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The Internet of Things and the trend toward liquification

Industry Insights Editor, RTInsights

Beyond simply adding intelligence to devices and networks, the Internet of Things (IoT)—with its potential for real-time visibility across a range of systems and devices—is an economic game-changer for entire industries.

That’s the key takeaway from a new report published by the IBM Institute for Business Value, which looked at the IoT’s impact on selected industries. The report, which takes a macro-economic view of how the IoT will transform organizations, was authored by Veena Pureswaran, global electronics industry leader in the IBM Institute for Business Value, and Dr. Robin Lougee, global research industry lead for the consumer product and agriculture industries at IBM Research.

The authors argue that the IoT will lead to “liquification of the physical world.” The bottom line is that the IoT means much more than smart thermostats or “washing machines that text you when the cycle is done,” Pureswaran and Lougee point out. “The IoT is now poised to bring…liquid marketplaces by enabling searching, managing and monetizing assets in the physical world,” they say. Physical assets will become participants in real-time global digital markets.

The trend toward liquification leads to opportunities in three areas: asset marketplaces, risk management and improved efficiency. One asset marketplace that can benefit from IoT is commercial real estate, which is riddled with inefficiency. “The commercial real estate market suffers high turnover rates, is often sub-optimal and illiquid,” the authors state. “The IoT can help correct this market failure by instrumentation and digitization. Sensors, coupled with understanding of utilization, can create liquid marketplaces of real estate by enabling real-time discoverability, usability and payment.” Digitally tagged space can be rented or shared in off-hours—such as corporate conference rooms that can be leased as classroom space during off-hours, the authors suggest.

With assistance from Oxford Economics, the authors modeled the potential of this transformation in the US commercial real estate market. “Based on 50 percent behavioral adoption rates of IoT technologies, we analyzed the impact of unlocking capacity from vacancies, shadow space, hoteling and ‘hot-desking’ (workspace sharing), as well as improved utilization hours. The expected result: a remarkable 39 percent increase in available space.” This translates into a 42 percent reduction in price per square foot, according to the report. “As real estate rental prices fall, the industry and consumers, both existing and induced, will see a benefit of $142 billion per annum.”

Another area that will be transformed by real-time IoT is risk management. “The provision of credit and management of risk today in many economies is a crude business, as crude as advertising was in the era of newspapers and television,” Pureswaran and Lougee write. “Instrumentation and digitization enabled by mobile phones and the IoT promise a revolution in how credit and risk are managed. Combining device instrumentation, digital money, GPS logs and social networks, it will be possible for financial institutions to build much more accurate pictures of risk and simultaneously reduce the cost of repossession.”

Finally, there are macro-economic gains that can be seen through improved efficiency, according to the report. This will happen as industries that have not yet been transformed by the information revolution—for example, agriculture—will begin to reap the benefits of IoT. Sensor technologies and real-time data collection can correlate production decisions and farm yields with environmental factors, for example. 

Applications in agriculture include “field sensors for detailed monitoring, instrumented farm equipment for optimized planting and spraying, and drones for large-scale surveillance,” according to the report. These technologies could enable “more intensive farming of land and better-integrated farm management practices that will bolster productivity through efficiency.”

Pureswaran and Lougee make the following recommendations for staying ahead of the physical “liquification” that may be coming to every industry sector:

Evaluate opportunities for new digital marketplaces: As the IoT instruments everything around us and unleashes significant new capacity, new marketplaces will emerge everywhere,” they state. “As these new marketplaces evolve, it will become apparent that it’s not just about asset utilization: it’s about whole new business models. Higher asset utilization rates will lead to price wars from excess capacity. Online marketplaces will become more valuable and powerful than big market participants.”

Analyze IoT data and act on the insights: The IoT is no longer just about instrumenting devices, it is about using insights from devices,” Pureswaran and Lougee write. It’s important to “understand that IoT data generated from devices has potential for insights across the value chain. The winners in this transformation will use IoT data to obtain deep, personal insights and make real-time decisions, integrating real-time data and insights directly into business operations.”

Begin the journey for collaborative value: “A first step is to start with projects that promise clear ROI—implementing asset optimization, and designing products and services to take advantage of intelligent systems,” the authors state. “Leaders in this transformation will study usage patterns, refine their approaches and optimize their processes.”

Read more by Joe McKendrick at RTInsights: “Predictive Maintenance: Teaching Old Machines New Tricks.”