McKinsey explores what IoT leaders do to drive greater results in their business
- IoT leaders are achieving cost and revenue gains of at least 15% or more, while laggards see less than 5%.
- Pursuing 80% more IoT use cases compared to their peers, IoT leaders are progressing faster down the learning curve of monetising their application areas.
- IoT leaders anticipate that their IoT use cases will boost their gross profits by 13% over the next three years, three times as much as IoT laggards.
What IoT leaders do to excel and drive greater results compared to their peers is explored in the recent McKinsey report, What separates leaders from laggards in the Internet of Things. The study is based on interviews with 300 IoT executive-level practitioners from companies with more than $500M revenues which are implementing large-scale IoT strategies with projects that have progressed from pilot to production. Enterprises from 11 major industry segments from Canada, China, Germany, and the United States were included in the survey.
McKinsey found 16% of enterprises have IoT programs in production, delivering aggregate cost and revenue impacts of at least 15%. The study also found 16% of enterprises are lagging, attaining aggregate revenue and cost improvements of less than 5%. The following graphic compares companies by the level of financial impact from IoT initiatives:
Nine practices differentiate IoT leaders from laggards, and the study provides a fascinating look into each based on the survey data. Key insights into IoT leaders' practice areas is provided here:
Leaders are more aggressive about pursuing a greater number, scope, and variety of IoT applications and use cases than their less successful peers
What IoT leaders learn quickly is how steep the IoT learning curve is, and how it’s essential to run as many IoT pilots as possible to learn more. Leaders discover the first 15 or so IoT use cases typically have a modest payback, with the average payback rising until approximately 30 use cases have been achieved.
IoT leaders anticipate that their IoT use cases will boost their gross profits by 13% over the next three years, three times as much as IoT laggards. The following graphic illustrates the financial impact per IoT use case by the cumulative number of IoT use cases enterprises initiate.
Leaders are more willing than their peers to change business processes to unlock IoT’s value
McKinsey found IoT leaders are three times more likely than their peers to say that managing changes to business processes is one of the three most important capabilities for implementing IoT.
CEOs who champion their company’s IoT initiatives make strong contributions in this area, removing barriers and roadblocks quickly to keep IoT programs moving forward.
Leaders design, pilot and move to production IoT use cases that rely on advanced endpoints far more than their peers
McKinsey finds that IoT leaders are more visionary and aggressive than peers in developing applications with advanced endpoints. Leaders are gaining expertise and mastery of how to creatively use advanced endpoints today, reporting higher levels of satisfaction and positive results.
Leaders clearly define how IoT will create value and excel in building effective business cases
McKinsey found that IoT leaders are 75% more likely than their peers to cite the preparation of a strong business case as a critical success factor for their IoT programs. The study’s respondents who have an IoT vision that includes a strong value proposition, a proven delivery model, and a business model that drives revenue are getting results faster than their peers. 35% of leaders rate the importance of “strong business case and vision for value creation” as one of the top three success factors versus 20% of laggards. Leaders leave nothing to chance when it comes to defining how IoT will deliver business value either in the form of greater revenue or reduced costs.
A CEO’s involvement and support are essential for any enterprise to succeed with IoT
Based on personal experience with IoT pilots, C-level executives are indispensable in removing barriers and making process-level changes necessary for success. 72% of the surveyed executives agree. A vital catalyst of any enterprise succeeding with IoT is a clear, unequivocal time commitment on the part of the CEO. Enterprises in the leaders quintile were 2.4 more likely than laggards to report that their CEO serves as the champion of IoT efforts as the following graphic illustrates:
Leaders credit strong alignment with IoT strategies and priorities enterprise-wide as a critical factor in their success
IoT initiatives and pilots on their way to production require executives, managers, and frontline workers to learn fresh skills and collaborate across business and functional boundaries in new ways.
Enterprises need to have a strong unifying vision of where they’re going with IoT, with the CEO championing the change management required to make sure they succeed.
Leaders begin by adding IoT capability to existing products and services first
McKinsey found that Leaders are three times more likely than their peers to make their top priority adding IoT capabilities to existing products. They focus on how to turn the current scale they’ve achieved with suppliers, selling and service networks into a formidable competitive advantage. They’re also more adept at cross-selling and up-selling IoT-enabled products by capitalising on current customer relationships. The following graphic compares enterprises’ single highest-priority IoT effort:
Leaders excel at tapping into, scaling and relying on an ecosystem of partners for innovation versus doing it all themselves
McKinsey finds that IoT Leaders excel at scaling their partner ecosystems faster and more strategically than their peers. IoT Leaders also rely more on partners for the latest technology innovations instead of attempting to create them entirely on their own. They’re also deliberately choosing IoT platforms that support third-party developers and the advanced endpoints as the graphic below shows:
Leaders prepare for cyber attacks, so they don’t slow things down
McKinsey found that 30% of enterprises from both IoT leaders and their peers say that they’ve experienced cyber attacks that have resulted in high to severe damage. 57% of leaders had been the target of cyber attacks compared to 44% of their peers. The higher number of cyber attacks happening for leaders is due to the broader threat surface their many pilots, and production-level use cases create.
The more distributed and varied IoT use cases are the greater the risk of privileged credential abuse as well. Thwarting privileged credential abuse needs to start with a least privilege access approach, minimising each attack surface, improving audit and compliance visibility while reducing risk, complexity, and costs. Leaders in Zero Trust include Centrify, MobileIron, Palo Alto Networks, and others.
Interested in hearing industry leaders discuss subjects like this and sharing their IoT use-cases? Attend the IoT Tech Expo World Series events with upcoming shows in Silicon Valley, London and Amsterdam to learn more.
- » Android Auto is getting a safer, more intelligent makeover
- » Opinion: The road to truly intelligent connected cars
- » Jeff Bezos is ‘very excited’ about the automotive industry
- » Enterprises need to assess their IoT footprint, argues Zscaler
- » Hello Tractor: How the ‘Uber for Farming’ is revolutionising agriculture