The Internet Of Things — Blockchain’s Counterpart & Glue Of The New Digital Economy

In the next decade, more than 80 billion connected devices around the world will be in constant communication with people and with each other. This vast web of interaction, analysis and output will remold the way objects are produced, anticipate our needs and provide new perspectives on the world. At the same time, distributed systems will challenge how we create, measure and apportion data and value. Thanks to the ubiquity of sensors, the world will change in other ways, too. Supermarkets, for example, will no longer have check-out facilities, and fast-food restaurants will have less than half the staff they had 10 years before. As business models take advantage of the internet of things ( IoT) to optimize their operations and create a “pull economy,” the world around us will continuously anticipate our needs by analyzing our patterns of behavior. In this future, we will become more conscious of the value of our data and more concerned about our digital security; data flows will become overwhelming and cybersecurity threats part of daily headlines.

Yet there is much potential for good. IoT is already helping track water levels in developing nations, and can animate medical technologies in remote areas through satellite coverage. Public crime is likely to decrease due to the convergence of sensors, cameras, AI and facial recognition software. Trust in technological systems could increase as IoT helps decentralize and democratize economic production, providing many people around the globe with new and creative opportunities. However, to provide the expected value to society and industry, IoT must contend with the lack of security protocols, bandwidth limits, cultural acceptance hurdles, and missing agreements on how to parse the value of data and collaborative opportunities. It’s far from a fait accompli. It will require collective effort and cooperative governance for the investments to pay off.

IHS, a London-based market analytics company, forecast that the number of IoT devices will grow from an estimated 15.4 billion devices in 2015 to 75.4 billion in 2025. This fivefold increase will drive deeper connectivity in every part of life, link together global economies in novel ways and likely encompass a burgeoning machine-to-machine economy as well.

The impacts will be large and will subject current service and manufacturing industries to the type of upheaval that the media industry experienced between 1995 and 2015. Principles of jurisdiction and complex data traffic laws must be addressed so that the end goal can release vast amounts of value, accruing first in factories and the manufacturing sector, where operational efficiency is an understood quick fix, and the potential for better asset utilization and productivity is significant. The value of these shifts has been estimated as representing up to 11% of the world economy. Work by the World Economic Forum and Accenture indicates that most of this value will be generated in industrial applications, dwarfing the consumer side in business and socio-economic impacts; as much as $14 trillion could be added to the global economy by 2030, while supporting 12 of the UN Sustainable Development Goals.

Delivering this value is possible because of IoT’s three core capabilities. First, it enables rich data to be combined with smart analytics, which provides new sources of contextual data reflecting events in the wider environment. It also provides device performance data, helping firms and individuals anticipate how assets are performing and where opportunities to extend value exist. It will also deliver user-impact data, showing the effects of how, when and why people take actions. This enabling capability will reshape what we know and prioritize how we make decisions.

The second core capability comes from these devices communicating and coordinating in ways that enhance efficiency and productivity. Both end-to-end automation and new forms of human–machine collaboration will streamline routine tasks and enhance individuals’ ability to apply creativity and problem-solving skills to higher-value challenges. The ability to expand from an administrative and task-oriented mindset can shape more synthetic perspectives as people become accustomed to considering peripheral input in the shaping of products, services and ideas.

The third capability is the creation of intelligent-interactive objects that provide new channels for delivering value to citizens. As a distributed network of sensors and devices, synergistic opportunities exist for other distributed technologies, such as cloud AI, blockchain, additive manufacturing, drones, energy production, and more. With these new technologies converging, the decentralization of value creation and exchange will mimic the infrastructure that enables it, and the outcomes of this economic reformatting are likely to surprise us. For this reason, IoT will ultimately challenge existing institutions and conceptual frameworks on how to think about the nature of products, services and data, as well as how to think about the definition of their value in a way that works for business.

Thus, these three capabilities will create the impetus for changes to business models and structural shifts across a wide range of industries, including manufacturing, oil and gas, agriculture, mining, transportation and healthcare. As discussed in the World Economic Forum report, Industrial Internet of Things: Unleashing the Potential of Connected Products and Services, its pathway starts with firms improving their operational efficiency, and progresses through the creation of new products and services. This leads to an “outcome economy,” followed by an “autonomous, pull economy”. This process will also be applicable to sensors in the environment, helping create a proactive management of resources. For example, system-wide issues, such as power usage and emissions, can be optimized through incentives sent to citizens in real time to shape behavior for optimal traffic routing and energy consumption.

As with other emerging technologies, such as AI and robotics and blockchain, a critical concern involves the social impact on employment and skills. In particular, IoT’s potential for disruption will transform organizations and industries. In combination with AI and robotics, IoT is likely to reduce demand for routine, manual work, as well as to place increased scrutiny on workers. This reduction, though, will create increased demand for creative and problem-solving skills linked to programming, design and maintenance. Social and ethical discussions of the IoT should focus on an empowering and integrated digital-human workforce, with value delivered through augmentation rather than replacement. Curiously, each of these technologies alone may reduce employment opportunities, but together may enable new and prosperous opportunities for individuals. The future will reveal the truth.

The IoT will integrate us deeper into our symbiosis with the digital infrastructure, products and communications that mediate our lives. It will envelop the physical environment and find its way into the deep cracks of societal interactions, as well as affect the relationships between stakeholder groups. It will become indispensable and yet, like mobile technologies today, will also create demands on each of the stakeholder groups. The following are a few of these demands:

– In many business scenarios that utilize the IoT, data is multiuse, meaning it can render value to multiple parties in a variety of contexts. Contextual questions about who owns the data, who profits from its use and how it can be valued properly will all need some form of resolution, depending on the business models employed.

– In some IoT scenarios, the potential outcomes of data usage could be valuable for environmental and social benefit, such as in the reduction of waste or energy usage. However, in some scenarios, the optimal benefits for society fail to equate to the maximal benefits for businesses. Policy-makers and societal stakeholders need to consider how we value the utilization of the infrastructure and machine-to-machine communications in areas where productivity isn’t the biggest or most important outcome.

– To reduce ex post conflict, businesses will need to learn how to approach collaborative opportunities (e.g., using mobile applications data for the determination of insurance premiums) and clarify business cases. The value created in this way across a distributed system through the sharing of data will require disassembling the value that is created and apportioned to the requisite actors. Frameworks and best practices for fair outcomes should be a topic that includes societal stakeholders.

– Technology, especially the internet, has had a tremendous impact on social life, economic opportunities, wages, the availability of knowledge, communications, and more. Technologized living has accelerated in the age of social networks. There is some concern that such life will become even more demanding with further entrenched technological pressures. Stakeholders will most likely be faced with similar questions posed by users of the internet; whether it should be a public good, who has access and how to create fair practices that do not exploit people are questions that must be addressed.

– IoT is likely to create volatility in a significant portion of the world’s economy, just as the internet did in the media, entertainment and travel industries. Policy-makers and businesses will need strategies to manage the fallout. Learning from best practices in earlier industry transitions will require collaboration from industry and governmental stakeholders.

Five key ideas

1. IoT consists of a range of smart and connected sensors that gather and communicate data to other devices or individuals across the internet for a wide variety of uses. IoT will enhance human and machine interaction, and the machine-to-machine data economy will grow larger than that of the human-to-human. Tens of billions of devices will be added to the IoT over the next decade and, through industrial applications, their interaction could add as much as $14 trillion to the global economy by 2030.
2. The distribution of sensors and devices means challenges to cross-border data issues, such as privacy, ownership, availability, and more. Policies and regulation concerning global IoT data flows will be a major challenge of the Fourth Industrial Revolution.
3. IoT is about much more than just smart appliances that are connected to the Internet and the services they provide. The real value in IoT development lies in data collection, analysis and management, finding unexpected correlations and opportunities, and anticipating disruption trends.
4. The use of sensors to return close to real-time data could help create a pull economy with positive outcome spirals due to optimization and incentives for consumer and citizen behaviors. This means that IoT could be instrumental in addressing systemic problems, such as efficient energy usage, traffic systems, global emissions, among others.
5. A critical concern for IoT involves the social impact on employment and skills as it combines with AI and robotics and reduces the need for routine or manual labor. The major risks from IoT systems, however, are generally thought to be cybersecurity-related hazards, due to unsecured devices, the lack of standards and cross-border data concerns.