Where the Internet of Things (IoT) Is a Driver of Strategic Opportunity

The Internet of Things (IoT) is considered to be a “disruptive technology”.  This means that it disrupts the status quo in a competitive industry.  Consider that the value proposition of the IoT is that if you add a valuable information component to a product, and enable it to be shared, you have created value.  But it’s new value – disruptive value – in that it can potentially upset the balance in relationships between suppliers and buyers.  It can potentially allow new competitors to enter previously impenetrable markets, and substitute products to beat old established ones.   

This is the second part of a series of four articles on “Project Management for the Internet of Things (IoT) Opportunity”, where we explore this lucrative opportunity in practical terms.  This article, Part 2 in the series,“Where the IoT Is a Driver of Strategic Opportunity”, looks deeper into strategic drivers at work.  Part 1, looks at “What Does IoT Disruption Mean for Project Management?”, defining the disruptive change and what it means.  Part 3, focuses on “A Compelling Strategy Driven By the IoT”, where you’ll read about a case of betting a company’s future on the IoT.  Finally, Part 4, “Project Management Essentials for a Successful IoT Project Portfolio,” dives into the key elements you and your organization to strive for to exploit the IoT opportunity. 

Here’s a quick analysis of how the IoT effects industry relationships using Michael Porter’s model of strategic competition. 

I’d like to summarize the value proposition of the IoT in a simple equation:   

Thing + Information + Sharing = New Value Proposition 

Now let’s look at each of these components. 

Thing: 

The old established industry structure has included product-based companies – companies that have for a long time manufactured and sold ‘widgets’ – physical products – to customers.  The ‘Thing’ in the equation above is a physical product that has been well-established. 

Information: 

The ‘Information’ component, by contrast, has not been well-established.  Advances in information technology have created the possibility for many products to gain in value with an information component. In some cases, new firms have appeared that create information components that have value.  In other cases, the forward-thinking and capable product companies have developed an information component that adds value.  If it makes business sense, the product and information components will eventually merge into higher value products, and those that don’t will find themselves left behind as customers buy the combined product. 

Sharing: 

Networks, and particularly the public internet, are the ultimate vehicles for sharing.  The maturing of the internet has been the major ‘Sharing’ component, and it can make the combination of a product and information much more valuable. As a result, companies that are thinking strategically can leverage the disruptor that we call the IoT by: 

  1. Bringing new software solutions to its existing customer base – Product-based companies can add an information and sharing component to their physical products and begin to sell the combined offering to their existing customer base. 
  2. Old products can be combined with new software solutions – Software product companies may benefit from leverage a product-based company’s customer base to sell its software products.  This is the basis for many acquisitions – product companies buying software companies, and software companies busying product companies.  Each can expand not only its customer offering but also can expand its customer base. 
  3. Ultimately the industry can be expected to evolve to a new equilibrium based on the combined product, information, and sharing solution.  To the extent that a firm can do this, it can lock in the leadership position in a particular market.  In the process, the disruption will result in growth and longer term profitability. 

Have you analyzed how the Thing, Information, and Sharing components play with your business or industry? 

This post is part of the series: Project Management for the Internet of Things (IoT) Opportunity

This series of four articles looks at different facets of the IoT Opportunity.

  1. What Does IoT Disruption Mean for Project Management?
  2. Where the IoT Is a Driver of Strategic Opportunity
  3. A Compelling Strategy Driven By the IoT
  4. Project Management Essentials for a Successful Internet of Things (IoT) Project Portfolio