Transforming to an IoT Business
The majority of people are familiar with the Internet of Things (IoT), which was first coined in 1985 and was born according to Cisco Systems in 2008 when more things were connected to the internet than people. In practical terms, IoT is defined as physical objects that connect and exchange data with other devices and systems over the internet. Now, IoT is ubiquitous, especially in the consumer market, where home automation/monitoring is now quite common. As of 2020, there were over 12 billion connected devices with a forecast of more than 30.9 billion IoT devices worldwide by 2025 (source: Business Insider, IoT Analytics, Gartner, Intel, Statista). There were 5.8 billion connected automotive and enterprise IoT devices by the end of 2020, and it is expected that more than 15 billion enterprise IoT devices will be connected by 2029 (source: Gartner), which is why enterprise IoT is the focus of this book. While over 98% of business leaders have an understanding of IoT, statistics show that many are unclear of the exact definition of the term (source: Fierce Electronics), which undermines the full potential of enterprise IoT solutions and is the reason we decided to write this book. The enterprise market is where IoT is making the biggest impact in terms of digital transformation, with operational cost savings and new business models. By the end of this chapter, you will have a good understanding of the underlying IoT solution technologies and markets, as well as how IoT solutions can be used to transform a business with operational cost savings, improved efficiencies, and new business models.
In this chapter, we will cover the following main topics:
- Understanding IoT technologies
- Leveraging IoT for digital transformation
- Discovering the top IoT markets
Understanding IoT technologies
In this section, you will learn about the underlying IoT technologies while using a high-level IoT solution end-to-end architecture as a guide. This includes IoT devices, connectivity, data analytics, and applications. The goal of this section is to provide you with a practical understanding of an IoT solution that will form the basis for an enterprise’s digital transformation, as discussed in the next section.
At a high level, an IoT solution consists of four basic layers, as shown in the following figure:
Figure 1.1 – High-level IoT architecture
The device layer is the actual physical device or thing in IoT that is connected to the internet. It captures critical IoT sensor data such as temperature, humidity, light, and air quality for remote monitoring applications. We will explore IoT devices in more detail in Chapter 6, Reviewing Cellular IoT Devices with Use Cases, but some common IoT devices that gather this sensor data include gateways, routers, and asset trackers. This sensor data can include location data for assets such as cars and enterprise fleets, health data for remote patient monitoring (RPM), or video data for security. We will cover IoT device types in more detail in Chapter 2, Understanding IoT Devices and Architectures, and describe how an IoT device is the foundation for an IoT solution. We will also discuss the near real-time processing of data at the device layer, known as edge computing, which is a growing and important trend that is driving tremendous growth in enterprise IoT.
The connectivity layer is the wireless or wired connectivity, which is the gateway to the internet. This could be a wireless local area network (WLAN) technology such as Wi-Fi, Bluetooth, or Zigbee or a wireless wide area network (WWAN) technology such as cellular or LoRaWAN. As we will discuss in Chapter 2, Understanding IoT Devices and Architectures, and Chapter 3, Introducing IoT Wireless Technologies, WLAN technologies rely on a WAN gateway device to backhaul connectivity to the internet. Although several wireless technologies enable IoT, which we will present in Chapter 3, Introducing IoT Wireless Technologies, we will make the case that cellular technologies such as LTE and 5G are unique enablers for the new and transformative IoT business models, which is part of the reason why cellular IoT devices grew 18% year-over-year to reach 2 billion by the end of 2021 (source: IoT Analytics). More specifically, Low Power Wide Area (LPWA) cellular technologies such as LTE Category M (LTE-M) and Narrow Band IoT (NB-IoT) offer unique features in terms of lower cost and power that further enable new IoT applications. In Chapter 3, Introducing IoT Wireless Technologies, we will provide much more detail on both licensed and unlicensed wireless IoT technologies, especially LPWA, and how they enable the growth of enterprise IoT solutions and new IoT business models. In Part 2, we will do a deep dive into cellular IoT wireless technologies.
The data analytics layer is where the IoT device data is processed and is typically implemented in combination with the application layer in the domain of a Cloud Service Provider (CSP) such as Amazon Web Services (AWS) or Microsoft Azure. The data analytics layer is where the value of the IoT device data is realized in terms of data analytics and actionable data for an enterprise IoT solution. As mentioned earlier, for many IoT applications, much of the IoT data processing is moving from the data analytics layer in the cloud to the device, which is known as “edge” data processing. This enables more real-time and low-latency applications such as intelligent transportation (for example, autonomous vehicles), augmented/virtual reality, and video intelligence. We will go into more detail on IoT data processing in the context of IoT architectures in Chapter 2, Understanding IoT Devices and Architectures.
The application layer is the dashboard for the IoT solution that pulls together the IoT device data with the connectivity and processing into a meaningful presentation. For example, in the case of asset tracking, this would be a map showing the location and contiguous path of an asset such as a fleet vehicle or container, along with temperature and humidity sensing data/alerts along the way. Behind the application is where data processing takes place. This involves the time series data from the IoT device along with sensor and location data. In this example, the asset tracking application in combination with the underlying data processing provides not only a better user experience in monitoring the asset but also identifies patterns that drive business decisions around real operational cost savings. We will cover the IoT application protocols, including MQTT and CoAP, in more detail in Chapter 2, Understanding IoT Devices and Architectures.
We will review the end-to-end IoT solution architecture in more detail in Chapter 2, Understanding IoT Devices and Architectures, but at a high level, these four IoT layers are the basis for an enterprise IoT digital transformation in terms of improved customer experience, real-time insights leading to operational cost savings, and new service business lines. In the Understanding IoT markets section, we will discuss the top IoT markets, along with some example applications in each market, that helped create a digital transformation strategy that is being adopted by more and more businesses. While in 2018, 57% of businesses adopted IoT in some way, this increased to 94% in 2021 (source: Aruba Research Report, Microsoft). Moreover, 83% of organizations that employed IoT technology have reported a significant increase in business efficiency (source: Aruba Research Report, Microsoft). In the next section, we will learn how IoT can drive enterprise digital transformation.
Leveraging IoT for digital transformation
What is the role of IoT in enterprise digital transformation? In short, IoT solutions act as a connection between the physical assets of a business and the information technology (IT) infrastructure, leading to improved operational efficiencies as well as new and better customer experiences. To provide the impetus for implementing an IoT solution in your business, we will describe five areas where IoT can enable digital transformation in your business:
- Monitoring and managing assets and inventory.
- Increasing operational efficiencies and productivity.
- Creating smart factories.
- Driving new business models.
- Improving the customer experience.
Let’s start by reviewing one of the most common areas where an enterprise IoT solution can transform your business – monitoring and managing assets and inventory.
Monitoring and managing assets and inventory
Figure 1.2 – Asset tracking and monitoring use cases
One of the leading areas where IoT can transform a business is asset monitoring and inventory management. In terms of asset monitoring, an IoT solution can provide automatic notifications on the health and location of business assets such as fleet vehicles/trailers, containers, pallets/bins, retail coolers, and machinery. This enables a business to reduce human error and improve daily operational efficiencies and asset downtime due to maintenance, also known as predictive maintenance. Business assets are the lifeblood of a successful business, so effectively monitoring and managing these assets is a fairly easy way to realize significant operational cost savings. An IoT solution is also ideal for inventory management, where the location, temperature, and stock levels of inventory are critical to the success of a business supply chain. An IoT solution with wireless technologies such as RFID, Bluetooth, Wi-Fi, and cellular in conjunction with the appropriate IoT devices and applications virtually eliminates the outdated manual processes associated with inventory management, which are prone to human error and theft, which increase the operational cost of a business. Along the lines of asset management is shipment tracking with IoT-enabled asset monitoring of not only location but also temperature, humidity, and tampering to directly validate the integrity of shipments. This will be discussed in more detail in the next section on IoT markets.
An IoT solution can further transform your business by improving overall operational efficiency and productivity through the seamless integration of business processes and systems.
Increasing operational efficiencies and productivity
There are many ways an IoT solution can increase efficiency and productivity in a business. In general, an enterprise IoT solution can efficiently tie inventory management systems and factory automation/monitoring with customer relationship management (CRM) systems and logistics for improved customer relationships and operational cost savings. In a factory setting, the data from IoT devices can provide unique insight into the production line processes and shipping delivery times, which helps operations complete quicker and more cost-effectively. Moreover, enterprise IoT solutions can reduce employee workloads and allow for further automation, creating cost-saving efficiencies. Industrial IoT (IIoT) solutions are revolutionizing the manufacturing industry by monitoring machine performance and conditions for predictive maintenance to eliminate production line bottlenecks due to machine downtime.
This leads to our third related area where IoT is transforming businesses, which is the Smart Factory.
Creating smart factories
Figure 1.3 – Evolution of Industry 4.0 and smart factories
As discussed earlier, IIoT solutions can create several operational efficiencies in a factory setting, which, together with the IoT data analytics from staff, supply chain, stock inventory, and machine health, allows for what has been called the 4th industrial revolution or Industry 4.0. The hallmarks of the smart factory in Industry 4.0 that have been enabled by IoT are predictive analytics for machine maintenance, inventory management, and smart production workflows that are more automated (for example, industrial robotics) for improved operational and cost efficiencies, as well as reduced waste. With a smart factory, potential disruptions are reduced, and production is both more efficient and predictable.
With the adoption of IoT, businesses are now also able to create entirely new business models, thus creating new revenue streams and providing added value to customers.
New business opportunities
Businesses that use IoT solutions have created entirely new service business models, which allow them to track and monitor the performance of their products over their full life cycle, enabling new value-added services for their customers. For example, in the healthcare market, IoT enables both RPM and telemedicine services, which we will cover later in this chapter. In the agricultural market, IoT enables crops as a service with full crop life cycle management from seed to shipment. An IoT supply chain logistics solution provides not only real-time location data but also data on the temperature, humidity, and integrity of shipped assets such as perishables, including pharmaceuticals and food, which provides significant value to end customers and consumers. These value-added services create a closer relationship and trust with their customers, enabling future business.
By implementing IoT solutions, businesses can now offer subscription services around these IoT-enabled value-added services that avoid the upfront capital expense associated with traditional products. With a continuous connection to customers through an IoT solution, businesses can now develop recurring revenue as-a-service models where the customer pays for continuous value. For example, several new IoT-enabled businesses offer fleet/asset management applications that provide a subscription-based offering to their customers to track and manage their fleet and other critical assets without the upfront capital expense for the devices or infrastructure. The as-a-service IoT solution model, which uses advanced data analytics, can be extended to many other subscription-based models, such as security monitoring as a service, health monitoring as a service, crops as a service, and predictive maintenance as a service.
Ultimately, IoT solutions not only benefit businesses but also customers with improved, more personalized customer engagements throughout the product life cycle.
Improving the customer experience
There are many ways IoT solutions improve customer experiences. IoT solutions allow businesses to collect data at various points in a product life cycle from the time it is produced to the time it is retired, providing deep insight into how the product is used to better personalize the customer experience. This improves customer loyalty and trust in the brand. For example, we are probably all familiar with the ease of making purchases at retail stores and kiosks using smartphone apps and smart point-of-sale IoT devices, which improves and personalizes the customer experience with that business. Retailers are also using IoT to manage shelf stocks and monitor shopper behavior to better serve in-store customers.
Now that you have some insight into how IoT can enable a digital transformation in your business, let’s review the leading IoT markets with some example IoT applications in each before considering some common business problems solved by implementing an IoT solution.
Understanding IoT markets
- Supply chain logistics
- Industrial and manufacturing
In this section, we will review and define each of these segments and provide insights into how IoT is transforming these markets with some example IoT applications.
Transportation includes both automotive connected cars and enterprise logistics, which depend on air, rail, and truck transportation. As we will discuss in the next section on the logistics market, IoT asset monitoring solutions in transportation are a critical part of improving efficiencies in supply-chain logistics. Concerning connected cars, Cisco estimated that connected vehicle applications will be the fastest-growing IoT market with a 30% compound annual growth rate (source: Cisco 2020). The number of connected cars is projected to be over 400 million by 2025 (source: Statista 2021). In terms of fleet management, IoT solutions enable an enterprise to better manage fuel consumption, optimize routes, and maintain its fleet to reduce operational expenses and increase productivity. Fleet management IoT solutions also improve fleet safety and compliance with the new electronic logging device (ELD) government mandates, which further improves overall fleet safety. A typical IoT solution for fleet management would include a vehicle location tracking device with the capability of monitoring vehicle maintenance and engine runtimes. Typically, there is also a gateway (ELD) device to automatically log drive times, which avoids the human error of manual drive logs. Many fleet management solutions now also include both security cameras and dash cameras to monitor both the driver’s behavior and the behavior of other drivers on the road for potential accident investigations and security. Almost all key components of a fleet, including location, vehicle behavior, engine maintenance/performance, idle time, cargo status, driver behavior, and security events, can be monitored with an IoT solution.
Nearly all new cars have integrated telematic IoT connectivity, which enables not only in-vehicle infotainment applications but also embedded communications, vehicle updates, and predictive maintenance, which improves the customer experience and provides new service business models for automotive OEMs. This IoT connectivity has been extended further to include autonomous driving and vehicle communication with other vehicles, city infrastructure, pedestrians, and cloud applications, which has been termed Cellular V2X (C-V2X). As we will discuss in Chapter 5, Validating 5G with IoT, low-latency, high-bandwidth 5G cellular technologies play a critical role in enabling these new connected car applications. Also included in the connected car IoT market are several IoT use cases based on the installation of after-market IoT gateways or dash cameras in the vehicle. For example, several insurance companies now offer insurance discounts to drivers with good driving behavior who use IoT sensor devices in their vehicles that detect speed, hard braking, and hard acceleration. Much like the fleet management IoT applications described earlier, dash camera applications can improve the safety and security of drivers.
Supply chain logistics
As shown in Figure 1.4, supply chain logistics is the networked infrastructure of suppliers, transportation, production, warehousing, and stock inventory that provides the end-to-end connection between suppliers and wholesale/retail customers:
Figure 1.4 – Supply chain logistics IoT use cases
The importance of supply chain logistics to the global economy was made clear with the recent pandemic in which shortages in semiconductor chips and raw materials have impacted all areas of the global economy, especially manufacturing. As shown in the preceding figure, with IoT technologies, it is now possible to have end-to-end visibility of the entire supply chain from the raw materials to the end customer. The supply chain disruptions because of the pandemic have been the impetus for change in supply chain operations worldwide and have increased the focus on IoT solutions to increase efficiencies and overall visibility. The global supply chain management market size was valued at USD 16.64 billion in 2021 and is expected to expand at a CAGR of 10.8% from 2022 to 2028 (source: Grand View Research 2022). There are three key areas of supply chain logistics where IoT solutions can have the most impact. These are as follows:
- Inventory/warehouse management
- Asset monitoring
- Transportation and fleet management
Let’s go into more detail on the IoT solutions deployed in these areas of the supply chain.
The most common application of IoT in supply chain logistics is in the area of inventory and warehouse management, where IoT solutions can not only track incoming and outgoing shipments but also manage inventory levels by working with enterprise ordering and inventory management systems:
Figure 1.5 – IoT solutions in inventory/warehouse management
One of the fundamental needs in supply chain logistics is being able to locate and manage warehouse inventory in near real-time, which improves the visibility/traceability of stock and provides customers with more predictable orders and lead times. Before the advent of IoT solutions, warehouse inventory management was a mostly manual process requiring lots of people to locate, track, and report inventory coming in and out of a warehouse or distribution center.
With an IoT solution, several wireless and device technologies significantly improve the visibility and management of warehouse inventory. Today, cellular or Wi-Fi-connected barcode scanners are commonplace to track inventory, but there are also RFID and Bluetooth tags attached to assets that can automatically provide both the location and status (for example, temperature) of inventory within the warehouse. As part of an IoT solution, RFID readers and Bluetooth location beacons are placed strategically in warehouse and distribution centers to automatically track/monitor inventory along the supply chain and report back to the enterprise IoT platform. This not only increases the visibility of the inventory but also reduces the errors associated with manual processes and enables operational cost savings with reduced workloads.
In the context of a complete supply chain logistics IoT solution, it is important to not only manage/monitor inventory and material in warehouses but also along the entire supply chain from the factory to the end customer, as shown in the following figure:
Figure 1.6 – IoT solutions in supply chain asset monitoring
Especially with high-value assets, products, and pharmaceuticals, asset monitoring along the supply chain is an important IoT use case that is becoming more common as the cost of wireless monitoring devices with sensors are decreasing. As part of an IoT solution, a low-cost/disposable wireless monitoring device is attached to the target asset, and it reports to an IoT platform either periodically or based on events (for example, movement, sensor threshold exceeded, tamper, and shock). This not only provides visibility along the supply chain but also provides traceability for issues on the journey (for example, theft) and validates the integrity of the asset from the source to the destination. In some IoT solutions, the trace of an asset’s journey and everything that has happened to it along the way are sent to private blockchain networks as an immutable record of the asset’s integrity.
Transportation and fleet management
Transportation and fleet management is the third area of supply chain logistics where an IoT solution can have a significant impact in terms of operational cost savings and asset integrity. As shown in the following figure, fleet management IoT solutions can provide data on both the cargo location and environment, as well as the vehicle’s health:
Figure 1.7 – IoT solutions in transportation/fleet management
As part of an IoT fleet management solution, IoT provides not only the shipment location and environmental conditions but also the vehicle condition, which combines fleet management with supply chain visibility/monitoring. Domestically, this fleet is generally trucks and trailers, which would have integrated IoT devices for cargo tracking and vehicle monitoring, as shown in the preceding figure, but there are several modes of transportation in supply chains including air, sea, and rail where supply chain visibility is important. The challenge is to provide shipment visibility and status across all modes and carriers globally. A global IoT solution using a global WWAN cellular technology in combination with an appropriate IoT shipment monitoring device with data logging can address this challenge by providing the traceability and asset integrity validation discussed earlier. This use case will be discussed in more detail in a case study in Chapter 8, Implementing an IoT Solution with Case Studies, where we will cover global cellular technologies and devices as part of a supply chain logistics IoT solution.
Industrial and manufacturing
Earlier, we discussed how IIoT and Industry 4.0 are transforming the manufacturing industry by improving workflow efficiencies and factory automation. Manufacturing is the sector most affected by IoT, with a potential economic impact of $3.9 trillion by 2025 (source: McKinsey Global Institute). According to GE, 58% of manufacturers say IoT is required to digitally transform industrial operations (source: GE), with 80% of industrial manufacturing companies having adopted IoT in some way (source: Security Today).
There are three main reasons why production/manufacturing is one of the leading IoT markets. First, IoT solutions enable production machine monitoring and predictive maintenance, even in older factories without significant automation saving downtime. Retrofitted IoT remote connectivity and sensors on machines in a factory allow operators to quickly identify issues and implement predictive maintenance on the machine, minimizing downtime and significantly improving production efficiency. Moreover, machine learning and artificial intelligence in the IoT devices connected to machines can identify anomalous patterns and alert an operator to act. As an example, IoT vibration monitoring of a machine can be used to identify unusual behavior such as an impending machine bearing failure before it is a costly machine failure and production stopper. Second, IoT enables remote production control of machines, where operators can remotely fix/tune many performance issues without hindering the production flow. In this case, a single operator can monitor and control several machines, which reduces the factory workload and enables operational cost savings. With low-latency 5G technologies in the IoT solution, this monitoring and control can be near real-time, increasing operational efficiency. Finally, IoT enables industrial robotics, which reduces factory workloads and increases efficiency at all stages of manufacturing, and with 5G technologies in the IoT solution, there is more flexibility and mobility of production lines where robots can be placed on the factory floor with safer human-robot interactions.
With the recent pandemic and the increased need for RPM, IoT solutions have been a focus in healthcare. Implementing IoT RPM solutions can offload our critical healthcare infrastructure and foster better patient care:
Figure 1.8 – IoT solutions in healthcare RPM
IoT in healthcare has been termed the Internet of Medical Things (IoMT) and includes RPM-connected devices and applications, as well as wearables. As shown in Figure 1.8, with RPM, wireless medical devices such as blood pressure monitors, glucose monitors, oximeters, and ECGs can be connected wirelessly typically through an IoT gateway to the internet for evaluation by a medical professional. RPM with IoMT lends itself to many healthcare “as-a-service” telemedicine models, and with low-latency and highly reliable 5G technologies, remote and robotic-assisted surgeries have been proven to work well, which overcomes geographic limitations for surgical procedures in remote areas. The importance of RPM and care was clear with the recent COVID-19 pandemic, where care facilities and hospitals were overwhelmed with patients. Certainly, IoT-enabled RPM with patients at home would have reduced the strain on our healthcare infrastructure. With the aging population and chronic care monitoring becoming more prevalent, IoMT services will become more important in the next 5 years. Deloitte says that the IoMT market will reach $158.1 billion in 2022, and Goldman Sachs claims that healthcare organizations save $300 billion annually from RPM and other technological benefits.
Figure 1.9 – IoT solutions in the Smart Grid
IoT in energy and utilities has been termed the Smart Grid. With IoT-enabled remote monitoring and control of the energy grid infrastructure, the overall network efficiency and resiliency from generation to transmission and distribution and ultimately businesses and homes can be optimized. Some Smart Grid IoT applications include connected electric meters, real-time transmission/distribution outage notifications and restorations, remote monitoring/control of power generation and storage, and dynamic load distribution. Especially with aging utility infrastructure and new forms of energy generation, storage, and distribution, the Smart Grid will become even more critical in the next 5 years. According to Future Market Insights in 2022, IoT in the utility market is extrapolated to reach a value of $129.1 billion by 2032. The global focus on dramatically reducing carbon emissions is another strong driver for this growth in the Smart Grid. Government mandates in carbon emission reductions from power generation plants drive the need for constant monitoring enabled by IoT.
In all the markets where IoT is deployed, the huge amount of data garnered from these deployments is valuable not only for business insights and decision frameworks but also as a product. Within the context of an enterprise IoT solution, data analytics and artificial intelligence can be used to identify trends and anomalies in the underlying business process monitored/controlled by the IoT solution. This analysis can be used to improve workflow efficiencies, reduce operational costs, and improve equipment maintenance, as discussed earlier. This data can also be shared with customers either directly or through Application Programming Interfaces (APIs) to the enterprise IoT application. This improves the customer experience with the IoT solution and allows customers to further develop and innovate around the IoT data with their customers.
In this chapter, we have hopefully provided a good overview of how IoT enables an enterprise’s digital transformation and the leading enterprise markets where IoT is making a significant impact. In our review, we have addressed many of the business needs solved by implementing an IoT solution, including operational cost savings and improved efficiencies. In the following chapters, we will go into more detail on the specific components of an enterprise IoT solution with a focus on cellular technologies.