IoT, new business models and digital agility 102116

IoT, New Business Models and Digital Agility – Ties to Security

ROBERT B. COHEN, PHDSENIOR FELLOW, ECONOMIC STRATEGY [email protected]

IoT Tech Expo NA 201620-21st October, Santa Clara Convention Centre

THE AUTHOR THANKS THE EWING MARION KAUFFMAN FOUNDATION, BROCADE COMMUNICATIONS AND THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT FOR THEIR FINANCIAL SUPPORT.

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Main Topics for Today UNDERSTANDING THE UNIQUE CHALLENGES OF SECURITY FOR THE IOT, AND

PREPARING FOR THE NEXT EVOLUTIONS OF THE TECHNOLOGIES INVOLVED ADDRESSING THE RISKS OF BIG DATA – GREATER VOLUME OF SENSITIVE

DATA CREATING A GREATER RISK OF DATA AND IDENTITY THEFT, DEVICE MANIPULATION, DATA FALSIFICATION, IP THEFT AND SERVER/NETWORK MANIPULATION ETC.

ENABLING DATA SECURITY IN IOT – PROTECTING INTEGRITY, AUTHENTICITY AND CONFIDENTIALITY OF INFORMATION

EXPLORING ISSUES OF PRIVACY – TO WHAT EXTENT USERS REQUIRE PRIVACY, AND HOW IT CAN BE MAINTAINED WHILST STILL MAKING DATA USEFUL

10/21/2016 IoT Tech Expo NA 2016

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LINKING SECURITY TO WHAT IoT MEANS FOR THE ECONOMY

• IoT INTRODUCES MANY UNAPPRECIATED EFFICIENCIES – COST CUTTING AND INNOVATIVE WAYS TO CHANGE HOW PRODUCTS ARE PRODUCED.• BETTER CONTROL OF PRODUCTION, SUPPLY CHAINS AND DELIVERY OF GOODS/SERVICES• GREATER PRODUCTIVITY IN THE ECONOMY THAN WE ARE MEASURING

• THIS IS VERY TRUE OF ELECTRONIC & MECHANICAL INDUSTRIES IOT IS CHANGING

• ENHANCED COMPETITIVENESS OF FIRMS ADOPTING IoT• WHERE BUSINESS MODELS OFFER JOINT PRODUCTS – A GOOD PLUS A SERVICE

BUNDLED TOGETHER – AS DONE BY ROLLS-ROYCE, BOEING, MICHELIN OR JOHN DEERE.• WHEN THESE FIRMS ADD GUARANTEES OF ZERO DEFECTS OR ZERO DOWNTIME TO

THEIR PRODUCTS, IT MAKES THEM MORE COMPETITIVE IN THE MARKETPLACE.

• IoT SECURITY IS THE KEY TO OBTAINING THESE BENEFITS


ECONOMIC IMPACTS OF IOT• IoT TRANSFORMS ELECTRICAL, MECHANICAL AND SERVICE INDUSTRIES• THIS IS A DRAMATIC CHANGE IN HOW INDUSTRY OPERATES. IT SPANS MANY INDUSTRIES. AS IOT IS MORE

WIDELY ADOPTED, IT SHOULD REDUCE COSTS, INCREASE OUTPUT AND CREATE GREATER DEMAND FOR NEW TYPES OF JOBS• TO PARAPHRASE DR. JOHN FULTON OF OHIO STATE, IF YOU’RE GOING TO DO FARMING IN THE FUTURE, THIS IS WHAT YOU ARE GOING TO

USE, PRECISION AGRICULTURE WHICH IS MOVING TO DIGITAL DATA; THIS INCLUDES: PRECISION AGRICULTURE,, PRESCRIPTIVE AGRICUTURE AND BIG DATA. (IoT)

• IoT INTRODUCES GREATER CONTROL OVER PRODUCTION• REDUCES COSTS• MAKES IT EASIER TO EXPAND PRODUCTION, RAISE REVENUES• RESULTS IN GREATER PRODUCTIVITY – THIS IS NOT SHOWING UP IN THE DATA

• FACILITATES LINKING MANUFACTURED PRODUCTS TO SERVICES• MONITORS ENGINES IN REAL TIME, REDUCING UNEXPECTED MAINTENANCE • EXTENDS LIFETIME OF PRODUCTS, LIKE ENGINES• SUPPORTS ZERO DEFECT OR ZERO DOWNTIME GUARANTEES

• SPEEDS UP PRODUCTION OR SERVICE DEVELOPMENT• ACTIVELY IDENTIFIES ISSUES IN PRODUCTS WHILE THEY ARE PRODUCED• REDUCES ERRORS AND POORLY PRODUCED PRODUCTS, ELIMINATING TIME LOST• SHOULD ADD TO PRODUCTIVITY


THE INTERNET OF THINGS CHANGES PRODUCTION AND INTRODUCES EFFICIENCIES• CHANGES PRODUCTION – • THE “FACTORY OF THE FUTURE”• “DIGITAL AGRICULTURE” GROWS OUT OF COMBINING PRECISION

AGRICULTURE WITH PRESCRIPTIVE ANALYTICS AND BIG DATA ANALYTICS. INTEGRATED SYSTEMS .

• IMPROVES EFFICIENCIES – • BIG DATA ANALYTICS REPORTS WHEN PERFORMANCE VARIES

FROM WHAT’S EXPECTED. • ROLLS-ROYCE’S ON-ENGINE ANALYTICS.• STANLEY BLACK AND DECKER PRODUCTION LINE CONTROLS.


A FEW EXAMPLES OF HOW IoT CHANGES PRODUCTION

• BOEING ANALYTICS ON THE FACTORY FLOOR COMBINED WITH ROBOTS IMPROVES EFFICIENCIES.• JUST IN TIME MATERIALS• TIMING PROGRESS ON THE LINE• EXPANDING PRODUCTION BY USING A MOVING ASSEMBLY LINE• COST SAVINGS PLUS EXPANDING THE SCALE OF PRODUCTION

• PRECISION AGRICULTURE• COMBINES GPS, BIG DATA ANALYTICS, WIRELESS COMMUNICATIONS• OPTIMIZES FERTILIZING, WATERING, HARVESTING• WIRELESS LINKS BETWEEN VEHICLES REDUCE PROCESS TIME


IMPROVES EFFICIENCIES• BIG DATA REDUCES DOWN-TIME FOR ROLLS-ROYCE’S ENGINES

• ON-BOARD ANALYTICS TRANSMIT ONLY DATA THAT DEVIATES FROM NORMAL• AS A RESULT, ROLLS ADDRESSES PROBLEMS BEFORE THEY ARISE• BY MONITORING PERFORMANCE IN GREAT DETAIL, ROLLS CAN OFFER CONTRACTS FOR SERVICE:

“POWER BY THE HOUR”• ITS PRODUCT BECOMES A SERVICE

• MILESTONE MERCK INSOMNIA STUDY (2004)• ELECTRONIC REPORTING SMALLER DEVIATION THAN IF PATIENTS USED PAPER TO REPORT CLINICAL

RESULTS – DID THEY GET TO SLEEP?• SAMPLE SIZE NEEDED FOR RELIABLE CLINICAL TRIAL COULD BE REDUCED – VARIANCE IN SAMPLE

WAS MUCH LOWER • PHASE 3 CLINICAL TRIAL SAVINGS OF $1.5 MILLION• AVOIDED “PARKING LOT SYNDROME” – TAKING TOO MUCH TIME TO FILL IN RESULTS ON PAPER

FORMS


IoT CHANGES COMPETITIVENESS•CHANGES WHAT DETERMINES COMPETITIVENESS• ADDING REAL-TIME ANALYTICS TO BOEING JETS MAKES THE

PRODUCT MORE COMPETITIVE.

•MEANS THAT EMERGING SYSTEMS THAT COMBINE SEVERAL TECHNOLOGIES WILL DETERMINE COMPETITIVE SUCCESS• ANALYTICS• SOFTWARE DEVELOPMENT• INFRASTRUCTURE MANAGEMENT


IoT CHANGES COMPETITIVENESS• ADDING REAL-TIME ANALYTICS TO BOEING 787• MISSION CONTROL MANAGES SYSTEMS AND CONTROLS• CORRECTS PROBLEMS IN-FLIGHT• UNMANNED FLIGHTS OF THE FUTURE?

• FORD EMPLOYS BIG DATA• SAVINGS OF $2 BN OVER 4-5 YEARS IN SUPPLY CHAIN/DEALER DELIVERIES• BIG DATA ANALYSIS IDENTIFIED TRUCK DESIGN CHANGES THAT COULD IMPROVE

FUEL EFFICIENCY AND LOWER PRODUCTION COSTS – ALUMINUM CHASSIS• REDUCES COST, INCREASES PROFITABILITY – 50% PROFIT ON NEW F-150


IoT CHANGES BUSINESS MODELS• ADDING “AS-A-SERVICE” TO MECHANICAL/ELECTRONIC PRODUCTS

• ROLLS-ROYCE “POWER BY THE HOUR”• MICHELIN “KILOMETER BY THE HOUR”• FANUC ROBOTIC SYSTEMS AND ZERO DOWNTIME

• ADDING GUARANTEES OF HIGH LEVELS OF PERFORMANCE• ROLLS-ROYCE “ZERO BASED DISRUPTION”• FANUC “ZERO DOWNTIME” WITH GM/CISCO

• 5,000 ROBOTS IN 26 GM FACTORIES THROUGHOUT THE WORLD• UNPLANNED DOWNTIME IN AN AUTO PLANT CAN COST $15,000 – $50,000 A MINUTE, $3

MILLION AN HOUR


IOT REQUIRES NEW JOB SKILLS • WE SEE THESE CHANGES IN ANALYTICS, SOFTWARE DEVELOPMENT AND INFRASTRUCTURE

MANAGEMENT• IN ANALYTICS

• FORD IS HIRING DATA ANALYSTS/SCIENTISTS• UPS DEVELOPED PREDICTIVE ANALYTICS• MOST ANALYTICS EMPLOYEES NEED COMPUTER PLUS ANALYTIC TOOLS SKILLS (HADOOP)

• IN SOFTWARE DEVELOPMENT• PROGRAMMERS WORK IN DIGITAL SYSTEMS: BOEING APPLIED SIMULATION AND ANALYTICS• RAPID DEVELOPMENT OF NEW SERVICES IN CLOUD ECOSYSTEMS; TESTING AND DEVELOPMENT OF NEW

SOFTWARE FOR APPLICATIONS.

• IN INFRASTRUCTURE MANAGEMENT• BIG DATA LAKES REQUIRE FAMILIARITY WITH VIRTUALIZED ENVIRONMENTS. WE SEE THIS AT FORD,

BOEING, AND UPS.


FUTURE ECONOMIC IMPACTS OF IOT• IN THE FUTURE, COMPANIES WILL BE ABLE TO CAPTURE CONTINUOUSLY STREAMED DATA AND

ANALYZE IT RAPIDLY. • THIS MAKES IT EASIER TO RESPOND TO WHAT HAD BEEN CONSIDERED COMPLEX EVENTS. FOR

EXAMPLE, HEARST PUBLICATIONS USES AMAZON TO CAPTURE STREAMED DATA TO ANALYZE CUSTOMERS’ COMMENTS ON WEBSITES. • RAPIDLY CAPTURING SUCH EVENTS CAN ALSO HELP IMPROVE THE OVERSIGHT AND ANALYSIS OF CLINICAL

TRIALS. • IT CAN HELP HEALTHCARE ORGANIZATIONS CORRELATE MEDICAL TREATMENT OUTCOMES WITH GENOMIC

CHARACTERISTICS TO IMPROVE OUTCOMES AND REDUCE COSTS.

• CONTINUOUS SERVICE DELIVERY FOR SOFTWARE WRITTEN ON CLOUD COMPUTING INFRASTRUCTURE PERMITS RAPID CHANGES TO SOFTWARE QUICKLY. THIS LETS USERS MANAGE AND ANALYZE BIG DATA BETTER • BY UPDATING SOFTWARE RAPIDLY, MANUFACTURERS CAN IMPROVE A SOFTWARE PROGRAM• THIS LETS THE PROGRAM ADDRESS SOMETHING LIKE A MALFUNCTION BEFORE IT DISRUPTS A PRODUCTION

LINE. PRESCRIPTIVE OR “FAULT TOLERANT” PRODUCTION/PERFORMANCE IS POSSIBLE.

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IMPROVING THE RETURNS FROM IOT IN THE FUTURE

• SOFTWARE DEVELOPMENT COSTS DROP TO WHERE THEY ARE FAR LOWER THAN TODAY • CLOUD INFRASTRUCTURE MAKES RAPID DEVELOPMENT OF SERVICES EASIER.

• LINKS BETWEEN DATA SOURCES ARE CHEAPER TO ESTABLISH – CYCLE COMPUTING ACHIEVES 48 YEARS OF GENOME ANALYSIS IN 3 HOURS. • DRAMATIC COST SAVINGS• TREMENDOUS INCREASE IN PRODUCTIVITY• FIRMS THAT ACHIEVE THIS ARE ABLE TO GROW FASTER THAN AVERAGE

FIRMS• NEW SOURCE OF ECONOMIC GROWTH

IoT Global Innovation Forum 2016 DRAFT VERSION 1

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IoT, new business models and digital agility 102116