With over 10 billion interconnected smart devices, the Internet of Things is rapidly moving from hype to reality. Over the next ten years, the number of interconnected smart devices is expected to explode to tens of billions, and continue an upward trajectory for decades to come. What does this mean in terms of economic value of the IoT? With the seemingly limitless potential of monetizing interconnected devices, McKinsey & Co. tackled that topic, made more complex since the Internet of Things is still in its nascent stages.
According to The Wall Street Journal, McKinsey & Co.’s 144-page report, issued in June 2015, “analyzes the long term economic potential of IoT, and uses this analysis to estimate the economic value of several IoT-based solutions by 2025.”
One key discovery is that, rather than look at IoT from the viewpoint of individual applications, “IoT should be viewed through the lens of so-called settings, the physical environments in which these various systems and applications are deployed.” This point of view better captures overall value for the many parties in each setting, says the report.
McKinsey & Co. identified nine distinct settings and their major applications, says WSJ, noting that the greatest economic potential is in factories, followed by cities. Although much of today’s IoT focuses on health and fitness (which McKinsey groups under the heading “Humans”), this arena, although full of potential, “will require particularly challenging structural and behavior changes among health-care providers, payers and patients.”
Other distinct settings include Home; Retail Spaces; Offices; Outdoor Worksites; Vehicles; and Outside/Other and includes a wide range of activities from quality control, customer care and productivity to training and mining, oil and gas exploration.
Because IoT still presents many unknowns, the McKinsey report offers a spectrum in its estimate of total economic impact, from $4 trillion to $11 trillion per year by 2025. “Our central finding is that the hype may actually understate the full potential of the Internet of Things — but that capturing the maximum benefits will require an understanding of where real value can be created and successfully addressing a set of systems issues, including interoperability.”