As cheap as chips: turning the 'internet of things' into business benefits

To benefit from the internet of things, organisations should develop offerings responsive to the flow of data from chips embedded in products.

The "internet of things" is the term used to describe how chips can be embedded into everything from washing machines to jet engines . It enables them to relay information about their current state to a remote service centre or to receive commands to adjust their settings. 

With the advent of cheap chipsets and sensors, the economics are changing. What was once the preserve of esoteric machinery and expensive services is now applicable to lower-cost products that can be equipped with an embedded chip for as little as £3 per item. Smarter organisations are already thinking about how they can change their business to benefit from this development.

To benefit from a cheaper internet of things, organisations should develop new service offerings that are responsive to the flow of information from the chips embedded in their products.

To achieve this, businesses must consider:

  • How they can generate more than £3 profit, per object, by offering a service that customers are likely to want.
  • How they can they overcome technical issues – such as dealing with embryonic standards – to make the venture a reality.

Creating service models for the internet of things

Several companies have already created successful service offerings around the internet of things. Rolls-Royce, for example, has embedded its aircraft engines with chips so they transmit information about their condition, and their need for maintenance if necessary, so the firm can ensure replacement parts are available at the right airport to service planes when they arrive. This infrastructure and added-value to customers has allowed Rolls-Royce to introduce new service-based costing to its customers.

In a similar vein, a washing machine manufacturer could hypothetically track detergent usage in the machines it has sold, and then deliver a new bottle of detergent to the customer before the current one runs out. In a marketplace with a mature e-commerce order-fulfilment capability, it would be economic to deliver enough detergent over two or three years to easily recoup the cost of installing the chip in the machine in the first place. A fast-moving consumer goods organisation identified the points at which it would make sense to embed intelligence into its products.

Cheap as chips

Economic trends are set to continue over the next few years with cheaper chips consuming less power, to the point where they cost pence and can operate untended for months. On the one hand this raises the frightening prospect that opening a soft-drink can, through interoperating with your home network, could update your Facebook page. But the same mechanisms would allow the makers of soft drinks to gather real time insight about how their products are being consumed. This would also allow marketing campaigns to be assessed for effectiveness. Does the Super Bowl TV advertisement for a soft drink lead to an instant spike in consumption? If so, who will purchase the drink?

At the point where the majority of things are imbued with the ability to communicate, networking effects will start to be felt as well. An action triggered by the user on one device could lead to a cascade of other state changes and messages being exchanged with other devices. If two tins of beer and a packet of potato chips are opened within a 20-minute interval, and the TV is switched on to the sports channel, then you are probably going to be more amenable to an advertisement flashing up on your smartphone for a 20% discount on pizza if ordered in the next 10 minutes. Even more so if the pizza brand is your favourite, your address is known and the payment can be made on the smartphone. 

These examples are clearly aimed at the lazy tendencies in all of us. More importantly, the same technology can be used to track the truly important things such as people’s health - a pill jar that reminds you to take your medication is already being trialled. How you interact with your environment through devices will provide a set of complete data that can be interpreted to gain insight into your health and wellbeing.

Going beyond the next few years, it is quite possible that there will be more untended devices communicating over the internet than there are people. We will delegate machines to handle interactions for us, and to interact with other machines to accomplish our objectives.

As an example, perhaps we will delegate our cars to transport us from A to B, with the journey being accomplished by means of convoys of cars communicating with each other over the internet to automatically regulate a constant distance apart. The intelligent cars would negotiate leaving one convoy at a motorway interchange to join another on an A-road, with only the last couple of miles being driven manually. To overcome objections about machines being completely in charge, the convoys could be led by real drivers who would have their fuel costs partially paid for by members of the convoy.

Overcoming the challenges

Inevitably there are business and cultural challenges associated with offering new services in this area. In the short term, embedded chips have the potential to create much more continuous data than businesses are used to handling. Some of this data will be valuable as it can be analysed to guide how existing services can be improved, such as performance-tuning the washing machine. Other data will need to be mined in case it can provide insight for new business opportunities. While difficult to predict the type, volume or usefulness of the data, cloud-hosted solutions and cloud architecture reduce the associated challenge by providing a cost-effective means of accumulating and analysing large amounts of unpredictable data.

Alastair McAulay (pictured) is an IT expert at PA Consulting Group

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