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The Internet of Everything (IoE) Value Index

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Technology infrastructure and tools are essential, but it’s the effective application of technology that will separate winners from losers in the IoE Economy.

The benefit of IoE is derived from the compound impact of connecting people, process, data, and things, and from the value this increased connectedness creates as “everything” comes online.

Here’s how we estimated IoE value realized:

The IoE Value Index incorporates both survey data and market indicators drawn from third parties.
The survey component of the Index is based on a respondent’s capabilities in three areas:

collaboration, analytics/“Big Data,” and the Internet of Things (for example, sensors). These capabilities are representative of the core enablers of the 21 IoE use cases around the world. The survey asked business and IT leaders to provide perceptions of their companies’ strengths and weaknesses across these capabilities in order to ascertain the level of progress their companies have made in each area.

The third-party data component of the Index is based on measures of transformational IT investment of a respondent’s industry and the levels of innovation productivity and network quality within a respondent’s country. By combining these indicators, we created a composite picture from both an industry and geographical perspective.

Using both survey data and third-party market data enabled Cisco to base the Index upon both intra-firm capabilities (as assessed in the survey) and “hard” data on the business environment in which companies operate. Respondents were not asked about IoE per se, but rather about the types of capabilities their organizations possessed in collaboration, analytics/ “Big Data,” and the Internet of Things; the quality and quantity of information available to them; and their views on the overall connectedness of their business.

But while IoE will enable companies to “catch up” to competitors and compete on an equal footing, the companies that win in the long run will be those that use IoE to create unique offerings.

Top firms in the Leading country category continually innovate how they develop, produce, sell, and deliver their products and services, largely because they must compete against firms in local markets that place a similar emphasis on technological and business process innovation.

That said, in recent years Pursuing countries have developed sectors of their economies that are among the world’s leaders, both in terms of revenue growth and technological capabilities.

To realize additional IoE value, these firms must focus on investing in cutting-edge technologies and internal organizational transformation that can foster growth. Midsize firms and companies from emerging economies pose a formidable and growing challenge to market incumbents.

In absolute terms, supply chain is driving the most IoE value in 2013 ($158.7 billion), followed by customer experience ($145.2 billion). Executives are, on balance, positive about IoE’s potential impact on their businesses in the areas of jobs, wages, and information security.

In addition to the impact on jobs, wages, and information security, executives view IoE positively because it helps them stay ahead of the innovation curve. Industries in the Leading category are IT-intensive, both in terms of the types of products and services they deliver and how they are delivered.

To move forward, Peforming industries need to shore up their IoE infrastructure while investing in the right cutting-edge technologies. Even so, firms in Pursuing industries that can incorporate IoE into their operations, products, and services have strong “breakaway” potential.

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When we contrast the contribution that technology and management practices play in realizing IoE value with that of information quality and quantity, it becomes clear that data itself is not a strategic differentiator. Together, a strong technology foundation and management prowess are the keys to realizing value from IoE, and to overcoming the challenges companies face in maximizing their opportunities.

What are the benefits respondents expect to gain from IoE? At the top of the list is increased operational efficiency as companies automate processes, use their resources more effectively, and reduce downtime and inefficient work practices.

For manufacturers to improve their ability to profit from IoE, they should focus on two main areas: M2M and M2P connections. Manufacturers need to invest in machine intelligence and robotics as well as networks that can transmit data wirelessly in a plant-floor setting. The five highest-rated IoE enablers for energy firms were all M2M technologies.

By improving their M2P capacities with predictive analytics, retailers could realize more value from connected marketing and advertising. This access, where everyone can avail themselves of innovations, is the real democratization of IT brought about by IoE: when we connect the unconnected — whether people, process, data, or things — we can create enormous value.

Sustainable differentiation will hinge on one critical success factor — the ability to harness, through the right blend of management practices and business process change, IoE-related technology innovations for business gain.
(Read More: How Much Value Are Private-Sector Firms Capturing from IoE in 2013?)

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