IoT, new business models and digital agility 102116
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The document discusses the transformative impact of the Internet of Things (IoT) on business models, security challenges, and economic productivity. It emphasizes that IoT introduces efficiencies in production, reduces costs, and leads to new job skill requirements, all while highlighting the importance of data security and privacy. The future of IoT suggests a shift towards real-time data analytics and service-based models, which can significantly enhance competitiveness and economic growth.
IoT, new business models and digital agility 102116
- 1. IoT, New Business Models and Digital Agility – Ties to Security ROBERT B. COHEN, PHD SENIOR FELLOW, ECONOMIC STRATEGY INSTITUTE BCOHEN@BWAY.NET IoT Tech Expo NA 2016 20-21st October, Santa Clara Convention Centre THE AUTHOR THANKS THE EWING MARION KAUFFMAN FOUNDATION, BROCADE COMMUNICATIONS AND THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT FOR THEIR FINANCIAL SUPPORT.
- 2. Main Topics for Today UNDERSTANDING THE UNIQUE CHALLENGES OF SECURITY FOR THE IOT, AND PREPARING FOR THE NEXT EVOLUTIONS OF THE TECHNOLOGIES INVOLVED ADDRESSING THE RISKS OF BIG DATA – GREATER VOLUME OF SENSITIVE DATA CREATING A GREATER RISK OF DATA AND IDENTITY THEFT, DEVICE MANIPULATION, DATA FALSIFICATION, IP THEFT AND SERVER/NETWORK MANIPULATION ETC. ENABLING DATA SECURITY IN IOT – PROTECTING INTEGRITY, AUTHENTICITY AND CONFIDENTIALITY OF INFORMATION EXPLORING ISSUES OF PRIVACY – TO WHAT EXTENT USERS REQUIRE PRIVACY, AND HOW IT CAN BE MAINTAINED WHILST STILL MAKING DATA USEFUL 10/21/2016 IoT Tech Expo NA 2016 2
- 3. LINKING SECURITY TO WHAT IoT MEANS FOR THE ECONOMY • IoT INTRODUCES MANY UNAPPRECIATED EFFICIENCIES – COST CUTTING AND INNOVATIVE WAYS TO CHANGE HOW PRODUCTS ARE PRODUCED. • BETTER CONTROL OF PRODUCTION, SUPPLY CHAINS AND DELIVERY OF GOODS/SERVICES • GREATER PRODUCTIVITY IN THE ECONOMY THAN WE ARE MEASURING • THIS IS VERY TRUE OF ELECTRONIC & MECHANICAL INDUSTRIES IOT IS CHANGING • ENHANCED COMPETITIVENESS OF FIRMS ADOPTING IoT • WHERE BUSINESS MODELS OFFER JOINT PRODUCTS – A GOOD PLUS A SERVICE BUNDLED TOGETHER – AS DONE BY ROLLS-ROYCE, BOEING, MICHELIN OR JOHN DEERE. • WHEN THESE FIRMS ADD GUARANTEES OF ZERO DEFECTS OR ZERO DOWNTIME TO THEIR PRODUCTS, IT MAKES THEM MORE COMPETITIVE IN THE MARKETPLACE. • IoT SECURITY IS THE KEY TO OBTAINING THESE BENEFITS 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 3
- 4. ECONOMIC IMPACTS OF IOT • IoT TRANSFORMS ELECTRICAL, MECHANICAL AND SERVICE INDUSTRIES • THIS IS A DRAMATIC CHANGE IN HOW INDUSTRY OPERATES. IT SPANS MANY INDUSTRIES. AS IOT IS MORE WIDELY ADOPTED, IT SHOULD REDUCE COSTS, INCREASE OUTPUT AND CREATE GREATER DEMAND FOR NEW TYPES OF JOBS • TO PARAPHRASE DR. JOHN FULTON OF OHIO STATE, IF YOU’RE GOING TO DO FARMING IN THE FUTURE, THIS IS WHAT YOU ARE GOING TO USE, PRECISION AGRICULTURE WHICH IS MOVING TO DIGITAL DATA; THIS INCLUDES: PRECISION AGRICULTURE,, PRESCRIPTIVE AGRICUTURE AND BIG DATA. (IoT) • IoT INTRODUCES GREATER CONTROL OVER PRODUCTION • REDUCES COSTS • MAKES IT EASIER TO EXPAND PRODUCTION, RAISE REVENUES • RESULTS IN GREATER PRODUCTIVITY – THIS IS NOT SHOWING UP IN THE DATA • FACILITATES LINKING MANUFACTURED PRODUCTS TO SERVICES • MONITORS ENGINES IN REAL TIME, REDUCING UNEXPECTED MAINTENANCE • EXTENDS LIFETIME OF PRODUCTS, LIKE ENGINES • SUPPORTS ZERO DEFECT OR ZERO DOWNTIME GUARANTEES • SPEEDS UP PRODUCTION OR SERVICE DEVELOPMENT • ACTIVELY IDENTIFIES ISSUES IN PRODUCTS WHILE THEY ARE PRODUCED • REDUCES ERRORS AND POORLY PRODUCED PRODUCTS, ELIMINATING TIME LOST • SHOULD ADD TO PRODUCTIVITY 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 4
- 5. THE INTERNET OF THINGS CHANGES PRODUCTION AND INTRODUCES EFFICIENCIES • CHANGES PRODUCTION – • THE “FACTORY OF THE FUTURE” • “DIGITAL AGRICULTURE” GROWS OUT OF COMBINING PRECISION AGRICULTURE WITH PRESCRIPTIVE ANALYTICS AND BIG DATA ANALYTICS. INTEGRATED SYSTEMS . • IMPROVES EFFICIENCIES – • BIG DATA ANALYTICS REPORTS WHEN PERFORMANCE VARIES FROM WHAT’S EXPECTED. • ROLLS-ROYCE’S ON-ENGINE ANALYTICS. • STANLEY BLACK AND DECKER PRODUCTION LINE CONTROLS. 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 5
- 6. A FEW EXAMPLES OF HOW IoT CHANGES PRODUCTION • BOEING ANALYTICS ON THE FACTORY FLOOR COMBINED WITH ROBOTS IMPROVES EFFICIENCIES. • JUST IN TIME MATERIALS • TIMING PROGRESS ON THE LINE • EXPANDING PRODUCTION BY USING A MOVING ASSEMBLY LINE • COST SAVINGS PLUS EXPANDING THE SCALE OF PRODUCTION • PRECISION AGRICULTURE • COMBINES GPS, BIG DATA ANALYTICS, WIRELESS COMMUNICATIONS • OPTIMIZES FERTILIZING, WATERING, HARVESTING • WIRELESS LINKS BETWEEN VEHICLES REDUCE PROCESS TIME 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 6
- 7. IMPROVES EFFICIENCIES • BIG DATA REDUCES DOWN-TIME FOR ROLLS-ROYCE’S ENGINES • ON-BOARD ANALYTICS TRANSMIT ONLY DATA THAT DEVIATES FROM NORMAL • AS A RESULT, ROLLS ADDRESSES PROBLEMS BEFORE THEY ARISE • BY MONITORING PERFORMANCE IN GREAT DETAIL, ROLLS CAN OFFER CONTRACTS FOR SERVICE: “POWER BY THE HOUR” • ITS PRODUCT BECOMES A SERVICE • MILESTONE MERCK INSOMNIA STUDY (2004) • ELECTRONIC REPORTING SMALLER DEVIATION THAN IF PATIENTS USED PAPER TO REPORT CLINICAL RESULTS – DID THEY GET TO SLEEP? • SAMPLE SIZE NEEDED FOR RELIABLE CLINICAL TRIAL COULD BE REDUCED – VARIANCE IN SAMPLE WAS MUCH LOWER • PHASE 3 CLINICAL TRIAL SAVINGS OF $1.5 MILLION • AVOIDED “PARKING LOT SYNDROME” – TAKING TOO MUCH TIME TO FILL IN RESULTS ON PAPER FORMS 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 7
- 8. IoT CHANGES COMPETITIVENESS • CHANGES WHAT DETERMINES COMPETITIVENESS • ADDING REAL-TIME ANALYTICS TO BOEING JETS MAKES THE PRODUCT MORE COMPETITIVE. • MEANS THAT EMERGING SYSTEMS THAT COMBINE SEVERAL TECHNOLOGIES WILL DETERMINE COMPETITIVE SUCCESS • ANALYTICS • SOFTWARE DEVELOPMENT • INFRASTRUCTURE MANAGEMENT 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 8
- 9. IoT CHANGES COMPETITIVENESS • ADDING REAL-TIME ANALYTICS TO BOEING 787 • MISSION CONTROL MANAGES SYSTEMS AND CONTROLS • CORRECTS PROBLEMS IN-FLIGHT • UNMANNED FLIGHTS OF THE FUTURE? • FORD EMPLOYS BIG DATA • SAVINGS OF $2 BN OVER 4-5 YEARS IN SUPPLY CHAIN/DEALER DELIVERIES • BIG DATA ANALYSIS IDENTIFIED TRUCK DESIGN CHANGES THAT COULD IMPROVE FUEL EFFICIENCY AND LOWER PRODUCTION COSTS – ALUMINUM CHASSIS • REDUCES COST, INCREASES PROFITABILITY – 50% PROFIT ON NEW F-150 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 9
- 10. IoT CHANGES BUSINESS MODELS • ADDING “AS-A-SERVICE” TO MECHANICAL/ELECTRONIC PRODUCTS • ROLLS-ROYCE “POWER BY THE HOUR” • MICHELIN “KILOMETER BY THE HOUR” • FANUC ROBOTIC SYSTEMS AND ZERO DOWNTIME • ADDING GUARANTEES OF HIGH LEVELS OF PERFORMANCE • ROLLS-ROYCE “ZERO BASED DISRUPTION” • FANUC “ZERO DOWNTIME” WITH GM/CISCO • 5,000 ROBOTS IN 26 GM FACTORIES THROUGHOUT THE WORLD • UNPLANNED DOWNTIME IN AN AUTO PLANT CAN COST $15,000 – $50,000 A MINUTE, $3 MILLION AN HOUR 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 10
- 11. IOT REQUIRES NEW JOB SKILLS • WE SEE THESE CHANGES IN ANALYTICS, SOFTWARE DEVELOPMENT AND INFRASTRUCTURE MANAGEMENT • IN ANALYTICS • FORD IS HIRING DATA ANALYSTS/SCIENTISTS • UPS DEVELOPED PREDICTIVE ANALYTICS • MOST ANALYTICS EMPLOYEES NEED COMPUTER PLUS ANALYTIC TOOLS SKILLS (HADOOP) • IN SOFTWARE DEVELOPMENT • PROGRAMMERS WORK IN DIGITAL SYSTEMS: BOEING APPLIED SIMULATION AND ANALYTICS • RAPID DEVELOPMENT OF NEW SERVICES IN CLOUD ECOSYSTEMS; TESTING AND DEVELOPMENT OF NEW SOFTWARE FOR APPLICATIONS. • IN INFRASTRUCTURE MANAGEMENT • BIG DATA LAKES REQUIRE FAMILIARITY WITH VIRTUALIZED ENVIRONMENTS. WE SEE THIS AT FORD, BOEING, AND UPS. 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 11
- 12. FUTURE ECONOMIC IMPACTS OF IOT • IN THE FUTURE, COMPANIES WILL BE ABLE TO CAPTURE CONTINUOUSLY STREAMED DATA AND ANALYZE IT RAPIDLY. • THIS MAKES IT EASIER TO RESPOND TO WHAT HAD BEEN CONSIDERED COMPLEX EVENTS. FOR EXAMPLE, HEARST PUBLICATIONS USES AMAZON TO CAPTURE STREAMED DATA TO ANALYZE CUSTOMERS’ COMMENTS ON WEBSITES. • RAPIDLY CAPTURING SUCH EVENTS CAN ALSO HELP IMPROVE THE OVERSIGHT AND ANALYSIS OF CLINICAL TRIALS. • IT CAN HELP HEALTHCARE ORGANIZATIONS CORRELATE MEDICAL TREATMENT OUTCOMES WITH GENOMIC CHARACTERISTICS TO IMPROVE OUTCOMES AND REDUCE COSTS. • CONTINUOUS SERVICE DELIVERY FOR SOFTWARE WRITTEN ON CLOUD COMPUTING INFRASTRUCTURE PERMITS RAPID CHANGES TO SOFTWARE QUICKLY. THIS LETS USERS MANAGE AND ANALYZE BIG DATA BETTER • BY UPDATING SOFTWARE RAPIDLY, MANUFACTURERS CAN IMPROVE A SOFTWARE PROGRAM • THIS LETS THE PROGRAM ADDRESS SOMETHING LIKE A MALFUNCTION BEFORE IT DISRUPTS A PRODUCTION LINE. PRESCRIPTIVE OR “FAULT TOLERANT” PRODUCTION/PERFORMANCE IS POSSIBLE. 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 12
- 13. IMPROVING THE RETURNS FROM IOT IN THE FUTURE • SOFTWARE DEVELOPMENT COSTS DROP TO WHERE THEY ARE FAR LOWER THAN TODAY • CLOUD INFRASTRUCTURE MAKES RAPID DEVELOPMENT OF SERVICES EASIER. • LINKS BETWEEN DATA SOURCES ARE CHEAPER TO ESTABLISH – CYCLE COMPUTING ACHIEVES 48 YEARS OF GENOME ANALYSIS IN 3 HOURS. • DRAMATIC COST SAVINGS • TREMENDOUS INCREASE IN PRODUCTIVITY • FIRMS THAT ACHIEVE THIS ARE ABLE TO GROW FASTER THAN AVERAGE FIRMS • NEW SOURCE OF ECONOMIC GROWTH 12/21/2016 IoT Global Innovation Forum 2016 DRAFT VERSION 1 13