When we hear the term “Internet of Things” (or “IoT”), a lot of ideas — and a lot of hype — comes along with it. Unfortunately, when articles in the popular press focuses on things like refrigerators that are connected to the Internet, much of the true potential for the IoT gets overlooked.
A June 2015 report by the McKinsey & Company sought to quantify the real economic value of the Internet of Things. The central conclusion to their report is that despite all the hype surrounding the IoT, its total potential economic value could be as high as $11.1 trillion dollars by the year 2025. (This high value estimate would equal over 10% of the world’s economy.)
The challenge to capturing this economic value is knowing where that economic growth and value is going to come from. Certainly as consumers we can imagine a host of new services and devices that will come to market, and upgrading to those new devices (and learning how to use them) is going to create a new measure of economic growth.
The McKinsey report identified a set of scenarios where they expect to see the most value within the growing IoT economy. Some might be surprised to learn that the largest anticipated sub-economy for the IoT is in factories and other industrial settings. New connected devices can facilitate new efficiencies (as well as completely new processes) in areas such as operations management and predictive maintenance — all to the tune of somewhere between $1.2 billion and $3.7 billion.
Going down the list, the other areas for forecasted economic growth include:
- Municipalities (public health and safety, traffic control): $0.9-$1.7 trillion
- Personal/Human (illness monitoring, wellness improvement): $0.2-$1.6 trillion
- Retail (self-checkout, optimizing shopping experience: $0.4-$1.2 trillion
- Outdoor Applications (self-driving vehicles, navigation logistics): $600-$900 billion
- Work sites (equipment maintenance, health and safety): $200-$900 billion
- Vehicles (maintenance and monitoring): $200-$700 billion
- Home (security, utilities management, chore automation): $200-$200 billion
- Office (worker monitoring, training): $100-$200 billion
As you can see, it’s hard to imagine any aspect of the modern economy that wouldn’t be potentially impacted by IoT.
In fact, the current state of affairs is one in which most of the information and data generated by IoT devices are not actually used for any reason other than relatively narrow purposes. As an example, the McKinsey report notes that an oil rig has approximately 30,000 sensors, but that only 1% of the data are actually examined, because the remaining information is used only to detect and control problems, and are not used to try to make the oil rig function better.
The IoT certainly appears to be an example of the notion that “we don’t know what we don’t know.” The IoT has the capacity to change our lives in countless ways, and to generate a tremendous amount of economic activity in the process, and there are different views and opinions on how that may happen.