Are IoT and Big Data Hype or High ROI?

The Internet of Things (IoT) and Big Data are getting a lot of press recently. Particularly in supply chain and operations, but also in marketing and sales, these tools are being touted as ways to help companies advance rapidly in a competitive world.

IoT consists primarily of high-speed technical solutions (such as radio-frequency identification, or RFID) that provide instant information about the location of materials and people throughout the organization and supply chain. It utilizes the cloud as a data and software repository and, not surprisingly, software companies that support IoT and cloud applications generate much of the press.

Big Data (aka Data Analytics) involves data driven decision-making and analysis to improve competitiveness. It includes the analysis of large data sets to reveal patterns, trends and other information useful in developing strategy and tactics in marketing, supply chain and operations. Companies have been using large data sets to analyze customers, markets, suppliers and parts for a long time.

Is it Hype?

Gartner Group developed a methodology to measure the viability of new technologies called the Hype Cycle. The Hype Cycle cites high (and potentially inflated) expectations when an idea or product is first developed, followed by a “Trough of Disillusionment” when people realize that it won’t solve all their problems. As time goes on, the idea may reach a “Plateau of Productivity.”

Hype Cycle

From www.gartner.com/technology/research/methodologies/hype-cycle.jsp

According to Gartner, some of the technologies currently on the upslope of inflated expectations include mobile robots, delivery drones, autonomous vehicles and 3D bio printing. Some that are peaking and heading into the Trough of Disillusionment include IoT, consumer 3D printing, big data, mobile health monitoring and cloud computing. 3D scanners, speech recognition, and virtual reality are moving toward productivity.

How Do You Decide?

So how do you, as an executive in an SME company, decide whether these technologies are worth investing in when the media suggests you’ll be left behind if you don’t? Large companies introduce many new technologies with greater resources than those typically available in an SME, but even Intel is questioning whether IoT and Big Data are hype, or provide a high ROI on the investment.

Here are three things to think about if you’re considering bringing IoT and Big Data into your organization.

Strategy Alignment

Big Data and IoT can be powerful tools and create value for your customers if they’re aligned with the strategy of the business. Much like the tools of Lean or of Six Sigma, many companies use them inappropriately or because they’re the latest fad, spending time and money but not getting lasting results.

Take RFID for instance. RFID was developed in the 1970s as a means to track up-to-the-moment location of materials throughout the supply chain. A small RFID chip was attached to products or pallets and scanned whenever the item passed through a reader. The potential was great, but unfortunately so was the cost. Wal-Mart was an early adopter and had some success, mostly because the company had the financial resources to implement it, but also because efficient materials movement was a cornerstone of Wal-Mart’s business strategy. RFID made sense for them.

Can Your Company Use It?

Do your internal and external partners (typically your suppliers and distribution channels) have a full understanding of the applicability of IoT and Big Data? If not, you risk wasting time looking for interesting uses that don’t add any value to the organization. One company I know had a whole team that did nothing but analyze data, hoping to discover something useful. Eventually the initiative faded away.

How will the data be contextualized? At one client, the analysts were originally part of accounting, and when they delivered data, it always came in an accounting context. What the company needed was in an inventory management context. When the analysts were reassigned to the supply chain team, their reports quickly became relevant and helped cut costs and inventory.

It Should Contribute To Profit and Growth

The information needs to:

1) Improve the value for customers

2) Drive continuous improvement

3) Make everyone’s job easier

Value improvement is always the big target, since high-value customer relationships provide opportunity for revenue growth and increased market share.

Continuous improvement is based on problem solving, so both IoT and Big Data need to drive that as well. Data should be timely and relevant and expose the need for improvement. An example of a well-designed report is the Turn & Earn report often used in distribution and manufacturing to analyze products for gross profit margin and cash flow. The report, when first generated, reveals products that are losing money or tie up cash, and others that have been dead for years.

By making everyone’s job easier, IoT and Big Data initiatives become personal to those involved, which encourages sustainability and long-term success.

When they alignment with your strategy, are useable and generate profit and growth, IoT and Big Data can help drive the success of your organization. To find out how to connect these technologies to your strategy, call me.

© 2015 – Rick Pay – All Rights Reserved