+ All Categories
Home > Business > Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Date post: 02-Nov-2014
Category:
Upload: cxo-community
View: 780 times
Download: 0 times
Share this document with a friend
Description:
To get the most value from IoE, business leaders should begin transforming their organizations based on key learnings from use cases that make up the majority of IoE’s Value at Stake. Learn about this and more when you download the white paper (http://www.cxo-community.com/component/content/5369?task=view).
Popular Tags:
18
Joseph Bradley Joel Barbier Doug Handler Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion More Relevant, Valuable Connections Will Improve Innovation, Productivity, Efficiency & Customer Experience Executive Summary The Internet of Everything (IoE) creates $14.4 trillion in Value at Stake — the combination of increased revenues and lower costs that is created or will migrate among companies and industries from 2013 to 2022. The five main factors that fuel IoE Value at Stake are: 1) asset utilization (reduced costs) of $2.5 trillion; 2) employee productivity (greater labor efficiencies) of $2.5 trillion; 3) supply chain and logistics (eliminating waste) of $2.7 trillion; 4) customer experience (addition of more customers) of $3.7 trillion; and 5) innovation (reducing time to market) of $3.0 trillion. Technology trends (including cloud and mobile computing, Big Data, increased processing power, and many others) and business economics (such as Met- calfe’s law) are driving the IoE economy. These technology and business trends are ushering in the age of IoE, creating an unprecedented opportunity to connect the unconnected: people, process, data, and things. Currently, 99.4 percent of physical objects that may one day be part of the Internet of Everything are still unconnected. To get the most value from IoE, business leaders should begin transforming their organizations based on key learnings from use cases that make up the majority of IoE’s Value at Stake. These use cases include smart grid, smart buildings, connected healthcare and patient monitoring, smart factories, connected private education, connected commercial (ground) vehicles, connected marketing and advertising, and connected gaming and entertainment, among others. Robust security capabilities (both logical and physical) and privacy policies are critical enablers of the Internet of Everything Economy. The IoE Value at Stake projections are based on increasingly broad adoption of IoE by private-sector companies over the next decade. This growth could be inhibited if technology- driven security capabilities are not combined with policies and processes designed to protect the privacy of both company and customer information. Page 1 © 2013 Cisco and/or its affiliates. All rights reserved. To get the most value from IoE, business leaders should begin transforming their organizations based on key learnings from use cases that make up the majority of IoE’s Value at Stake. White Paper
Transcript
Page 1: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Joseph Bradley Joel Barbier Doug Handler

Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion More Relevant, Valuable Connections Will Improve Innovation, Productivity, Efficiency & Customer Experience

Executive Summary• TheInternetofEverything(IoE)creates$14.4trillioninValueatStake—thecombinationofincreasedrevenuesandlowercoststhatiscreatedorwillmigrateamongcompaniesandindustriesfrom2013to2022.

• ThefivemainfactorsthatfuelIoEValueatStakeare:1)assetutilization(reducedcosts)of$2.5trillion;2)employeeproductivity(greaterlaborefficiencies)of$2.5trillion;3)supplychainandlogistics(eliminatingwaste)of$2.7trillion;4)customerexperience(additionofmorecustomers)of$3.7trillion;and5)innovation(reducingtimetomarket)of$3.0trillion.

• Technologytrends(includingcloudandmobilecomputing,BigData,increasedprocessingpower,andmanyothers)andbusinesseconomics(suchasMet-calfe’slaw)aredrivingtheIoEeconomy.

• ThesetechnologyandbusinesstrendsareusheringintheageofIoE,creatinganunprecedentedopportunitytoconnecttheunconnected:people,process,data,andthings.Currently,99.4percentofphysicalobjectsthatmayonedaybepartoftheInternetofEverythingarestillunconnected.

• TogetthemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfromusecasesthatmakeupthemajorityofIoE’sValueatStake.Theseusecasesincludesmartgrid,smartbuildings,connectedhealthcareandpatientmonitoring,smartfactories,connectedprivateeducation,connectedcommercial(ground)vehicles,connectedmarketingandadvertising,andconnectedgamingandentertainment,amongothers.

• Robustsecuritycapabilities(bothlogicalandphysical)andprivacypoliciesarecriticalenablersoftheInternetofEverythingEconomy.TheIoEValueatStakeprojectionsarebasedonincreasinglybroadadoptionofIoEbyprivate-sectorcompaniesoverthenextdecade.Thisgrowthcouldbeinhibitediftechnology-drivensecuritycapabilitiesarenotcombinedwithpoliciesandprocessesdesignedtoprotecttheprivacyofbothcompanyandcustomerinformation.

Page 1©2013Ciscoand/oritsaffiliates.Allrightsreserved.

TogetthemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfromusecasesthatmakeupthemajorityofIoE’sValueatStake.

White Paper

Page 2: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

The Internet of Everything Is Happening NowCiscoestimatesthat99.4percentofphysicalobjectsarestillunconnected.1Conversely,thismeansthatonlyabout10billionofthe1.5trillionthingsgloballyareconnected.2Atamorepersonallevel,thereareapproximately200connectablethingsperpersonintheworldtoday.3Thesefactshighlightthevastpotentialofconnectingtheunconnected.

Evenso,thegrowthoftheInternethasbeenunprecedented(seeFigure1).Ciscoestimatesthattherewereabout200millionthingsconnectedtotheInternetintheyear2000.Drivenbyadvancesinmobiletechnologyandthe“bringyourowndevice”(BYOD)trend,amongothers,thisnumberhasincreasedtoapproximately10billiontoday,puttingussquarelyintheageoftheInternetofThings(IoT).ThenextwaveofdramaticInternetgrowthwillcomethroughtheconfluenceofpeople,process,data,andthings—theInternetofEverything(IoE).4

Figure 1. RapidGrowthoftheNumberofThingsConnectedtotheInternet.

Source:CiscoIBSG,2013

IoEisfurtherbeingdrivenbyseveralfactors.First,powerfultechnologytrends—includingthedramaticincreaseinprocessingpower,storage,andbandwidthatever-lowercosts(Moore’slawstillatwork);therapidgrowthofcloud,socialmedia,andmobilecomputing;theabilitytoanalyzeBigDataandturnitintoactionableinformation;andanimprovedabilitytocombinetechnologies(bothhardwareandsoftware)inmorepowerfulways—makeitpossibletorealizemorevaluefromconnectedness.

Second,barrierstoconnectednesscontinuetodrop.Forexample,IPv6overcomestheIPv4limitbyallowingfor340,282,366,920,938,463,463,374,607,431,768,211,456morepeople,processes,data,andthingstobeconnectedtotheInternet.Amazingly,IPv6createsenoughaddresscapacityforeverystarintheknownuniversetohave4.8trillionaddresses.

Page 2©2013Ciscoand/oritsaffiliates.Allrightsreserved.

White Paper

ThenextwaveofdramaticInternetgrowthwillcomethroughtheconfluenceofpeople,process,data,andthings—theInternetofEverything.

Page 3: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Third,formfactorscontinuetoshrink.Today,acomputerthesizeofagrainofsalt(1x1x1mm)includesasolarcell,thin-filmbattery,memory,pressuresensor,andwirelessradioandantenna.Camerasthesizeofagrainofsalt(1x1x1mm)nowhave250x250-pixelresolution.And,sensorsthesizeofaspeckofdust(0.05x0.005mm)detectandcommunicatetemperature,pressure,andmovement.Thesedevelopmentsareimportantbecause,inthefuture,thingsconnectedtotheInternetmaybehardforthehumaneyetoevensee.

Finally,IoEreflectstherealitythatbusinessvaluecreationhasshiftedtothepowerofconnectionsand,morespecifically,totheabilitytocreateintelligencefromthoseconnections.Companiescannolongerrelysolelyoninternalcorecompetenciesandtheknowledgeoftheiremployees;instead,theyneedtocaptureintelligencefaster,frommanyexternalsources.ThiswilloccurthroughconnectionsenabledbytheInternetofEverything.

IoE Creates $14.4 Trillion of Value at Stake for Companies and Industries ValueatStake,accordingtoCisco,isthepotentialbottom-linevalue(higherrevenuesandlowercosts)thatcanbecreatedorwillmigrateamongcompaniesandindustriesbasedontheirabilitytoharnessIoE.CiscopredictsthattheIoEValueatStakewillbe$14.4trillionforcompaniesandindustriesworldwideinthenextdecade(seeFigure2).5Morespecifically,overthenext10years,theValueatStakerepresentsanopportunitytoincreaseglobalcorporateprofitsbyabout21percent.6

Inotherwords,between2013and2022,$14.4trillionofvalue(netprofit)willbe“upforgrabs”forenterprisesglobally—drivenbyIoE.IoEwillbothcreatenewvalueandredistribute(migrate)valueamongwinnersandlaggards,basedonhowwellcompaniestakeadvantageoftheopportunitiespresentedbyIoE.ThosethatharnessIoEbestwillreapthisvalueineitheroftwoways(see“UseCase”sectionforspecificexamples):

• Bycapturingnewvaluecreatedfromtechnologyinnovation

• BygainingcompetitiveadvantageandgrabbingmarketshareagainstothercompanieslessabletotransformandcapitalizeontheIoEmarkettransition7

Cisco’sanalysisshowsthatmostofthepotentialValueatStake(66percent,or$9.5trillion)comesfromtransformationbasedonindustry-specificusecasessuchassmartgridandsmartbuildings.Theother34percent,or$4.9trillion,isproducedbycross-industryusecasessuchasthefutureofwork(telecommuting)andtravelavoidance.ItisimportanttonotethatCiscoisfocusingontheamountofprivatesectorValueatStaketomakethefindingsandinsightsrelevantandactionableforbusinessesandindustries.Whileasignificantnumberonitsown,the$14.4trilliondoesnotincludepotentialValueatStakefromtheconsumerorpublicsectors,orfromsocietalbenefitsthatarebeyondthescopeofthisanalysis.

CiscocalculatedtheValueatStakebytakingabottom-upapproachconsideringthevaluecreatedbymorethan50usecasesintheprivatesectoronly—bothindustry-specificandcross-industry—andconsolidatingthemintothe21mostmaterialand

White Paper

Page 3©2013Ciscoand/oritsaffiliates.Allrightsreserved.

ValueatStake...isthepotentialbottom-linevalue(higherrevenuesandlowercosts)thatcanbecreatedorwillmigrateamongcompaniesandindustriesbasedontheirabilitytoharnessIoE.

Page 4: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

value-generatingexamples.Top-downanalysiswasalsoperformedasacross-checktovalidatethecompletenessandorderofmagnitudeofthemorethoroughbottom-upapproach.Finally,carewastakennottodouble-countvalueacrossusecases.8

Figure 2. HowMuchValueIsatStakeintheIoEEconomy?

Source:CiscoIBSG,2013

5 Drivers Fuel IoE Value at StakeTherearefivemaindriversofthe$14.4trillionIoEValueatStake.ThesefindingsallowbusinessleaderstobeginplanninghowtheycanbenefitfromIoE.TheamountofValueatStakeissomewhatevenlydistributedacrosseachofthefivedrivers.

• Asset utilization ($2.5 trillion) — IoEreducesselling,general,andadministrative(SG&A)expensesandcostofgoodssold(CoGS)byimprovingbusinessprocessexecutionandcapitalefficiency.

• Employee productivity ($2.5 trillion) — IoEcreateslaborefficienciesthatresultinfewerormoreproductiveman-hours.

• Supply chain and logistics ($2.7 trillion) — IoEeliminateswasteandimprovesprocessefficiencies.

• Customer experience ($3.7 trillion) — IoEincreasescustomerlifetimevalueandgrowsmarketsharebyaddingmorecustomers.

• Innovation, including reducing time to market ($3.0 trillion) — IoEincreasesthereturnonR&Dinvestments,reducestimetomarket,andcreatesadditionalrevenuestreamsfromnewbusinessmodelsandopportunities.

ThefactthateachoftheseareashasroughlythesameamountofValueatStakesuggeststhatfirmsmustexaminehowIoEcanimpacteveryaspectoftheirbusinessprocesses—includingbothcost-cuttingandrevenue-raisingactivities.

Inaddition,tobenefitfromIoE,firmsmustcombinetechnology-enabledsecuritycapabilities(bothlogicalandphysical)withpoliciesandprocessesdesignedtoprotecttheprivacyofcompanyandcustomerinformation.IoE’sgrowthpotentialintheprivatesectoroverthenextdecadewillrelyheavilyuponthesuccessofcompanies’securityandprivacyefforts.9

White Paper

Page 4©2013Ciscoand/oritsaffiliates.Allrightsreserved.

Therearefivemaindriversofthe$14.4trillionofIoEValueatStake.ThesefindingsallowbusinessleadershiptobeginplanninghowtheycanbenefitfromIoE.

Page 5: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Which Connections Matter Most?

Bydefinition,IoEincludesthreetypesofconnections—machine-to-machine(M2M),person-to-machine(P2M),andperson-to-person(P2P).Combined,P2MandP2Pconnectionswillconstitute55percentofthetotalIoEValueatStakeby2022whileM2Mconnectionsmakeuptheremaining45percent(seeFigure3).ItisimportanttonotethatwhileM2Mconnectionsarefastbecomingasizablesourceofvalue,theendresultoftheseconnectionsisultimatelytobenefitpeople.ThebottomlineisthattheIoEEconomyisaboutenablingpeopletobemoreproductiveandeffective,makebetterdecisions,andenjoyabetterqualityoflife.

Figure 3. P2MandP2PStillMakeUptheMajorityofInternetConnections.

Source:CiscoIBSG,2013

Connectedhealthcareandpatientmonitoringprovideagreatexample(moredetailsintheuse-casesectionbelow).Byenrichingtheconnectionsbetweenmedicaldevicesandbothpatientsanddoctors(M2P),andamongpatientsanddoctorsthemselves(P2P),betterhospital-levelcarecanbeprovidedatpatients’homes.Thisimprovesqualityoflife,increasespositivemedicaloutcomes,andreducescostsforbothprovidersandpatients.

Value at Stake by Geography and IndustryItisalsointerestingtolookatValueatStakebygeographyandindustry.Bygeography,theamountofValueatStakeiswelldistributedacrossthemajorgeographies(seeFigure4).Figure4alsoshowsthedegreeofbeneficialimpactforeachgeographicregion,asdeterminedbydividingtheValueatStakebythesizeofeachregion’soutput.ThegeographicandindustrydistributionsofValueatStakeareveryheavilydrivenbyeachregion’srelativeeconomicgrowthrateandbytherelativesizeofeachindustrysectorineachregion.Forexample,China’sValueatStakeisveryheavilyderivedfromitsrelativelyrapideconomicgrowthanditslargeshareofthisgrowthinthemanufacturingsector.IntheUnitedStatesandEurope,ValueatStakeopportunitiesaremoreprevalentintheservicesareas.

ThebottomlineisthattheIoEEconomyisaboutenablingpeopletobemoreproductiveandeffective,makebetterdecisions,andenjoyabetterqualityoflife.

Page 5©2013Ciscoand/oritsaffiliates.Allrightsreserved.

Page 6: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 6©2013Ciscoand/oritsaffiliates.Allrightsreserved.

Figure 4. ValueatStakeIsWellDistributedAcrossGeographies,YetImpactsRegionsDifferently.

Source:CiscoIBSG,2013

Fromanindustryperspective,fouroutof18industriesmakeupmorethanhalfthetotalValueatStake(seeFigure5).10Theamountincludesmanufacturingat27percent,retailtradeat11percent,informationservicesat9percent,andfinanceandinsurance,alsoat9percent.Theremaining14industriesrangebetween7percentand1percent.

Figure 5. TheTopFourIndustriesMakeUpMorethanHalfoftheTotalValueatStake.

Source:CiscoIBSG,2013

Fromanindustryperspective,fouroutof18industriesmakeupmorethanhalfthetotalValueatStake.

Page 7: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 7©2013Ciscoand/oritsaffiliates.Allrightsreserved.

TheindustrydistributionofValueatStakeisveryheavilydrivenbyspecificusecases.Forexample,muchoftheValueatStakeformanufacturerscomesfromgreateragilityandflexibilityinfactories,andfromtheabilitytomakethemostofworkers’skills.Additionally,alargeamountoftheValueatStakeforretailerscomesfromconnectedmarketingandadvertising.ThetopfiveindustriesintermsofpotentialIoEimpactrepresent63percentofthetotalValueatStake.

Real-World Use Cases Show the Impact and Potential of IoEToreceivethemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfromusecasesthatshowhowIoEworksintherealworld.Theeightusecasesfeaturedinthispaper,whichrepresent$6.17trillionofthe$14.4trilliontotalValueatStake,wereselectedfortheirusefulnessinhelpingbusinessleadersdeterminehowtomoveforwardwithregardtotheircompanies.11

Eachoftheseusecasesincludesageneraldescription,theamountofcontributiontothetotalValueatStake,andacomparisonofthekeyuse-caseattributesinboth2013and2022tohighlighttheimpactofIoE.Inaddition,eachusecasedescribesthevalueofconnections,topIoEdrivers,typesofconnections,IoEtechnologyenablers,andwhethervalueiscreatedormigrated.

1. Smart factories: $1.95 trillion of total Value at Stake

Addingconnectivitytomanufacturingprocessesandapplicationsincreasesfactoryproductivity,reducesinventorieswithreal-timeinventorysupplies,andcutsaverageproductionandsupply-chaincosts.

SmartfactoriesrepresentoneofthetwolargestusecasesintermsofValueatStake.Thevalueislargelyderivedfrommoreintelligentmachinesthatincorporatebettersensors,improvedconnectivitytoothermachines,andmoreintuitiveinterfaceswithpeople.Thesenewcapabilitiesallowmachinestobeprogrammedmoreeasilyandmakethemmoreadaptabletotheirconditionssotheycanbemoreefficientatdoingtheirwork.Inaddition,back-endconnectionstothecloudforanalyticsenablemoreeffectiveintegrationoflabor,capital,andtechnology.

ToreceivethemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfromusecasesthatshowhowIoEworksintherealworld.

2013

Current state (without IoE)

2022

Potential with IoE

Automated assembly machines are expensive and complicated to create and install

Reduced costs as automated tools become less expensive to manufacture and implement

Often inflexible and costly product-line changes

Revenues increase with ability to produce multiple products with variations in inputs.

Allows for greater customization of products and smaller product-line runs.

Quality controls rely on human perception and dexterity

Sensors help workers improve product quality

Reliance on low-cost manufacturing countries. Employees with IT and data interpretation skills are costly, scarce.

Socialization of knowledge flattens the skills curve; IoE maximizes access to human talent pools at lower cost

Inefficient use of key inputs for production. Lack of flexibility among assembly locations.

Reduced waste (materials, energy). Greater freedom and agility to reallocate production and optimize inputs.

Page 8: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 8©2013Ciscoand/oritsaffiliates.Allrightsreserved.

• IoE value created:Moreintelligentdesignofmachines;greatercontrolofinstrumentationandproductionconditions

• Main IoE driver(s):Assetutilization,supplychainandlogistics

• Type of IoE connection(s):Machine-to-machine

• IoE technology enabler(s): Machinedesigntools,productionsensors,employeetraining

• Value created or migrated: Migratedfrominefficientproducersandcountries

Valueinsmartfactoriesisobtainedfromcost-cutting,revenuegrowth,andbetterworkforcecollaboration.Withthisinmind,manufacturingleadersshouldaccelerateadoptionofIoEtechnologiesandconsiderinitiativesthatfocusonimprovedcollaborationamongworkerstomakeemployeesmoreefficient.

2. Connected marketing and advertising: $1.95 trillion of total Value at Stake

BroadITandsocialapplicationsformarketingandadvertisingtransformthewaycompaniesengagewithcustomers,analyzetheirbehavior,andoptimizetheimpactoftheirinteractions.Examplesincludelocation-basedservices,viralmarketing,andmobileadvertising.

Today,itisverydifficulttocreateandimplementcohesivemarketingandadvertisingstrategiesacrossnumerousanddisparatechannels(TV,radio,Internet,pointofsale).IoEwillenablecompaniestohaveacompleteviewoftheircustomers(behaviors,preferences,demographicprofile)anddeliverindividuallytargetedmessagesandofferstothemonanydeviceatthetimeandlocationwheretheywillhavethemostbeneficialimpact.Withinthisnewparadigm,companiescanreactmorequicklybyassessingandreactingtotheirmarketsinrealtime;increaseprofitsbyofferingpricingbasedoncustomers’situationandabilitytopay;andgrowrevenuesbybundlingtheirofferingswithotherproductsandservicesbasedonaholisticassessmentofcustomers’wantsandneeds.

Valueinsmartfactoriesisobtainedfromcost-cutting,revenuegrowth,andbetterworkforcecollaboration.

2013

Current state (without IoE)

2022

Potential with IoE

Missed or unidentified sales opportunities Increased sales from real-time market assessments and reactions

Inefficient geographical selling Increased sales from location-based selling

Inflexible product lines Increased sales from better use of Internet-driven “freemium” market segmentations

Lost sales due to shifting competitive pressures and poor timing

Increased sales by directly tying pricing to current selling situation and customers’ ability to pay

Little holistic assessment of customers’ wants and needs

Increased sales from improved coordination with other products and services (two-sided markets)

Page 9: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Page 9©2013Ciscoand/oritsaffiliates.Allrightsreserved.

White Paper

• IoE value created:Assimilationandanalysisofcustomerdemographicandpurchasehistoriesfrommultiplesources

• Main IoE driver(s): Customerexperience,innovation

• Types of IoE connection(s): Machine-to-machine,person-to-machine,andperson-to-person

• IoE technology enabler(s): Cloudcomputing,BigData,real-timedecisiontools,security

• Value created or migrated: Both

Data-drivenbusinessagilityisatthecoreofachievingtheValueatStakefromconnectedmarketingandadvertising.LeadersshouldfocusonIoEinitiativesthatuseBigDataandcloudcomputingtoimprovedecisionmakingacrossthecompany.Tosucceed,everycustomer-facingdepartment,includingmarketing,sales,service,andsupport,mustbeabletoadaptmorequicklytorapidlychangingcustomerdemandsintheIoEEconomy.

3. Smart grid: $757 billion of total Value at Stake

Aneffectivesmartgridusesnetworkconnections—fromproductiontocustomers—tobetterunderstanduserbehaviorandimprovethereliability,economics,andsustainabilityoftheproductionanddistributionofelectricity.

Utilitycompaniestodaytypicallyoperateona“besteffort”infrastructure:theygenerateandplaceenergyontheelectricalgridwithouttakingfulladvantageoftheirassets.Thismakesthegridvulnerabletofaultsandallowsonlyforaone-wayflowofelectricity—fromproducerstoconsumers.Inaddition,thesystemisinefficientbecausepowergenerationcannotbeeasilyadaptedtofast-changingenergyusagecycles.IoEwillimprovetheelectricgridbyautomaticallydetectingandrepairingproblems,controllingelectricalflowsbasedonreal-timedemand,improvinggeneratorutilization,andenablingmoresustainableenergysourcessuchaswindandsolarpower.

Data-drivenbusinessagilityisatthecoreofachievingtheValueatStakefromconnectedmarketingandadvertising.

2013

Current state (without IoE)

2022

Potential with IoE

Vulnerable to breakdowns and security threats

Automated detection and self-healing improves reliability of the electricity network

One-way electricity flow Ability to shape the flow of electricity enables more flexibility and distributed power generation capabilities

Production calibrated only for peak demand, requiring reserves and causing inefficiencies

Demand-side management improves generator utilization and grid efficiencies

Variability in renewable energy sources prevents widespread adoption

Enables more sustainable energy sources such as wind and solar to contribute to the power grid

Page 10: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Page 10©2013Ciscoand/oritsaffiliates.Allrightsreserved.

White Paper

• IoE value created: Connectssensing,measurement,andcontrolsinrealtimetoimprovesupplyanddemandalignment,increasereliability,andreducecosts

• Main IoE driver(s): Supplychainandlogistics

• Type of connection(s): Primarilymachine-to-machine

• IoE technology enabler(s):Integratednetworkarchitecture,smartsensorsandmeters,privatecloudcomputing,security

• Value created or migrated:Netreductioninenergycostsforallprivatesectorstakeholders

ValueatStakefromthesmartgridwillcomemostlyfromimprovedefficienciesandincreasedreliabilityoftheelectricaldeliverysystem.Forthistohappen,however,significantregulatorychangesarerequired.Assumingthesechangestakeplace,utilitycompanyleadersmustbereadytoimplementinitiativesthatallowformoreflexibility,improveddemand-sidemanagement,andtheenablementofmoresustainableenergysources.

4. Connected gaming and entertainment: $635 billion of total Value at Stake

Thisusecaseincludesserviceprovider(SP)andsoftwarevendorrevenuesandcashflowsfromallapplicationsofonlinegamingandentertainment;itdoesnotincludenon-revenue-generatinggamingactivities(suchassubsidizedadvertising).

Connectedgamingandentertainmentencompassesawidespectrumofproductsandservices,includinggamessuchasFarmVillefromZynga,streamingvideofromNetflix,andgamblingfrombwin.partyintheUnitedKingdom.IoEwillprovideawholenewwayforconsumerstoentertainthemselvesbyallowingthemtoplaywithothersremotely,selectwhattheywanttouseondemand,andchoosethedevicetheywanttouse(anydevice,anytime,anylocation).

• IoE value created:Enhancegamingandentertainmentexperiencewithremotecollaboration,richmedia,andon-demandprograms

• Main IoE driver(s): Innovation—increasedrevenuefromnewbusinessmodels

• Types of IoE connection(s): Person-to-machineandperson-to-person

• IoE technology enabler(s): Next-generationnetwork,includingintelligence,video,collaboration,BYOD,security

ValueatStakefromthesmartgridwillcomemostlyfromimprovedefficienciesandincreasedreliabilityoftheelectricaldeliverysystem.

2013

Current state (without IoE)

2022

Potential with IoE

Asset-heavy, dedicated hardware Asset-light, any Internet-enabled device

Pay for ownership Pay for access or free

Offline or dedicated networks (cable and TV)

On-demand streaming

Considerable space requirements (casinos)

Digital

Alone or co-located Together: collaborative, remote, and social

Page 11: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Page 11©2013Ciscoand/oritsaffiliates.Allrightsreserved.

White Paper

• Value created or migrated: Mixofnewvalueandvaluemigrationfromtraditionalproviders

Forleadersinthegamingandentertainmentindustries,thisusecasehighlightstheimportanceoffocusingonthedeliveryofcontenttoanydevice,anywhere.ItalsoshowsthatclosepartnershipswithSPsarecriticaltodeliveringtheseamless,high-qualityexperiencecustomerswillexpect,andevendemand,intheIoEEconomy.

5. Smart buildings: $349 billion of total Value at Stake

SmartbuildingscompriseanintelligentandconvergedIPnetworkofelectronicdevicesthatmonitorandcontrolfacilitiesservices,includingmechanical,electronics,HVAC,andlightingsystemsinabuilding,toachievegreaterenergyefficienciesandcostsavings,alongwithanimprovedexperienceforoccupants.

IoEallowsbuildingstocreatevaluebybringingtogetheroperationsthatarecurrentlysiloedintoasingleIP-basedplatform.IoEreduceswaste(energy)bygreatlyincreasingtheefficiencyofbuildingmanagement(HVAC,lighting,safety).Smartbuildingsalsomakemoreefficientuseofavailablespacebymaximizingoccupancy.Forexample,CiscoestimatesthatIoEcanreducespacerequirementsforthesamenumberofemployeesby40percent.

• IoE value created: Lowerenergycosts,lowermanagementandmaintenancecosts,lowercapitalexpenses

• Main IoE driver(s):Assetproductivity

• Type of IoE connection(s): Machine-to-machine

• IoE technology enabler(s): Sensors,cloudcomputing,video,physicalsecurity

• Value created or migrated: Valuecreatedfromnext-generationnetworkedsystems;valuemigratedfromstand-alonesystemsandlowerstaffingrequirements

Thisusecasewillhaveatremendousinfluenceonthecommercialrealestateandconstructionmarketsinthenext10years.AsSmartBuildinginitiativescometo

Forleadersinthegamingandentertainmentindustries,thisusecasehighlightstheimportanceoffocusingonthedeliveryofcontenttoanydevice,anywhere.

2013

Current state (without IoE)

2022

Potential with IoE

Inefficient use of energy leads to high amount of waste and increased costs; energy use not based on true demand or building occupancy

Reduces energy costs by using sensors and energy-efficient systems

Physical monitoring of building systems Labor savings and increased staff productivity from remote monitoring

No scaling of building management infrastructure across facilities

Costs savings by utilizing shared infrastructure and open protocols

Inconvenience to tenants due to frequent breakdowns and repairs

Improved equipment life from continuous, proactive monitoring and timely maintenance

“One size fits all” occupant experience Building automation delivers a personalized experience for each occupant

Page 12: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

Page 12©2013Ciscoand/oritsaffiliates.Allrightsreserved.

White Paper

fruition,loweroperatingcostsshouldleadtoreducedrents,providingbenefitsforbothbuildingownersandtenants.TheIoEEconomyshouldleadtomorebuildingrenovationandnewconstruction,whichwillalsoleadtofasterbuildingobsolescence.Commercialrealestateandconstructionleaderswillneedtobeginpreparingforthesesignificantshiftsintheirrespectiveindustries.

6. Connected commercial ground vehicles: $347 billion of total Value at Stake

Thisusecaseisbasedoncommercialfleet(ground)vehiclesthatuseanintegratedplatformofcontrolsystemstoautomatetaskssuchasnavigation,pathoptimization,andlogisticsimprovements.

Asvehiclesbecomemoreconnectedwiththeirenvironment(road,signals,tollbooths,othervehicles,airqualityreports,inventorysystems),efficienciesandsafetygreatlyincrease.Forexample,thedriverofavending-machinetruckwillbeabletolookatapanelonthedashboardtoseeexactlywhichlocationsneedtobereplenished.Thisscenariosavestimeandreducescosts.

• IoE value created: Reducedtimelostincongestion,loweraccidentrates,lowerfuelandrepaircosts

• Main IoE driver(s): Supplychainandlogistics,assetutilization

• Type of IoE connection(s): Machine-to-machine

• IoE technology enabler(s): Telematics,sensors,cloudcomputing,security

• Value created or migrated: Both

Whilethemainbenefitsfromconnectedcommercialgroundvehiclescomefromimprovedlogistics,thereisalsoanopportunityforbusinessleaderstoimproveservicequalityandconsistency,andtorealizeenvironmentalbenefitsthroughlowerenergyconsumptionandcarbonemissions.

Whilethemainbenefitsfromconnectedcommercialgroundvehiclescomefromimprovedlogistics,thereisalsoanopportunity...toimproveservicequalityandconsistency,andtorealizeenvironmentalbenefitsthroughlowerenergyconsumptionandcarbonemissions.

2013

Current state (without IoE)

2022

Potential with IoE

Lost time, money, and fuel due to traffic congestion

Reduced congestion from traffic management and optimization of transportation infrastructure

Reduced fuel efficiency due to sudden acceleration and braking

Improved fuel efficiencies from vehicles intelligently adjusting driving speeds

High accident rate due to human error Lower accident rates due to vehicle-to-vehicle and vehicle-to-infrastructure communication

High vehicle insurance costs Insurance premiums based on actual driving patterns

Ad-hoc routing of vehicles Lower fuel and maintenance costs due to optimized delivery routes

Page 13: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 13©2013Ciscoand/oritsaffiliates.Allrightsreserved.

7. Connected healthcare and patient monitoring: $106 billion of total Value at Stake

IoEwillenablebetter-connecteddevicesanddata-drivenpatientmanagement,resultinginimprovedhealthcareeffectivenessandefficiencies.

Manyoftheinefficienciesinhealthcaretodayaretheresultofsiloedsourcesofknowledgeandinformation—itisdifficulttoaccessalloftherelevantknowledgeavailableatthepointofcare.Inaddition,manymeasurementsandtestsareadministeredmanually.ThegreaternumberofsensorsandconnectionsinIoEwillallowforshorterhospitalstaysduetosmarterhomemonitoringsystemsandimprovedcarefromstandardizedtreatmentsthatconformtoallknownbestpractices.

• IoE value created: Continuousmonitoringofhealthconditionsinaless-expensivehomesetting;allcareaspectsconsolidatedandcoordinated

• Main IoE driver(s): Assetutilization,supplychainandlogistics,andcustomerexperience

• Types of IoE connection(s): Machine-to-machineandmachine-to-people

• IoE technology enabler(s): Medicaldevices,homeITconnections,security

• Value created or migrated: Both

Connectedhealthcareandpatientmonitoringinvolveafundamentalshiftinhowhealthcareprovidersdelivertheirservices.BillingandinsuranceprocesseswillalsohavetochangeforthisValueatStaketocometofruition.Giventhesechanges,businessleaderswillneedtofocusonbothnewtechnology-driveninitiativesandchangemanagement,whileaddressingpatients’privacyconcerns.

Connectedhealthcareandpatientmonitoringinvolveafundamentalshiftinhowhealthcareprovidersdelivertheirservices.BillingandinsuranceprocesseswillalsohavetochangeforthisValueatStaketocometofruition.

2013

Current state (without IoE)

2022

Potential with IoE

Long hospital stays to ensure patients can thrive at home after discharge

Reduced costs and improved quality of life from shorter hospital stays, with home monitoring systems that ensure health

Limited number of health conditions with home monitoring capabilities

Wider number of health conditions with home monitoring capabilities

Uncoordinated and manual collection of patient test records

Improved decision making from single electronic collection of patient records

Ad-hoc interpretation of medical test results and conditions

Improved patient care from standardized treatments that conform to best practices

Multiple doctors offer care in an uncoordinated manner

Improved patient care and health outcomes from consolidated, patient-centric views of all treatment aspects

Page 14: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 14©2013Ciscoand/oritsaffiliates.Allrightsreserved.

8. Connected private college education: $78 billion of total Value at Stake

Betterapplicationoftechnologieshelpsscaleteachers,faculty,andeducationalcontent;increasesnewwaysoflearning;andtransformstheeducationalmodel—givingstudentscurriculumflexibilitytolearnattheirownpace,anywhere,anytime,usinganydevice.

Today,educationismostlya“physical”experiencewhereprofessorsteachstudentsinclassroomsusingbooks.IoEwillallowprivatecompaniestochallengethistraditionalmodel.Evennow,earlyadoptersarebreakingdownphysicalbarrierstomakeeducationavailabletopeoplewhopreviouslydidn’thaveaccess.IoEwillenablenewbusinessmodels,extendprofessors’reach,andreducetextbookcosts.

• IoE value created: Extendprofessors’reachandscale;enablenewbusinessmodels:scalegloballywithoutphysicalvenueconstraints;reducetextbookcosts

• Main IoE driver(s): Customerexperience,assetutilization

• Types of IoE connection(s): Person-to-personandmachine-to-machine

• IoE technology enabler(s): Video,mobility,BYOD,collaborationtools,security

• Value created or migrated: Increasedpenetrationoftheonlineeducationmodel(migration)

TheIoEEconomywillgiveprivateeducationalinstitutionstheabilitytoscaleinstructionandprovideitatasignificantlylowercostthannot-for-profitinstitutions,whichwillgivefor-profitorganizationsasignificantcompetitiveadvantageovernot-for-profitestablishments.Andwhilevideoandonlinemediaarenotnewtoeducation,intheIoEEconomy,theywillofferremarkablenewcapabilitiesbothtoimproveacademicoutcomesandextendthereachofqualityeducationtopeoplewhohavenothadaccesstoit.Thiswillhaveasignificanteconomicimpact,forexample,byhelpingaddressthemoretechnicalskillsthatwillberequiredintheIoEEconomy.

TheIoEEconomywillgiveprivateeducationalinstitutionstheabilitytoscaleinstructionandprovideitatasignificantlylowercostthannot-for-profitinstitutions....

2013

Current state (without IoE)

2022

Potential with IoE

Physical classroom environment Improved access to education by scaling professors and highest-quality content to any device, anywhere

One-time instruction in a single location Greater accessibility from scaling content and providing recordable and replicable instruction anytime, at any venue

Static, linear content with limited control Improved quality of education by learning at your own pace, focusing only on relevant content, and viewing richer, interactive material

Accessible only during university and library hours

Improved education from greater availability of professors and content

Search for content (pull vs. push); costly textbooks; designed for one-size-fits-all

Improved education from proactive content (push vs. pull), free materials, and ability to customize curriculum

Page 15: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 15©2013Ciscoand/oritsaffiliates.Allrightsreserved.

How To Get StartedWhilethescopeofIoEmayseemdaunting,thereareactuallysomeverysimplestepsyoucantaketobegincapturingyourshareoftheIoEValueatStake:

• Determine where your business is today with regard to IoE. Withthehugenumberofconnectionsthatneedtobemadeamongpeople,data,andthings,companiesmustassesstheirstrengthsandweaknessesintheareasoftechnologyskills,businessprocessmanagement,dataanalytics,connectedness,andsecurity.

• Understand the role of IT in enabling your company to benefit from IoE. UsingITtoreducecostshasdiminishingreturns;investinginITtostrengthenandgrowthecustomerbasehasgreaterupsidepotential.

• Take steps now to maximize your firm’s capabilities in the areas of security and privacy:Asmentionedpreviously,securityandprivacyareessentialenablers—andpotentialinhibitors—ofIoE’sValueatStake.IoEsecuritywillbeaddressedthroughnetwork-poweredtechnology:devicesconnectingtothenetworkwilltakeadvantageoftheinherentsecuritythatthenetworkprovides(ratherthantryingtoensuresecurityatthedevicelevel).Privacy,ontheotherhand,willrequirethatcompaniescombinetechnologywitheffectiveprocessesandpolicies.TobenefitfromIoE,firmswillneedtoidentifynewprivacymodelsthatmeetcompanyandcustomerexpectations.

Mostimportant,firmswillneedtoconsidertheirowninternalculturalchangesthatarenecessarytoembraceIoE.ThevalueofanyITinvestmentwillbedeterminedbythecapabilitiesitenablesoutsidetheITdepartment.TheIoEValueatStakeemanatesfromthemarketing,HR,finance,production,sales,andothercorporatedepartments.Therefore,acompany’sITdecisionsmustconsidertherequirementsofthesedepartments.Corporatepoliciesonemployment,input-sourcing,andincustomer-facingareasmayneedadjustmenttoembracetheseIoE-drivenbestpractices.

The Game Is on . . .Challengesaboundfortoday’sbusinessleaders.Therapidpaceofchangecreatesconfusionandmisinformation,whichoftenleadstopoordecisionmakingor,worse,inaction.Whencombinedwithpricetransparencyandglobalsupplychains,manyofthesametechnologytrendsthatareusheringintheIoEeraarealsoenablingnewentrantstobecomeviablethreatsinjustweeksandmonthsratherthanyears.

Inthisenvironment,winnersandlosersaredeterminedfasterthaneverbefore.With$14.4trillionValueatStake,IoEpresentsanimportantopportunitytoincreasemarketshare,gaincompetitiveadvantage,strengthenandgrowyourcustomerbase,andincreaseprofitability.Andbecausethestakesarehigh—over10years,companiesstandtolosemorethanayearofprofitsiftheydonotembraceIoE—thetimetoactisnow.

“Youcan’twinifyoudon’tplay.Astechnologyandconnectednessacceleratethepaceofdeterminingthewinnersandlosers,preparingforIoEisnotaquestionofif,butofwhen.”

Joseph Bradley,General Manager and Senior Director,Cisco IBSG Global Research & Economics, Communications, and Planning Practices

Page 16: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

Page 16©2013Ciscoand/oritsaffiliates.Allrightsreserved.

The authors would like to acknowledge Michael Adams, Dave Evans, Jeremy Hartman, Jeff Loucks, James Macaulay, Bob Moriarty, Ewan Morrison, Andy Noronha, Kathy O’Connell, Noelle Resare, and Cisco IBSG’s industry practices for their valuable contributions to the development of this paper.

Jointheconversation:#InternetofEverything#IoE

Endnotes1. Source:CiscoIBSG,2013.

2. Ibid.

3. Ibid.

4. CiscodefinestheInternetofEverythingasbringingtogetherpeople,process,data,andthingstomakenetworkedconnectionsmorerelevantandvaluablethaneverbefore—turninginformationintoactionsthatcreatenewcapabilities,richerexperiences,andunprecedentedeconomicopportunityforbusinesses,individuals,andcountries.

5. ValueatStakediffersfromInternetMarketSize,ortotaladdressablemarket(TAM).ValueatStakeisaforecastofthepotentialbottom-linevaluethatcanbecreatedorthatwillmigrateamongcompaniesandindustriesgloballybasedontheirabilitytoharnesstheInternetofEverythingoverthenextdecade(10-yearnetpresentvalue).Ciscoestimatesthisvalueat$14.4trillionoverthenext10years.Bycontrast,theInternetMarketSize,orTAM,isprojectedtoreach$4.1trillioninannualrevenueforallparticipatingvendorsby2016.Beyondrelevantinformationandcommunicationstechnologies(ICT),itincludese-commerceandadvertising.Ciscowilladdress$258billion(6percent)ofthisInternetmarket(source:CiscoSMO,2012).ValueatStakeincludesshiftsofbenefitsamongcompetingfirmsinanindustry;shiftsofbenefitsamongdifferentindustries;new-to-the-worldrevenuegrowthfrominnovation;costsavingsfrommoreefficientprocesses;andallowancesforimplementationcosts.ValueatStakedoes notincludeextentoflossesatfirmsthatdon’ttransform;consumerorgovernmentbenefits;socialbenefits;andvalueestimatesforreducedriskofoperations.

6. Weselectedaperiodof10yearsbecauseitisareasonableamountoftimeforcompaniestoidentify,design,andimplementchangestocapturetheirshareoftheIoEValueatStake.The$14.4trillionnumberisthenetValueatStake.ThegrossValueatStakeis$18.7trillion.Inotherwords,aninvestmentof$4.3trillionisrequiredtoachievethenetValueatStakeof$14.4trillionover10years.Inaddition,Ciscoestimatesthatthe$14.4trillioninValueatStakerepresentsanincreaseinaggregatecorporateprofitofabout21percentover10years.

7. Ciscoestimatesthat59percentofValueatStakewillbenewvalueresultingfromtechnologyinnovation,while41percentwillbegeneratedbycompaniescapturingmarketsharefromthecompetition.

Page 17: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper

8. ToillustratehowValueatStakewascalculated,we’llusetheexampleofthe“ConnectedCommercialGroundVehicles”usecase.Cisco’sanalysisconsideredtwofactors:1)lowercostsforfleetownersand2)thepotentialrevenueincreaseforserviceproviders.Wealsoprojectedthepenetrationofcommercialgroundvehiclesasapercentageofthetotalglobalcommercialfleet—fromlowerpenetrationtoday(6.3percent)toestimatedpenetrationof24.5percentby2022.Usingresearch,wethenestimatedtheIoEbenefitspercommercialvehicle(includingfuelefficiencyanddriverproductivity)at$970annually.Fromthesebenefits,wedeductedone-timeandrecurringcosts.WealsoconsideredSPrevenueopportunities.Basedonthesamepenetrationnumbers,theanalysisalsoconsiderednewrevenueopportunitiesforSPs,includingconnectivityandvalue-addedservices.ToestimatetheValueatStakeforSPs,weassumedaconservativeaveragemarginof$12-$15monthly.TheoverallValueatStakenumber—$347billion—reflectsthecombinednetpresentvalueofthebenefitsforfleetownersandserviceproviders.WebelieveCiscoistheonlycompanytotakethiskindofuse-case-driven,bottom-upapproachtoevaluatetheopportunityofferedbytheInternetofEverything.

9. ThecriticalneedforsecurityandprivacyinIoEisunderlinedbyU.S.PresidentBarackObama’sexecutiveorderoncybersecurity,signedonFebruary12,2013,whichencouragesallnetworkoperators,companies,andconsumerstobecybersmartandcybersecure(http://www.whitehouse.gov/cybersecurity).

10.Sources:GlobalInsight,AmericanProductivityandQualityCenter,U.S.BureauofEconomicAnalysis,U.S.BureauofLaborStatistics(all2012),andCiscoIBSG,2013.The18industriesmeasuredfortheamountofValueatStake,inorderofsize,include:1)manufacturing;2)retailtrade;3)informationservices;4)financeandinsurance;5)healthcare;6)educationalservices;7)professional,scientific,andtechnicalservices;8)administrativeandwastemanagementservices;9)wholesaletrade;10)arts,entertainment,andrecreation;11)otherservicesexceptgovernment;12)agriculture,forestry,fishing,andhunting;13)construction;14)transportationandwarehousing;15)managementofcompaniesandenterprises;16)realestate,rental,andleasing;17)mining;and18)utilities.

11.The$14.4trillioninValueatStakecomprisesthefollowingusecasesandvalues:1)smartfactories,$1.95trillion;2)connectedmarketingandadvertising,$1.95trillion;3)smartgrid,$757billion;4)connectedgamingandentertainment,$634billion;5)smartbuildings,$349billion;6)connectedcommercialgroundvehicles,$347billion;7)connectedhealthcare/patientmonitoring,$106billion;8)connectedprivatecollegeeducation,$78billion;9)innovativepayments,$855billion;10)wealthmanagement,$451billion;11)improvedtimetomarket,$1.03trillion;12)businessprocessoutsourcing,$742billion;13)virtualattendants,$163billion;14)supplychaincostsavings,$697billion;15)smartfarming,$189billion;16)digitalsignage,$38billion;17)next-generationworkers(BYOD,mobilecollaboration,telecommuting,VDI),$2.16trillion;18)travelavoidance,$980billion;19)physicalandlogicalsecurity,$1.09trillion;20)next-generationretailbankbranches,$20billion;21)next-generationvendingmachines(digitalmalls),$49billion.

Page 18: Embracing IoE to Capture Your Share of $14.4 Trillion #TomorrowStartsHere

White Paper


Recommended