Beyond Devices: What Business Leaders Need to Know About the Internet of Things

Beyond Devices: What Business Leaders Need to Know About the Internet of Things

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The fourth annual Internet of Things World Forum (this year in London) is upon us, and we made the final edits to this article from another huge IoT conference-IoT World-in the heart of Silicon Valley. The Internet of Things (IoT) is literally everywhere, and one can’t help but marvel at how far the technology has come in the last few years.

Just take a walk down the home automation aisle of your local big-box home improvement or consumer electronics store and you are in the thick of a fierce competition among scores of manufacturers of smart connected devices. In the industrial sector, manufacturers are harnessing automation and robotics more and more to optimize operations. IoT is changing how we live our lives and do business. And yet, even when seeing that, we still hear that there are lots of businesses large and small that still haven’t grappled with the tremendous impact of digitization. Business leaders are asking themselves what it all means for them. They are curious about new business opportunities IoT can bring, but worry even more about the risks associated with the IoT technologies. Some are asking whether they are even going to have a business in the IoT world. And these conversations are not limited to tech companies. Manufacturing, entertainment, government, transportation, municipal services, healthcare and life sciences-the Internet of Things really does affect every sector.

Changing the way we think about business

To be sure, the opportunities are exciting, but business leaders have good reason to worry. The smart ones realize that the technology itself is not the main factor of what will determine success or failure in the IoT era-it’s the people who work in and manage organizations. The technology is happening, and we can talk about what some of the challenges to that still are, but the need for transformation has implications for business models and business practices, as well.

Dr. George Westerman, a Principal Research Scientist with the MIT Sloan Initiative on the Digital Economy, doesn’t see IoT as a revolution, but more as a tool to do things better. “Managers need to think about how they’ve been doing things for the last decades and rethink how that would work in the world of IoT,” he says. “Because this is going to allow you to be more agile, more accurate, and more efficient, if you are willing to do it. And if you’re not willing to do it-your competitors are.” Westerman has been studying digital technology leadership and innovation for many years and recently co-wrote the award-winning book “Leading Digital.” Today, he urges business leaders to create a new vision for how they will do business in the IoT age: “Digital has taught us a very important lesson in management-we need to rethink our impossibilities. Just as we’ve learned that it’s possible to give personal service without a person in the loop, we’re also learning that analytics and automation can do things that were never before possible-and IoT is extending that. Left alone, people tend to stick with what they know, but if you help them rethink their work, you can achieve breakthroughs.”

Recognizing risks and opportunities

Of course, the impossibilities have a dark side, too. To start with, security comes up pretty quickly in IoT conversations. What happens when your smart home gets “hacked”? What if someone else takes control of your driverless car? From a business perspective, it’s important to consider the vast amounts of data being generated by all these connected devices. What are the safeguards that you may or may not need around things like privacy and protections for the individual about whom the data is being collected, oftentimes without their explicit knowledge? That data often flow across jurisdictional and international boundaries and there are all sorts of implications and consequences of that. These data can provide a very rich source of insight into customers and customer behavior, operational aspects of everything, which-with a right kind of analytics-can at least potentially enable a much more systematic and data-driven approach to decision-making. And that is a huge opportunity, but there are potential downsides and risks to all of that that people really need to understand and prepare themselves for, as well.

Driven in part by what it takes to deal with this vast amount of data, artificial intelligence (AI) is making significant strides. Computers and machines, not only in isolation but connected together, have an increasing ability to undertake more and more of the tasks that have been the preserve of flesh and blood. The emergence of artificial intelligence and machine learning and cognitive computing as tools to help make sense of and process and act on these sort of mass streams and pools of data is going to be a transformative force in the next few years. For any business leader who hopes to still be in business in the next five and certainly ten years, understanding these forces now is absolutely critical.

Setting standards

As businesses struggle to adopt IoT, the lack of universal standards poses a serious challenge even for the most digitally advanced organizations. In addition to optimizing their own operations, businesses and organizations need to think about ways to interconnect all these smart devices and make sure that there are viable ecosystems and infrastructure to connect all these technologies and enable them to work together effectively.

Again, if you go down to the big-box store and take a look at the different options for connecting your smart home, there isn’t really a single universal standard that means that if you buy a smart light bulb that it will work anywhere in a way as if you buy an old-fashioned light bulb, it’s going to work in any light fitting of a particular kind regardless of whoever makes it.

Lack of consistency is not just a consumer-goods problem. Manufacturers face similar challenges when it comes to setting standards for the Industrial Internet of Things (IIoT) and interoperability, so that companies can connect their supply chain end to end. Until that happens, little progress can occur for organizations to realize the IoT’s full potential.

Professional groups and associations are beginning to address this challenge in a systematic way. For example, the IEEE Standards Association is working on “an architectural framework to promote cross-domain interaction, aid system interoperability and functional compatibility, and further fuel the growth of the IoT market.” The P2413 – Standard for an Architectural Framework for the Internet of Things (IoT) includes descriptions of various IoT domains, definitions of IoT domain abstractions, and identification of commonalities between different IoT domains.

Managing mindsets

The need for effective interconnectedness extends to people, as well. Dr. John Carrier, a Senior Lecturer at Sloan, talks about a culture clash between traditional manufacturing and digital practices that pose a significant threat to successful IoT adoption. The mindsets of people running machines on the factory floor and the IT professionals tasked with digitization of operations are fundamentally different. “In the past, IT acted in a support role to Operations (OT), primarily keeping the computers and networks up and running, and storing plant data for recordkeeping rather than analysis,” Carrier explains. “Management went to OT to get information on plant status. Now they’re starting to go to IT directly for real-time plant performance status and monitoring. This is putting OT in a difficult position, as equipment operation in high-hazard environments cannot be run by real-time sensor data alone; deep knowledge of the system is required to interpret the data.” Carrier advises manufacturing managers to engage operations workers in the IoT processes early to avoid the risk of compromising equipment performance, which could lead to catastrophic consequences. “Data is, at best, a shadow of the system, and it is vital that IT and OT work as a team to bridge the gap between the data and the system, and use the data to improve the system, rather than to optimize the plant to the point of failure,” he cautions. Business leaders need to find ways of mitigating these differences and ensuring collaboration across the enterprise.

Engaging in enterprise thinking

MIT Sloan Executive Education is offering two new programs to help executives make sense of IoT technologies and learn practical concepts and frameworks to lead and manage an organization in the age of IoT. The programs draw on the expertise of the entire Institute, namely the School of Engineering, the Office of Digital Learning, MIT Media Lab, and the Computational Science and Artificial Intelligence Lab (CSAIL). MIT Sloan Executive Education is also a founding member of the IoT Talent Consortium, an organization focused on developing an IoT-ready workforce.

How can business leaders manage these transformations successfully when they, too, may be entrenched in traditional ways of thinking? The behaviors and capabilities that have enabled senior executives to achieve the positions that they hold today-some of these are very different now. One wonders whether the more successful the people at the helm have been, the harder it’s going to be for them to make this mental shift.

Leaders need to develop new qualities and capabilities to be able to motivate and coordinate teams of people from multidisciplinary backgrounds when the kind of command-and-control mechanisms increasingly are ineffective, partly because the people that you are trying to command and control don’t enjoy what that feels like. And they have options. At least, the best people do. And so, increasingly you’re seeing the best talent having more bargaining power in that situation. The fairly structured hierarchical way of being a manager or leader where you control enough of the levers that you can be decisive and impose your will on an organization is being replaced by the need to have leaders whose principal activity is more about contextualizing and building networks of support and collaboration and knowledge-sharing.

One of the attributes of that is the idea of having “an enterprise mindset.” To have leaders who are able to not just look at the narrow best interests of a part of a business or organization, which is what they are accountable for and which probably determines their compensation, and look at the broader implications and opportunities at the enterprise level. Whatever boundary you draw around “the enterprise,” whether it’s your organization, your vendors and suppliers, your customers, or maybe even your city or country or the entire planet that may be affected by your business decisions, as a manager. Senior leaders need to develop the agility and resilience to be able to help envision the future, the digital future of their business, and then deal with the tough questions about how to implement that.

Read more about our perspectives on IoT:

“Who will power the IoT economy?”

“Implementing IIoT: A systems challenge disguised as a technological one?”

“The Internet of Things: Phenomenal or inevitable?”

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Dr. Peter Hirst is Associate Dean of Executive Education at MIT Sloan School of Management.

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