Planning for the evolution of the IoT

Companies looking to take the next step in the Internet of Things (IoT) need to evolve from a company that uses IoT-enabled products, to becoming an IoT-enabled organization, and become a system of systems for gathering all relevant information from their sensors to better manage data.

By Wael Elrifai September 19, 2017

In 2014, Michael E. Porter and James E. Heppelmann set out their vision for IoT’s five-stage evolution in an article, which culminated in a "system of systems" model, in which diverse systems are orchestrated and optimized in the form of wider constructs, such as smart factories, smart homes and smart cities.

In the example given by Porter and Heppelmann, a traditional tractor moves from stage one to two, to become a smart tractor. From there, it moves to a third stage, to become a smart, connected tractor. In stage four, it’s part of a product system, connected with related products such as tillers, planters and combine harvesters. In the fifth and final stage, it’s part of a ‘system of systems’, integrating with a wide range of other smart farm devices and sensors, as well as related apps and information services.

My experience working with customers indicates that the most advanced are currently between stage three (smart connected product) and stage four (product system). In extended supply chains today, manufacturers own the data.

Some monetize the data by granting limited access to it or selling it as a service in the form of embedded analytics further downstream (closer to the customer) in the supply chain. This model is well-established and should remain in place for the foreseeable future.

Fulfilling the "system of systems" model

The risk, however, is reaching a plateau at stage four because the leap to stage five is huge—both in terms of the transformation required and the potential payoff. In order to arrive at and fully benefit from the system of systems model, organizations will need to change their architectures and approaches to data ownership.

The big disruption involves transitioning from closed-loop systems, where manufacturers own all the data, to open data systems where businesses closer to the customer own and manage data.

This change is why Porter and Heppelmann posed the question in their article: "How does the company manage ownership and access rights to its product data?" as a key strategic decision to be made when seeking competitive advantage from IoT. The challenge becomes evolving from a company that used IoT-enabled products, to becoming an IoT-enabled organization. This difference means everything in the context of gaining maximum leverage from data.

Introducing the "first receiver"

The answer to that question is a "first receiver", which is a reference architecture designed to underpin the system of systems model. A key player in this is the first receiver organization; this is the customer-facing organization that acts as the host for the system of systems, and receives all sensor data first.

This first receiver organization’s role extends to storing incoming data and managing the processes of cleansing, enriching, and then distributing it to other related organizations on an as-needed basis.

This includes propagating the data to internal users locally and remotely within the organization, as well as to third-party partners or even regulatory bodies who also need this data. And so that these systems can be properly monitored and maintained, data must also be fed back to the various IoT devices involved (for example, heating systems).

To support this role, the first receiver organization would install an edge device inside or behind one or more servers, or virtually within a distributed cloud architecture. These devices would serve to ingest all the sensor data from the various IoT subsystems, filter the important signals from the noise, trigger alerts in response to exceptional events and persist (permanently store) the data.

Organizational challenges

However, technology architecture and governance is only one piece of the jigsaw puzzle in realizing the system of systems model. The profound transformation driven by IoT and data-driven architectures will also require new ways of working, new skills and resources, new types of contractual arrangements and significant cultural change up and down the supply chain.

Fortunately, despite many people’s fear of change and the unknown, many are beginning to realize the stakes involved in not exploring and understanding IoT. In a July 2016 survey of over 420 US enterprise decision-makers, carried out by Machina Research, 38% of respondents said their organizations were already actively using IoT technologies and 43% were planning to deploy IoT within the next two years.

Preparing now for the IoT future

Organizations that will gain the greatest and most sustainable competitive advantage from stage five IoT are those that start preparing now for its future. To help IoT executives cross the chasm from stage four (a product system) to stage five (a system of systems), we have developed a checklist to outline the various people, process and technology initiatives involved.

The benefits that IoT offers to organizations and society at large massively outweigh the risks, and that ultimately, people will have the will to overcome the challenges to make this system of systems vision become reality. 

Wael Elrifai, director of enterprise solutions, Pentaho. This article originally appeared at Internet of Business. Internet of Business is a CFE Media content partner. Edited by Chris Vavra, CFE Media,

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