Why the Internet of Things has become the driver of the digital transformation in the New Economy ?

Pauline Breuneval
4 min readApr 9, 2018

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The Internet of Things is here and is growing rapidly. According McKinsey Global Institute, the IoT will have a total economic impact of up to $11 trillion by 2025. Companies across the world are transforming their business model to take advantage of this market opportunity by creating new product and service offerings. What are the reasons behind this growing interest ?

What is the Internet of Things ?

The IoT could be defined as a network of internet-connected objects able to connect and exchange DATA using embedded sensors.

The purpose of the Internet of Things

The connected devices I am referring to could be physical devices, vehicles, home appliances, or other devices from the smartphone to the coffee machine. By taking advantage of data analytics, organizations meet new opportunities to adapt their business to the customers’ needs and to optimize their internal process.

The IoT allow objects to gather information and data about the environment thanks to sensors, to communicate valuable data from an object to another thanks to the internet and wifi and to generate intended actions thanks to artificiel intelligence.

For a better understanding of this topic, you can find all the basic definitions and terms related to IoT in the glossary providing here.

Technologies supporting the IoT growth

Technologies are the drivers of the IoT growth, they are the factors that enhance the utility of IoT. This report by PricewaterhouseCoopers lists all the main technologies considered as factors of the IoT growth:

  • Artificial intelligence: AI helps make data actionable, supporting enhanced IoT applications that enable predictive, prescriptive and adaptive analytics.
  • Connected Device expansion: the number of connected devices will grow to 80 billion by 2025 which will induce an increasing number of data generated that organizations will have to deal with.
  • Cloud computing: cloud computing nurtures the growth of IoT by extending its capabilities closer to connected devices and facilitating the operation of compute, storage and network services between end devices and cloud computing data centers.

Which impacts on the digital transformation in business ?

The IoT and its supporting technologies are driving the digital transformation of companies, allowing them to implement new business model based on data analytics and connected device. Companies took advantage of IoT and found new opportunities in terms of product or service offerings or in terms of business optimization.

The IoT value proposition

Companies are transforming their business model by including IoT because it actually creates value for them or for the customers:

  • It creates new business opportunities: the IoT enables companies to diversify their activities by creating new products and services as connected devices, the Smart House concept … that are attractive to customers !
  • It improves the customer experience: the IoT improves the customer experience on several points. It first creates value to the customer as he has more comfort, security and control. Furthermore, the IoT allows the company to gather data about customer habits and to analyse it to create personalized marketing efforts towards customers.
  • It allows process optimization and efficiency: by implementing a data driven business and automation in their process, organizations have a real opportunity to reduce cost and rise efficiency in several areas such as supply chain, human ressource management or security system.

Concrete example : the IoT in the Utility industry

Many companies have already take advantage of the IoT to launch new businesses. Big tech companies as Amazon or Google launched their connected objects and home automation business under the name of Amazon Echo and Google Home.

However, one significative fact is the transformation of the Utilities business model based on the IoT. The Gas and Electricity industry is facing many issues because of the customer changing expectation and of the energy transition. The IoT and the concept Smart House have appeared as a real market opportunity to deal with those previous issues. Consequently, Utilities big players around the world as EDF, British Gas or Eneco launched their own new venture specialized in IoT, connected devices and Home automation.

This new business model has created more value to customers by providing more energy saving, confort and control. it as created more value to the company too by the generation of synergies with the core business and by the cost reduction. Indeed, companies are able to gather data about consumer habits and to forecast their needs to reduce energy waste.

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