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    Sunday MBA

    Is your firm ready for the Internet of Things?

    Sunday MBA provides ideas on running better businesses and succeeding in the modern workplace, this week from MIT Sloan Management Review.

    The potential of the Internet of Things is fueling a lot of interest. The potential insights are enticing. For example, it’s fun to think about self-driving cars gathering performance data that can help manufacturers diagnose problems; operational data that can help mechanics prevent failures; driver data that can help insurers understand risk; and road data that can help cities improve infrastructure. These kinds of insights, we’re ready for.

    But there are a lot more changes coming with the IoT transformation than many people might recognize.

    In the classic triangle, fire requires heat, oxygen, and fuel; without all three, fire isn’t possible. By analogy, analytics required data, technologies, and knowledge to be possible.

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    Widespread implementation of information systems captured unprecedented amounts of data. Second, tools and technologies allowed the inexpensive storage and processing. Third, savvy analytical innovators creatively combined these to show everyone else what could be done.

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    Now, a similar convergence is coming with the Internet of Things. First, the cost and physical size of sensor technology have dropped such that they can be incorporated into most items. Second, widespread communications infrastructure is in place to allow these distributed components to coordinate. Third, once again, savvy innovators are showing the rest of us the possibilities from the data they collect. With these in place, the smoldering potential of IoT might be ready to catch.

    But are we ready for the whole package? Probably not — because IoT is likely to be associated with substantial changes such as:

    Market power: IoT should provide a greater amount and a greater value of data, but are companies ready to work with other firms to obtain value from this data? In the driverless car example, it is easy to see how different companies and stakeholders could make use of the data in different ways. But it might not be clear who owns what data and how it can be used.

    Complexity: Few organizations are prepared to be hardware and software development companies. But that’s what the Internet of Things will enable. As products are built with embedded sensors, the component mix increases in complexity. As a result, manufacturing systems and supply chains will become more elaborate. Software embedded in products will need to be updateable when the inevitable shortcomings are found.

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    Security: If we believe data is valuable, then we need to be ready for people to want to take it from us. The IoT context intensifies the need for security requirements; sensors or software that allow control of the product make attacks easier. We’ve already seen examples ranging from wind turbines that unauthorized users can control to ship data recorders that can be tampered with to Barbie dolls that allow attackers to overhear conversations. Poisoned data streams might be difficult to discern with the volume of data that IoT devices produce.

    Process changes: Many business processes continue to be “pull” oriented. Information is gathered, then analyzed, then decisions are made. This works when change is slow. But with the IoT transition, data will stream in constantly, defying routine reporting and normal working hours. Flooding data from IoT devices will give opportunities for quick reaction, but only if organizations can develop the capacity needed to take advantage of them. Few mainstream large companies are ready for this, much less small- to medium-sized companies.

    The good news is that by recognizing each of these challenges, organizations can begin the difficult process of getting ready. Before considering IoT devices to collect data, organizations can clarify ownership and governance. Before deploying IoT devices, organizations can design in security. Before installing IoT devices, organizations can design processes to build on the new information.

    “Before” is the key — it will be hard to get ready once the IoT fire is spreading.

    This article is adapted from “Ready or Not, Here IoT Comes” by Sam Ransbotham, an associate professor of information systems at the Carroll School of Management at Boston College. Copyright 2015 MIT Sloan Management Review. All rights reserved.