The ROI of IoT: The 7 benefits it can bring to your business
Organizations today are under a lot of pressure – both internally from management and externally from customers – to deliver a higher quality of products and services at lower costs, and to do so using existing resources. Companies must continually innovate in order to improve efficiencies, be more competitive, and drive profitable growth. They must invest in developing and adopting new technologies, like IoT, if they want to benefit from the new business opportunities these technologies promise to bring about. The decision over which technologies to pursue, when to adopt them, and how to manage the implementation process in order to harvest the anticipated business outcomes can be very overwhelming, especially if companies do not have the necessary in-house expertise.
Two major considerations are associated with any large technology investment: the irrecoverable cost of the project and the uncertainty about the value returned.
In other words, ROI is top of the investment priority list. Before a new technology is implemented, organizations may be concerned that they will not be able to exploit it effectively, or unsure of its final impact on the rest of the organization. They may also be worried about how customers and business partners will react, with no guarantee that they will adopt the new technology or processes themselves.
These questions cannot be effectively resolved before investment – although concepts like proof-of-concept are useful ways to solve this chicken-and-egg situation. Any expenditure companies make on IoT must deliver measurable ROI, and quickly. A lot of the time, ROI translates to “reduce costs”, although cutting costs is just one piece of the ROI equation. The ROI of IoT adoption is both direct and indirect. IoT should help companies to make direct cost-savings and increase revenues, but it should also improve profit margins via more abstract benefits: improving customer satisfaction, increasing efficiency and competitivity, and improving long-term strategic planning.
1. Real-time business insights
Having access to real-time data on all organizational or project processes – whether the progress of a tunnel construction project or the city’s mobility situation – allows comprehensive and preventative actions to be implemented predictively and holistically. By monitoring critical assets, maintenance can be carried out in advance to avoid downtime and industrial processes can be rendered more accurate and efficient. Measuring critical data points in a network of sensors positioned at key points on assets enables all relevant teams to be notified about the status of the asset, or project. They can then know if they need to implement an action or change certain processes, and if they should act immediately or in the future.
The ‘big picture’ approach enabled by IoT saves major resources and significant amounts of time.
It allows all decisions to be made with solid evidence and facilitates collaborative decision-making across departments and teams, who all have access to the same programme and data.
Smart, connected devices or data points enable remote monitoring and maintenance of key processes and assets, which drives both a reduction in the costs of maintenance over time and an improvement in the level of service to end-users. Improving efficiency is not the only way to cut costs: when it comes to things like structural health monitoring or construction site monitoring, where incident-related delays result in significant costs, being able to monitor and predict any anomalies is key to sticking to the budget. Depending on the business, IoT systems can not only make business operations more efficient but can also prevent any accidents or unintended events from happening, saving massive costs over the lifetime of projects.
Figure 1: the information value loop, source: Deloitte analysis, Deloitte University Press.
3. Increased revenues
Managing and maintaining connected assets more effectively can deliver a competitive advantage and drive revenue growth. This means more satisfied workers, translating into increased productivity, and a larger, more loyal customer base, due to the company having a better reputation and being able to offer better value for money. A concrete example of this is IoT-based smart parking systems. San Francisco’s SF Park system, for instance, allowed the city to deploy smart parking meters that altered prices according to supply and demand (demand-responsive pricing). This not only made parking easier for city residents but also allowed the city council to increase revenues by reducing parking fraud and exploiting peak parking times. IoT systems allow organizations to develop new applications for end users – in this case, a smart parking app – meaning that they can digitally monitor and collect revenues directly from their customers.
4. Improved user satisfaction
Systems that identify, diagnose, and resolve issues remotely have been made possible through IoT:
it is these systems that improve long-term business strategy, enable predictive maintenance, and improve the end-user experience. Solving problems more quickly keeps both workers and end-users happier – and in many cases safer – in a consistent, sustainable way.
For example, monitoring aging civil infrastructure like bridges with an IoT monitoring system is key to keeping these assets maintained and safe. This is because these systems enable real-time, remote monitoring, which facilitates predictive maintenance and prevents serious accidents like the Morandi Bridge Collapse in 2018. A connected assets strategy helps to deliver not only proactive but also predictive maintenance services, which improve uptime and safety and decrease the number of field visits, and the length of potential downtime.
5. Differentiated brand and improved competitivity
Whether you are specialized in urban traffic or tunneling, using IoT to optimize your key business processes and give your users access to new applications or information delivers a competitive advantage. If you can complete a tunneling project quicker and without going over-budget, through a precise, real-time IoT monitoring solution that allows you to prevent incidents, you will be the favored construction operator in your sector. The value and reliability of your offering to the customer is increased, encouraging them to choose your organization over others.
Figure 2: Continuous Improvement Process to data quality
6. Improved long-term planning and strategy
Consistently collecting data over the lifecycle of a project builds up a huge pool of information about the status of geographical areas (if you are a city, for example) or key assets (if you are a highway operator, for instance). IoT data from connected assets, in collaboration with other systems, offers previously unthinkable levels of visibility and automation across organizations. This allows cities and other organizations to build long-term strategic operational models that are based on real-time data and are highly precise.
If you know how your key equipment and assets are behaving, and how people are interacting with them, you can unlock the value of that data through an IoT software program that delivers actionable insights and improves business processes in future.
This also allows for the eventual creation of ‘digital twins’, where a ‘video game version’ of a geospatial area is created, through which actions can be deployed to ‘test’ their potential outcomes in real life. This improves business decision-making.
7. Future-proofs your business
Investing in IoT early on not only improves competitivity but also increases an organization’s capacity to further innovate in future. Deploying IoT systems across processes and departments enables organizations to build a bank of knowledge and experience, which can then be called upon during future adoptions of other new technologies and methods. Investment in innovation built upon this foundation of expertise will not only be more efficient and effective but will most likely have greater returns and a lower level of uncertainty associated with it. The snowball innovation effect from an initial investment in IoT has great potential to position organizations as leaders in their sector.