Understanding the Internet of Things (IoT): Implications for SMBs

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What is the Internet of Things (IoT)? 

The Internet of Things refers to groups of devices with sensors, software technology, and network connectivity that can exchange data with each other over the Internet. Examples of Internet of Things are manifold and can apply creatively to different industries:

• In manufacturing, IoT devices can be resourceful when it comes to automating the monitoring and quality control processes. This can help optimize the use of factory resources, preventing accidents whenever possible. 
• In healthcare, IoT solutions can help monitor aspects of a patient’s health (e.g., heartbeat, blood sugar levels, temperature). Once devices detect a change in these vital signs, it can “instruct” another device to take action to secure the patient’s health. 
• In agriculture, IoT solutions can do around-the-clock monitoring of water levels in produce, conditions of the weather, wind, and soil, or the health of livestock. This can optimize the distribution or use of water and fertilizers. 
• In interior systems, smart buildings (homes and offices) are typical examples of IoT solutions. A person can turn off their air conditioner remotely from the office, or control the thermostat for the health of their plants while away on vacation. In this sense, IoT solutions can increase safety and comfort for users.

IoT solutions carry incredible economic potential. Its market size, being gauged at around 5, 720 million USD in 2020, will likely more than double in the next few years, reaching a whopping 14, 000 million USD by 2026. According to McKinsey, businesses using IoT were 13% in 2014, but in a mere five years rose to 25% in 2019. Experts also have reason to believe that IoT technologies may bring about the next industrial revolution, with the COVID-19 pandemic being a catalyst for such a change.

The history of IoT

The concept of IoT was initially stirred up in the 1970s when MIT researchers developed a system called "Auto-ID", which used radio frequency identification tags to track objects. Other early records of IoT point to a group of computer science students at Carnegie Mellon University (Pennsylvania), who attempted to track the contents of a Coca-Cola vending machine back in the 1980s. However, technology had much to catch up with in the 70s and 80s, and it wasn’t until 1999 when Kevin Ashton, a British technology pioneer, coined the term the “Internet of Things”. During his time at Proctor & Gamble, an American manufacturing company, Ashton had the idea of placing radio-frequency identification chips (RFID) on products, so as to monitor their progress in the supply chain. This proposal later became ‘bigger than himself’; it morphed quickly in the 2000s, with the smart fridge produced by LG in 2000, the first iPhone in 2007, and the first driverless cars being tested by Google a few years later.

Key business implications of IoT on SMBs

For SMBs, where human resource is limited, IoTs can be a game changer. Here are areas where it can make a difference:

1. Operational Efficiency

By linking devices to an ‘internet’, IoTs are pivotal for making advances in process automation, maintenance, and real-time monitoring. This can differ depending on the industry. Goods transport companies, for instance, can monitor the progress of delivery or optimize routes with IoT. This can help business owners stay in the loop and take action whenever something abnormal is detected.

2. Customer Experience

IoT devices can also help businesses understand the performance of their products after they are sold, and hence do not need to always rely on customer feedback. In physical stores, an interesting application would be the use of heat maps or Bluetooth using IoT. That is, using heat or Bluetooth, IoT devices can detect the movement of customers around a store, thus informing practical decisions of where certain products can be placed.

3. New Business Models and Revenue Streams

The powerful amounts of data that IoT gathers in relation to each piece of equipment can create bountiful opportunities for data monetization. This is where a business can sell the insights gathered to companies aiming to create similar applications. Because processes are more streamlined, operational costs can be reduced (particularly in manufacturing), allowing the business to direct costs to other areas of product development, such as research and innovation.

4. Data-Driven Decision-Making 

Traditionally, business analysis was guided by historical data, which meant that companies relied on previous information to estimate the resources needed to run their business. With IoT, this approach is outdated for SMBs, as it is now possible to garner and analyze data in real time. 

These up-to-the-minute insights can be used to take proactive measures in the supply chain, such as predictive maintenance (e.g., foreseeing possible issues and troubleshooting before the problems occur). This can help businesses across industries make timely decisions, for instance, offering immediate medical assistance when a critical issue is detected in patients, or supplying inventory more effectively when certain items are close to being sold out. IoT also has a significant application to cost-sensitive businesses; in the fresh food market, for instance, IoT can detect premature spoilage of fresh produce, thus allowing stores to take action (e.g., offering promotions and discounts) before the products become too rotten to sell. In other cases, data-driven decision making with the IoT can also be helpful in asset management. 

Risks and challenges of IoT in SMBs

The IoT may be revolutionizing business, but there are caveats that companies should not turn a blind eye to. These risks mainly circle around the idea of security and privacy. As its name suggests, the IoT is connected through the Internet, thus exposing IoT platforms to a variety of cyberattacks. If data is successfully stolen, it could cause a severe leak of company secrets and lead to disrupted operations. Privacy-wise, due to the copious amounts of data gathered on IoT platforms, users can potentially have personal information exposed in the system. Data such as location and movement, health, and habits may be leaked and used to “track” users back. We also should not discard the fact that IoT systems themselves are highly complex and not straightforward to manage. Any insufficient planning could lead to device failure, security breaches, and data loss.

Despite the number of caveats listed here, mention-worthy is that regulations in relation to IoT are constantly being reviewed, so businesses need to be extremely careful and transparent with their IoT policies. Interested readers can refer to the General Data Protection Regulation (GDPR, if in Europe) or the California Consumer Privacy Act (CCPA, if in California) for insights into how such regulations are developing.

Embracing the future of IoT

IoT isn’t only about garnering data on the use of products; if used insightfully, it can be the driving engine to uncover trends, develop new models, and make business processes more efficient. In this sense, IoT may actually be the engine that brings forward the next industrial revolution. From monitoring to maintenance, and from research development to product usage, applications of IoT are manifold; the key, therefore, is to carefully evaluate how it relates to one’s industry and, more specifically, one’s very own business.