What does the internet of things mean for businesses?

Q&A: McKinsey & Company on how the internet of things will impact the CIO

A new report from management consultancy McKinsey anticipates a sensor-strewn future where everyday objects are plugged into the network - creating the so-called 'internet of things' and enabling more and more processes to become smart and self-regulating.

The report identifies six categories where the technology can be applied: from tracking behaviour, enhanced situational awareness and sensor-driven decision analytics to process optimisation, optimised resource consumption and complex autonomous systems - and looks at how deployments in different categories could benefit the enterprise.

In an exclusive interview with silicon.com, report co-author Michael Chui, senior fellow of the McKinsey Global Institute, the research arm of the consultancy McKinsey & Company, spoke to Natasha Lomas about how the internet of things will impact businesses and the CIO.

You can view the newly published article, The Internet of Things, at McKinsey Quarterly

silicon.com: Will the internet of things impact every industry?
Chui:The internet of things has applications across every industry and yet there are some industries that are applying certain types of these applications sooner or faster than others.

Some of the applications around process automation or optimised resource consumption - these are ones we're seeing increasingly deployed already.

In tracking behaviour, for instance, we are starting to see more experiments in the insurance field.

In automation and control under process optimisation we are seeing more of these sorts of applications being deployed, in semiconductor factories for instance. That's partly because number one, they're very technology-savvy but also number two, the factories are very expensive and the inventory going through these factories is very expensive and very sensitive to changes in their position.

There definitely is a pattern of adoption in different industries but certainly this type of technology can be applied in every industry.

internet of things semiconductor

The semiconductor industry is already using internet of things style applications
(Photo credit: Shutterstock)

Complex autonomous systems is one of the most demanding in terms of the technology and so we would expect those applications to be a little further out.

The full impact of sensor-driven decision analytics - again we have some early examples of it - but the full impact of it is still to come.

It will be a matter of years before we see the full impact of all of these but we are indeed already starting to see some real impact from some of these deployments.

When might we see widespread corporate deployments of internet of things applications?
I would say it depends on the company - for instance, large scale deployments of smart meters are definitely already happening in the utilities business - so, depending on the industry, some of these things are a today kind of issue.

On the other hand, some of the more futuristic applications - say the ability for a set of cars on a freeway to drive in formation in order to reduce congestion and traffic jams - are clearly a way off.

What are the barriers to mass deployments of the internet of things? Is it mostly a cost issue or are there also underlying technology leaps that need to happen too?
Certainly cost is one of the barriers - [but] cost and technology to a certain extent are quite linked.

Moving forward, having the sort of software that allows you to analyse this tremendous amount of data that will be flowing in. . . - [data] visualisation and the sorts of technology that will be required in order to derive business value from this whole set of data - all those things are still under development, certainly at the scale at which the internet of things could potentially be deployed.

Analysis software will have to continue to evolve and deal with a huge amount of data.

Secondly, the ability to visualise, or at least communicate this information to humans, will have to improve.

The ability to deal with real-time data will become increasingly important and I think not every organisation has that capability in place.

Then, fourthly, standards are emerging but will continue to have to emerge to create interoperable systems.

How will the internet of things impact the CIO?
What's interesting about the internet of things applications is they are essentially business applications and so the role of the CIO in these applications is going to be very dependent on the role of the CIO within the companies that are applying them.

The greater the degree to which the CIO truly is a business partner with the other business leaders in the business, the greater extent to which the CIO will be involved and a leader in helping to shape these internet of things deployments.