The Internet of Things (IoT) in Business
- More than 127 new devices are connected to the internet each second
- By 2025, the number of network-connected devices is projected to reach more than 50 billion
- 68% of middle-market business owners are concerned with IoT devices being compromised by cybercrime
The world is more connected than ever before. In nearly every aspect of our lives, we can rely on a connected device to make tasks easier. Whether it’s a smart home security system, a wearable fitness tracker, an internet-connected car or an in-home voice assistant, smart devices have exploded in popularity in recent years.
These devices are all part of the Internet of Things (IoT). At its core, the IoT is a network of devices, all connected to the internet and equipped with sensors that transmit, collect and share data. While these devices are impressive, their potential is just beginning to be unlocked. According to research from McKinsey & Company, there were 12.5 billion network-connected devices in the world a decade ago. By 2025, that number is projected to reach more than 50 billion.1 To put that growth into perspective, it is estimated that more than 127 new devices are connected to the internet each second.2
IoT technologies are also transforming the ways we do business across nearly every industry — including the manufacturing, construction, retail and hospitality sectors. When leveraged correctly, IoT solutions can help businesses in the middle market enhance productivity, learn more about certain aspects of their operations and improve their overall risk profile.
As these devices become more powerful, affordable and commonplace in commercial settings, it is incumbent upon business owners and insurance professionals alike to understand how the IoT works and how these devices can be used to streamline processes and build efficiencies.
Ways middle-market businesses are using the benefits of loT
There are countless ways that middle-market business owners are applying the IoT to enhance their understanding of their business and improve their operations. Here, we will examine just a few common ways businesses are utilizing the IoT.
One of the most compelling benefits of IoT devices is their ability to help businesses build efficiencies. This can involve eliminating certain unnecessary steps from their processes or by making tasks more streamlined. Take the example of a large restaurant chain that equips its industrial coolers with IoT devices that can measure and report the temperature in the coolers throughout the day. Local health departments often require restaurants to record the temperatures in their coolers multiple times per day to prevent food safety issues from occurring.
Traditionally, restaurants have been required to have employees check and record the temperatures in their coolers. This process is manual and prone to errors. However, through IoT-enabled sensors, restaurants can set up automatic reports that document the temperature in the coolers in an easy-to-access report. Additionally, these sensors can alert the business if there are issues with the coolers that need to be addressed.
While this example is from the restaurant industry, it is not hard to imagine how middle-market businesses across various industries are improving their day-to-day operations by automating certain processes through the IoT
Improving preventive maintenance
Many organizations rely on specialized equipment to conduct business. Oftentimes, this equipment requires routine maintenance to keep it performing at its best. The last thing a business wants is to have a critical piece of equipment break at an inopportune time. The monitoring capabilities that IoT devices offer can help address issues and allow businesses to perform maintenance on equipment before the issues become larger problems that lead to downtime.
Enhancing monitoring capabilities
Business owners can’t be everywhere at once, and neither can their employees or safety professionals. But that doesn’t mean certain risks aren’t present in portions of their business. One key benefit that IoT devices offer is the ability to enhance monitoring capabilities for a wide variety of risks. IoT devices can often pick up on issues that a worker might not discover in a timely enough manner for the business to take direct and immediate action to address the hazard.
One emerging capability involves the use of security cameras and artificial intelligence to identify troublesome conditions. For example, these types of systems can examine security camera footage in real time to identify potential slip, trip and fall hazards on an assembly line or in a retail environment, and then send an alert. Thus, it supplies the business with the information needed to prevent a potential employee or customer injury.
Preventing and limiting commercial property losses
When it comes to commercial property losses, water and fire damage are two of the biggest issues a business must address. This, too, is an area where IoT devices can play an active role. For example, there are a variety of sensors that businesses can place on equipment or industrial systems to spot certain conditions that can lead to damage.
In the case of water damage, businesses can use sensors that detect water leaks. Other sensors can determine if there are abnormal vibrations in water systems, a sign that water damage may be occurring. These sensors can then shut off the water supply to prevent further damage or give workers the time needed to examine the issue. Similarly, there is a host of devices that can be used to detect the early warning signs of fire in industrial settings.
The main goal of these IoT devices is to provide early warning signs that will prevent property claims from occurring in the first place or limit the damage caused, thus reducing the severity of a claim. This is important, as property damage claims can be devastating for businesses. While this type of damage is typically covered under commercial property policies, businesses still have to contend with the disruption of their operations, which can impact their reputation with customers and other third parties.
Correcting risky behaviors
One final benefit that IoT devices offer is the ability to correct or improve employee behaviors. Frequently, employees act without knowing they are doing something risky or not as efficiently as they could be. These actions, if serious enough, can lead to workplace incidents. Businesses can often rely on the data supplied by sensors placed throughout their operations to detect these behaviors and correct them before they lead to costly and dangerous incidents.
A prime example of this application of the IoT is the way that many middle-market businesses are leveraging telematics in their fleet of commercial auto vehicles to correct certain driving behaviors. By examining IoT data, fleet managers can detect risky driver behaviors, such as excessive driving speeds or hard braking. In turn, this data can allow fleet managers to address these bad habits with drivers before they become serious or deadly issues.
Disadvantages of IoT
The same powerful features that allow IoT devices to provide businesses tremendous advantages can also lead to potential hurdles that must be addressed. This is especially true for businesses that are adopting these technologies for the first time. One of the biggest disadvantages of IoT that many businesses face is the sheer volume of data certain IoT technologies deliver. In order to get the most out of their investment, it is essential that businesses leverage this data in meaningful ways and not let it overwhelm them.
This all starts before an IoT system is purchased and/or implemented. It is vital that business owners select IoT devices that are appropriate for their operations and in line with their goals. When it comes to IoT technology, what works for one business may not work for another, based on a variety of factors that include size, nature of operations, personnel and experience level with data and technology. The good news is that businesses are not on their own when it comes to selecting the proper IoT device. Insurance professionals are essential to guiding businesses to the correct devices and providing ways to best leverage this technology.
The initial phase of installing and setting up IoT systems is critical. Understanding what all of the information provided by the devices means can be challenging. Oftentimes, businesses will need to work with providers to determine what they want to measure and how they want that information displayed or provided. Additionally, data on its own is exactly that: just data. In some cases, businesses will need to take the insights gleaned from their IoT systems and pair them with personnel who can take appropriate action. For example, if a manufacturing business uses information from workers’ wearable devices to identify an issue with repetitive motions, the business’s safety professionals or management may still need to intervene to address the issue.
To that end, it is important that businesses develop protocols around their IoT programs and not lose sight of the human element of these technologies. The question of how to best interpret IoT-provided data and turn that information into actionable business practices is one that should not be overlooked. Considering these questions will help businesses see a return on investment from these devices and make their application throughout the business a smoother process.
Finally, cybersecurity and data privacy should not be overlooked when it comes to IoT devices. According to Nationwide’s Agent Authority survey, 68% of middle-market business owners are concerned with IoT devices being compromised by cybercrime. This concern appears justified, as 1 in 4 middle-market businesses surveyed reported that their devices had been subjected to an attempted cyberattack. Keeping this in mind, it is essential for businesses to take cybersecurity seriously when it comes to IoT devices and work with their insurance and technology partners to ensure their devices are secure.
IoT devices are powerful tools that can provide business owners with new insights about their business. These devices can enable businesses to make informed decisions and address risk in a more holistic fashion by coupling data with expertise. There is no doubt that, moving forward, more businesses will turn to the IoT for creative solutions to challenges in various aspects of their operations.
- The IoT is a network of devices, all connected to the internet and equipped with sensors that transmit, collect and share data
- When leveraged correctly, IoT solutions can help businesses in the middle market enhance productivity, learn more about certain aspects of their operations and improve their overall risk profile
- It is essential for businesses to take cybersecurity seriously when it comes to IoT devices and work with their insurance and technology partners to ensure their devices are secure
“Digital ecosystems for insurers: Opportunities through the Internet of Things,” Simon Behm, Ulrike Deetjen, Sanjay Kaniyar, Nadine Methner and Bjorn Munstermann, mckinsey.com/industries/financial-services/our-insights/digital-ecosystems-for-insurers-opportunities-through-the-internet-of-things# (Feb. 4, 2019).
“What’s new with the Internet of Things?” Mark Patel, Jason Shangkuan and Christopher Thomas, mckinsey.com/industries/semiconductors/our-insights/whats-new-with-the-internet-of-things (May 10, 2017).