Four Implications of the Internet of Things for Business

I believe we will see a 10,000 to 100,000 increase in the number of computers, phones, devices and living things attached to the internet in the next 5-10 years -- what many are calling "the internet of things".  We have probably already passed the point when there are more things to attached to the internet than people.  All cars, many toys, most sick patients, lab equipment, cows with senors on their hoofs, you name it, will have the option to be connected to the network.  Most importantly, there are 4.3 billion mobile phones which already have at least a sound sensor, many have cameras which can also scan bar codes and analyze pictures, others  have accelerometers, and it's not hard to imagine many more sensors attached to this mobile platform.  In short, we are at the early stages of "instrumenting the planet".

This addition of billions of sensors is an ongoing development of what Jeff Rayport & I termed "The Virtual Value Chain" (VVC) back in a 1995 article for the Harvard Business Review.  The information description for every product, service, home, car, and business is increasing at an increasing rate, globally.  One of the most important and interesting implications of this enhancement of the VVC is how it enables new business models, new products and new services.  This story is not new with the internet.  James Beniger noted in his wonderful book, The Control Revolution: Technological and Economic Origins of the Information Society, each successive wave of information innovation enables a new level of "control" of production and organization.  Put another way, you can't have a railroad without a telegraph because you could not coordinate the different trains streaming toward each other on the same tracks, without some communication ahead of their movement.  Let's review some of the current implications:

Implication #1: Those who have a superior virtual value chain will be more efficient.  There is no doubt that those firms like WalMart, Amazon, Zappos, UPS, and even GE's jet engine business, have a  advantage over their competition because their virtual value chain is more accurate, complete, detailed, and rapid than others in their industries.  For example, these firms can sense of actual movement of product or assets in real time which means they don't need to create prediction models nor carry buffer stocks.  They can manage real time demand.

Implication #2: There will be crazy new applications that have fascinating, unintended consequences.  For example, there is a company called WideNoise which you can download and use on you iPhone to measure noise pollution.  I would not be surprised to see a sensor network, based on cell phone pictures, and other additional sensors begin to map the impact of the massive BP oil spill in the Gulf of Mexico.  Already if there is a Google Earth application which shows the size of the oil spill compared to Mahattan, San Francisco, Paris, London, Rome, Hawaii and Washington, D.C.  This type of visualization based on more sensor based data will come along soon and influence the nature of the data used in describing just how big a disaster this is.

Implication #3: There will be a torrent of data to digest.  A good friend of mine Admiral John Morgan (retired) has started a company to help analyze the torrent of data which is now streaming off of the thousands and millions of cameras used for surveillance and intelligence.  The number of video feeds from military drones alone has increase one or two orders of magnitude over the past decade and there are simply not enough eyeballs to watch and interpret it all.  We will need to turn to new technology to digest the information generated by our technology.

Implication #4: All companies will need to worry about their privacy policy.  I'm a believer that the best thing for companies, in the long term, is to support very strong privacy rights, and to give customers property rights in their data.  As my friend John Perry Barlow once said, "the productivity of property is in direct proportion to the quality of personal rights".  Google is now getting sideways with the European commission because they collected and stored information from wireless data networks about individuals using those networks in direct violation of EU law.  As more and more virtual value chains get built out more and more companies may have a Google like problem.

Given the enormous productivity and control which more information gives Beniger pointed out in his book on Control Revolutions, companies will pursue it with a vengeance.  Are you ready for the competition and the human costs that arise?

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