Internet of Things (IoT)
Updated: Feb 2
What it is and the value it drives
The Internet of Things (IoT) is a collection of technologies that helps achieve an outcome for both “things” and their users. The benefit for the “things” is reliability, with data and analysis used to extend their life, protect them from failure, or ensure peak performance. The advantage for the user can be protecting an investment, or having a machine perform as desired. Today, the Internet of Things is visible in connected cars and buildings, smart home appliances, and other “things” that can be made “smart”.
Four core layers compose the Internet of Things. First, there are devices, such as those mentioned above, equipped with sensors (e.g., pressure, temperature, video, motion), actuators, and "edge computing" capabilities, which allow the device to run simple computation locally, at low latencies. Second is connectivity, which enable devices to join the Internet by cellular, Wi-Fi, and low-power wide area networks. Third, there are enablement platforms based on cloud computing, which ingest, store, and process data from the devices, and produce visualizations and reports. The final layer is business applications, i.e., customer- or device-facing functionalities which provide added value from IoT devices, such as mobile apps, monitoring dashboards, etc.
IoT has the potential to create value in several important ways:
Productivity and efficiency. Connected devices in factories, sites, and offices can help personnel trace inventory and equipment, as well as provide details on the work at hand, so as to reduce time spent investigating issues and performing regular inspections in person.
Safety. Building and road security systems can be enhanced with smart cameras to detect intrusions or damages, air quality sensors, and even alertness sensors to ensure drivers are awake, reducing the need for human surveillance, and increasing the health and safety of workers and citizens.
Service quality. When devices and machinery can track and report their own status, it becomes possible to perform predictive maintenance, as well as dispatch repair teams as soon as an incident happens, reducing or avoiding negative impact. Moreover, through continuous data collection, it is possible to measure service quality objectively and assess the effect of improvement efforts.
Customer engagement. Beyond smart home devices, IoT-based analytics could allow for customized experiences in retail with instant checkouts, in automotive with connected cars, in insurance with usage-based policies, etc.: this will increase the relevance of services for users, along with their enjoyment.
Home to manufacturers of advanced components for sensing and machine vision like Omron and Keyence, Japan has a clear opportunity to be competitive in IoT.
Where it is today
IoT adoption in consumer and industrial sectors has been increasing steadily: by 2023, the number of worldwide IoT devices is expected to reach 43 billion, about five per human on the planet, and the IDC forecasts IoT spending will keep increasing at a CAGR of 13.6% through 2022. A McKinsey survey on Industry 4.0 from 2019 revealed that industrials were piloting an average of eight IoT projects per company: Chinese and Indian companies were the most enthusiastic adopters, running over 10 projects on average, while Japanese players had about four.
As shown in the exhibit, use cases for IoT are truly pervasive, from creating the foundation for smart cities, to improving energy management in buildings, to enabling new ways of working in shops and offices.
The automotive and manufacturing sectors present great opportunities for Industrial IoT deployments. In 2019, Volkswagen, in partnership with Amazon AWS, launched its Industrial Cloud platform, which aims to connect its over 100 plants worldwide, along with their supply chain partners. Starting with 5 MVP (Minimum Viable Product) trials in select plants in 2019, they developed a "Volkswagen Group App Store" of IoT use cases which can be redeployed across plants, from digital shop floor management (e.g., asset tracking), to quality assurance in press shops (e.g., computer vision for fault inspection), and Overall Equipment Effectiveness monitoring during assembly.
In Japan, Mitsubishi Fuso Truck and Bus announced its "Factory of the Future" in 2017, with production commencing in 2018. In the Kawasaki City plant, over 400 sensors will be deployed to monitor the movements of equipment and the status of operations, in order to assess how the newly installed collaborative robots are helping improve the plant's KPIs.
In the utilities sector, IoT-enhanced power plants and grids have been delivering improved service continuity and efficient consumption. Since 2018, TEPCO has been operating a remote optimization center aimed at increasing fuel efficiency and operations of its thermal plants: analytics based on IoT data from the plants helped drive fuel costs down by ¥70 million per unit a year, and reduce outages by 10-20%.
Electricity grids can also be made "smarter" with IoT, especially when it comes to renewables, which depend on numerous variables to perform efficiently and cost effectively. GE Renewable Energy, for example, has developed IoT-powered Digital Wind Farms, which can generate more power and greater profits by combining real-time power plant data with generation prediction models.
Finally, there have been interesting applications of IoT in retail, as well. Using RFID tag technology to track inventory in warehouses and stores, Uniqlo has extended tag use cases to smart checkouts: instead of scanning bar codes for each item, shoppers can place their bags in front of the cashier, and instantly see the total; moreover, signals from the tags can be used to replenish stock more effectively, as well as to provide insights into shoppers' habits as they take items from shelves and put them back. Another interesting innovation in inventory management also comes from Japan: SmartMat provides shelving units that can detect stock availability by weighing their contents, providing instant updates to the operators.
How the technology will continue to evolve
At all three technology layers of IoT, there are likely to be developments that will make IoT solutions more powerful, flexible, and easy to deploy.
At the most basic level, devices will become more capable. Advanced sensors such as cameras and microphones will become small and cheap enough to integrate in more devices.
As edge computing becomes more powerful, "edge AI" will become more common thanks to specialized processors: it will be possible to run advanced audio analytics or object recognition algorithms without communicating with the cloud, thus lowering latencies and reducing privacy concerns.
Finally, as battery consumption is a major concern for self-standing, long-running applications, more solutions for small-scale energy harvesting will emerge, so that processors on devices can harness energy from the surrounding environment or even the movement of the devices themselves.
At the level of connectivity, the widespread deployment of 5G networks will make it possible to deploy massive number of devices to provide pervasive analytics of factories, workplaces, and cities at low latency and low cost.
From a software perspective, it will become even easier to keep smart devices up to date, by pushing over-the-air updates automatically, so that functional assets will not need manual maintenance or replacement if the software requirements change.
Finally, the platforms that enable IoT will keep evolving to make it simpler to deploy, manage, and program IoT fleets. All major public cloud providers are constantly developing their portfolio of IoT solutions, through which users can visualize data, operate devices, and create an analytics pipeline into other business domains. Building on the latest software engineering practices, open source, "containerized" development platforms for IoT are becoming more comprehensive, which makes shipping software to a highly specialized device as simple as building a website or a smartphone app.
The key future applications
Technology advances will further improve the performance and attractiveness of IoT solutions, but the core technology is already mature for broad application. The remaining obstacles to adoption lie primarily in organizations and markets, and since only a few players have successfully scaled, Japanese companies have the opportunity to be early movers in developing and applying IoT across even more industries.
Organizational challenges often impede deployments: despite the excitement driving initial adoption, two thirds of businesses currently using IoT are still in pilot or proof-of-concept phases, a condition known as "pilot purgatory of IoT", where solutions have started showing promising returns on investment, but have yet to achieve significant benefits at scale. Without top leadership buy-in and funding, plant managers may initiate projects across locations simultaneously, sometimes with different vendors; reconciling multiple deployments into a centralized solution then becomes a challenging task.
From a market perspective, IoT service providers report that customers may not yet see the value of IoT as a service beyond the physical devices. Without a compelling go-to-market strategy and a track record of unquestionably successful use cases, customers may struggle to see a compelling value proposition in the face of high deployment costs.
Building on its high-quality electronics and the ongoing deployment of its 5G network infrastructure, there is potential for Japan to develop innovative applications not only in factories, but also in hospitals, on the roads, and in consumers' homes.
IoMT (Internet of Medical Things) is a promising field on two fronts. First, assets in hospitals and care facilities could be tracked in real time, optimizing utilization and enabling timely maintenance and procurement. Second, personal devices can help ensure the safety of patients as they are administered treatment and surgery, but also track their vital signs and position even after they leave the hospital, increasing the effectiveness of telemedicine: in the face of Japan's aging population, remote patient observation could help prevent strain on care facilities.
"Smart cities" also require pervasive IoT in order to deliver on their promise of optimized infrastructure maintenance, targeted improvements, and citizen safety. Focusing on mobility, players like Miovision are already providing traffic monitoring solutions to cities worldwide: TrafficLink can use computer vision to detect problems or traffic disruptions before citizens report them, so that maintenance teams can be dispatched as soon as possible. As smart cities are pioneered globally, including in Japan, IoT applications that can integrate into a centralized civic platform will become a new layer of infrastructure.
Finally, consumer goods also show promise as consumers get used to smart homes and AI assistants. While IoT is finding more uses in TVs, white goods, and other home items, growth moves slowly as these items do not need to be replaced frequently. A key value proposition for consumers would be appliances that can be controlled from a centralized device or adapt usage patterns, such as smart AC or lighting; another would be the opportunity to connect to platforms and provide real-time customized promotions, such as a fridge that can self-replenish from e-commerce sites based on reviewing its contents and owner's preferences.