while companies’
experience of the IoT has not been as
anticipated, this has not dimmed their
enthusiasm so much as given them a better
understanding of what is required to make the
IoT a success.
Big Ass Solutions is a case in point. “While
the IoT has been a challenge in some
respects, we’re alive to the fact that there’s
potentially a huge upside here for us in terms
of using the diagnostic and preventative
maintenance data generated by smart fans
and smart lighting to create new customer
service and support strategies,” says Mr Lesser.
“Right now, I’d say we’ll have to implement
new layers of employee education and
technical support deployment to take
advantage of this, but over the long term we’ll
definitely be able to scale up this aspect of
our business.”
Success factors
Executives see the technical capabilities that
underpin the IoT as the most critical success
factors for IoT strategies. When asked which
organisational capabilities are considered to
be most important to IoT success, 45% say
technology innovation and 32% say data
Looking ahead
3
Positive outcomes
In which, if any, of the following areas has your organisation’s use of the IoT had the greatest impact?
The IoT has…
(% respondents)
Which parts of your business have seen the greatest positive change from the IoT so far?
(% respondents)
sparked a new wave of innovation thanks
to data that gives us better insights
unlocked new revenue opportunities
from existing products/services
changed our existing business model
or business strategy
Data management & analysis
Products or services
Technology infrastructure management
25
22
20
38
29
27

analytics, while 25% cite business model
innovation as a success factor. That emphasis
on technology innovation and data analytics
broadly holds true across the survey base,
regardless of the IoT adoption phase that
respondents are in.
One way in which the IoT may challenge
firms’ existing data analytics capabilities is the
format of data produced by sensors. As Jim
Hare, research director at Gartner, said at an
event hosted by the analyst firm earlier this
year: “The staple inputs for IoT analytics are
streams of sensor data from machines,
medical devices, environmental sensors and
other physical entities. The challenge is going
to be how to manage and store those data.”
Data specialists are far more accustomed
to working with structured data drawn from
operational systems that fit neatly into the
strict format of rows and columns offered by a
relational database. According to Mr Hare, IoT
data demand that they develop expertise in
managing and storing data in event-stream
processing platforms and time-series
databases and become adept at using more
specialised analytical algorithms.
The prospect of digital disruption,
meanwhile, clearly weighs heavily on
respondents’ minds. More than half (52%)
agree “somewhat” or “strongly” that the IoT
“will most likely favour new digital-native
entrants to our markets”. In line with this, 46%
agree “somewhat” or “strongly” that the IoT is
“one of the most important parts of my
organisation’s digital transformation strategy”.
That is certainly how Juha Pankakoski, chief
information officer and chief digital officer at
Konecranes, sees it. The Finnish company
manufactures cranes and heavy lifting
equipment for use in ports, factories and
warehouses. Many of these products now
bristle with sensors, says Mr Pankakoski—over
11,000 sensors in total. These provide both
customers and Konecranes with data that
give real-time visibility into the operational
status of their equipment and how it is being
used.
“In a sense, the IoT is bringing this
equipment to life, because embedded
intelligence allows a crane to sense its own
condition and report back on it,” explains Mr
Pankakoski. That, in turn, enables Konecranes
to build out digital services that support these
assets and the companies that use them.
For example, a mechanical problem with a
particular piece of machinery can be quickly
detected and a Konecranes field engineer
sent to service it, so that the customer does
not suffer unnecessary downtime, he explains.
Over time, much of this intelligence will feed
directly into how Konecranes designs and
develops future products, too.
“So the IoT is at the very heart of our digital
transformation strategy,” says Mr Pankakoski.
“It’s how we intend to stand out from the
competition, because our customers are
clearly very interested in how technology can
help them use our equipment safely and
productively, so they get the most from their
investments.”

While this research suggests that many
organisations have been forced into a “reality
check” when it comes to their IoT ambitions,
the overall message is a positive one.
Businesses are laying the groundwork for the
IoT, and while many have encountered
challenges in doing so, the extensive research
and planning they are engaged in points to
an IoT built on firmer foundations than naive
aspiration. Examples such as ISS and Daimler,
which have successfully adapted their
business models and organisational cultures to
harness the opportunities of the IoT, offer
concrete evidence that this transformation is
not only possible but worth undertaking.
Many areas of the business have changed,
or are changing, as a result of companies’
early efforts—and for the positive, respondents
say. Data management and analysis is where
the greatest proportion (38%) have seen
progress, followed by products and services
(29%) and technology infrastructure
management (27%). Employee productivity,
customer service and support and supply
chain management/ logistics have all seen
positive changes, too.
That creates a powerful bargaining
position, and while respondents acknowledge
that senior leadership support and
engagement is an essential success factor in
getting the go-ahead for further work,
one-half (50%) agree that their IoT initiatives
now have this backing.
While many could see the transformational
impact of smartphones when they first
emerged, it took some years before that
impact was well understood, and even longer
before companies knew how to harness it.
Now, though, few executives would question
whether or not they have made a lasting
impact on their business.
As the IoT business index 2016 reveals, most
companies are (perhaps to their frustration)
still in the early phases of their IoT journey. But
with this level of executive backing and
planning investment, the IoT promises to be in
a very different—and more advanced—state
in three years’ time.
Conclusion
Building a platform for progress

The Internet of Things business index is based
on an online survey conducted by The
Economist Intelligence Unit in September 2016.
(See Appendix 2 for survey details.)
The index scores are generated from the
responses to two questions in the survey:
● To what extent is your organisation using, or
planning to use, the IoT in its products or
services (eg, embedding sensors in
products, developing services utilising data
generated by IoT technology)?
● To what extent is your organisation using, or
planning to use, the IoT in its internal
operations (eg, to reduce energy
consumption, monitor status of plant and
equipment)?
The response options to each question are:
non-existent; in research; in planning; early
implementation; and extensive. Each
response option is assigned a score ranging
from 1 (non-existent) to 5 (extensive). The
responses to the questions are fed into a
model which converts the scores—for the
entire sample and for each regional and
industry sub-sample—to a 1-10 scale, where:
1-2 = non-existent (or virtually non-existent)
3-4 = in research
5-6 = in planning
7-8 = early implementation
9-10 = extensive
Scores lying between these levels (for
example, 2.5) indicate that businesses in the
relevant sample or sub-sample are
transitioning from one stage to another.
Appendix 1:
Index
methodology

Appendix 2:
Survey results
Percentages may not
add to 100% owing
to rounding or the
ability of respondents
to choose multiple
responses.
It has had a major impact
It has had a limited impact so far but I expect it to have a major impact in future
It has had a limited impact so far and will continue to have a limited impact in future
It has had no impact so far but I expect it to have a major impact in future
It has had no impact so far but I expect it to have a limited impact in future
It has had no impact so far and I don’t expect it to have any impact in future
I am not aware of the Internet of things
Which of the following statements best describes the impact IoT has had on business in general so far?
Select one of the following statements, which best characterises your view.
(% respondents)
21
32
20
12
9
6
0
Data management & analysis
Products or services (B2B or B2C)
Technology infrastructure management
Employee productivity
Customer service/support
Supply chain management/ Logistics
None
Asset management
Energy management
I am not aware of the Internet of things
Other
Which parts of your business have seen the greatest positive change from the IoT so far?
(% respondents)
38
29
27
19
18
18
16
11
4
0
0

sparked a new wave of innovation thanks to data that gives us better insights
unlocked new revenue opportunities from existing products/services
changed our existing business model or business strategy
allowed us to enter into new markets or industries
inspired new working practices or businesses processes
lowered our cost base
We have not used the IoT in any meaningful
lead to greater cooperation and product partnerships with our competitors
encouraged greater investments in technology
exposed us to greater competition from start-ups/entrepreneurs/new entrants to the industry
The IoT has not changed the way we conduct our business in a meaningful way
Don’t know
In which, if any, of the following areas has your organisation’s use of the IoT had the greatest impact?
The IoT has…
Select up to two.
(% respondents)
25
22
20
16
16
15
11
9
8
7
4
0
Non-existent: we have not yet begun to consider it, or have decided not to proceed with it
In research: we are researching how it can be utilised in our products/services
In planning: we have completed research and are planning or piloting roll-outs
Early implementation: we have begun to introduce products/services utilising it
Extensive: it is utilised in several products/services and supported by marketing
To what extent is your organisation currently using, or planning to use, the IoT in its products or services
(eg, embedding sensors in products, developing services utilising data generated by IoT technology)?
(% respondents)
21
35
21
14
8
Non-existent: we have not yet begun to consider it, or have decided not to proceed with it
In research: we are researching how it can be utilised to support our operations
In planning: we have completed research and are planning to utilise it
Early implementation: we have begun to utilise it to support our operations
Extensive: it is utilised in several areas of our internal operations
To what extent is your organisation currently using, or planning to use, the IoT in its internal operations
(eg, to reduce energy consumption, monitor status of plant and equipment)?
(% respondents)
21
37
22
15
6

Adopted Plan to adopt in
next 3 years
No plans to adopt
in the next 3 years
Don’t know
Hiring talent with IoT capabilities
Acquiring a business or assets with IoT capabilities
Raising fresh capital to explore IoT options
Conducting or sponsoring research to establish market size/demand
Seeking advice from third party experts/consultants
Learning from the successes or failures of early movers
Establishing joint ventures or alliances to exploit IoT opportunities
Training existing staff to work with the IoT
Establishing a cross-functional task force to explore and/or pursue IoT opportunities
Establishing an IoT centre of excellence
Introducing new business models
What measures has your organisation taken to use the IoT more extensively in the business
(either in products/services or internal operations)? And which have you not yet adopted?
Please select one answer option for each measure.
(% respondents)
20 35 36 9
16 35 40 9
23 38 29 9
27 38 26 9
35 40 16 9
35 40 16 9
20 44 27 9
33 44 14 9
25 44 22 9
20 41 30 9
24 45 22 9
Up by more than 100%
Up by between 51% and 100%
Stayed the same
Down by between 1% and 10%
Down by between 11% and 50%
Down by between 51% and 100% decline
We have yet to make any investment in the IoT
Don't know
How has your organisation’s investment in the IoT changed over the last three years?
And how do you expect it to change in the next three years?
Last 3 years Next 3 years
(% respondents)
1
0
12
6
28
25
21
35
25
20
2
2
0
0
0
0
11
11
0
0

High costs of required investment in IoT infrastructure
Concerns about security and privacy
Lack of senior management knowledge/commitment
Weaknesses in your organisation’s technology infrastructure
Regulation (eg, relating to data privacy)
Weaknesses in public communications infrastructure available to your organisation
Immaturity of industry standards around the IoT
Products or services do not have an obvious IoT element to them
General economic uncertainty
Undeveloped consumer awareness
Absence of business case / business model
Other
Don’t know
What are the chief obstacles currently to your organisation using the IoT?
Select up to two.
(% respondents)
29
26
23
16
12
12
10
10
8
6
5
0
2
Technology innovation
Data analytics
Business model innovation
Organisational agility
Product design
Process engineering design
Marketing
Partner / supplier management
Other
Don’t know
Which of the following organisational capabilities do you consider to be most important for success in the IoT?
Select up to two.
(% respondents)
45
32
25
23
15
10
9
5
0
0

Strongly
agree
Somewhat
agree
Neither agree
nor disagree
Somewhat
disagree
Strongly
disagree
Don’t know
Our progress with the IoT has not happened as fast as we expected
Our initial focus is on using IoT technologies to improve internal operational efficiency and performance
My organisation’s IoT initiatives have engaged support from the most senior leadership
IoT is one of the most important parts of my organisation’s digital transformation strategy
The advent of the IoT will most likely favour new digital-native entrants to our markets
We expect IoT technologies to help us or our customers to meet corporate sustainability goals on emissions reductions
We expect to be making internal cost savings and/or external revenues from IoT technologies in the next three years
We are moving beyond IoT pilot programs into full scale enterprise deployment
To what extent do you agree or disagree with the following?
(% respondents)
24 33 27 10 2 5
18 42 29 6 2 2
19 31 36 11 3 1
14 32 32 16 4 2
16 36 32 9 5 2
18 37 30 8 3 4
19 36 29 7 4 4
14 27 32 15 8 4
Board member
CEO/President/Managing director
CFO/Treasurer/Comptroller
CIO/Technology director
Other C-level executive
SVP/VP/Director
Head of business unit
Head of department
Manager
Other
Which of the following best describes your title?
(% respondents)
0
3
11
23
13
9
12
15
14
0
North America
APAC
Europe
Rest of the World
Where are you personally located?
(% respondents)
30
30
30
10
IT
Finance
Operations and production
Strategy and business development
General management
Information and research
In-house facilities management
R&D
Risk
Customer service
Marketing and sales
Human resources
Procurement
Legal
Supply-chain management
Other
What are your main functional roles?
Select all that apply.
(% respondents)
32
18
17
14
12
10
9
6
5
5
4
4
3
2
2
1

Daily basis
Generally once week
At least monthly
Annually or semi-annually
It has only been mentioned to me once or twice
I have never discussed IoT at my organisation
Roughly how often are you involved in a formal
conversation or structured meeting about the IoT at
your organisation?
(% respondents)
1
31
33
21
13
0
Agriculture and agribusiness
Automotive
Construction and real estate
Energy and natural resources
Financial services
Healthcare, pharmaceuticals and biotechnology
IT and technology
Manufacturing
Outsourced facilities management
Retailing
Consumer goods
Telecommunications
Transportation, travel and tourism
Logistics and distribution
Infrastructure
What is the primary industry your organisation is in?
(% respondents)
9
9
9
9
9
9
9
9
9
5
4
3
3
2
1

Whilst every effort has been taken to verify the
accuracy of this information, neither The Economist
Intelligence Unit Ltd. nor the sponsor of this report can
accept any responsibility or liability for reliance by
any person on this report or any of the information,
opinions or conclusions set out in the report.
Cover:Shutterstock

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