Schwerpunkt Interview

“The Internet of Things: A New Perspective Beyond Technology”

Dr. Oliver Bäcker is the Internet of Things and Emerging Technologies lead at Deloitte Switzerland and a member of the leadership team at Deloitte Digital. He has extensive experience consulting clients on the Internet of Things by providing viable IoT strategies, feasible technical solutions, and desirable designs. Oliver holds a Ph.D. in technology management from University of St. Gallen and was a visiting scholar at the MIT Center for Digital Business. His research was published by leading international journals and received multiple awards.

The interview is conducted by Prof. Dr. Dennis Herhausen, Associate Professor of Marketing, KEDGE Business School

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Nowadays, everyone is talking hand with the miniaturization of smart Dr. Oliver Bäcker about the Internet of Things (IoT) devices. As they are getting smaller and Director and Internet of Things as one of the most promising smaller, it becomes easier to include cheap & Emerging Technologies lead at Deloitte Switzerland technological trends. You have sensors in many consumer products. Tel.: +41 (0) 58 2796781 been publishing about IoT for Secondly, IoT depends on the connec- [email protected] more than 10 years now. tivity between the physical world and the Why does it appear more topical digital world. Network connectivity as today than ever before? well as bandwidth and coverage are incre- I firmly believe that we need to assess the asing, which makes it easier to implement potential of the Internet of Things not just IoT solutions as compared to 10 years ago for its technological capabilities but rather when we had weaker connectivity, lower for its impact as an enabler of new business bandwidth, and less coverage. models. Thus, the focus should not be on the A third point is that when talking technology but on the associated business about connectivity we need standardized model. In this sense the topic is becoming software platforms. In the past, compa- ever more relevant because the business de- nies faced a very fragmented landscape of mand for IoT solutions is growing while the different IoT solutions. These days, we development of key enablers is reducing the see more and more standardization and a barriers to developing viable IoT solutions. consolidation of IoT platforms in the mar- Firstly, a decrease in hardware costs ket, which simplifies vendor selection and makes the implementation of IoT sensors reduces implementation costs. and technology much more feasible. In ad- The fourth and most important point is dition, the decreasing prices go hand in the maturity of complementary technolo-

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gies that drive the value of IoT. Topics For me, the impact of IoT is visible ac- combination with analytics capabilities like Big Data and Analytics play a pi- ross three different dimensions. The potential problems can even be identi- votal role for the Internet of Things first dimension is operational efficien- fied in advance transforming service because the more I can learn from the cy and the associated cost reduction. tasks from reactive to predictive mainte- acquired data the more value I can ge- Condition monitoring and predictive nance. In the consumer industry, we see nerate. Thus, IoT generates more value maintenance are examples of IoT tech- IoT-empowered products entering the when combined with advanced ana- nology driving an increase in the ope- market such as coffee machines with lytics capabilities because the value rational efficiency of production lines. embedded sensors. Here, IoT technology will increase dramatically if I can ana- The second dimension is the gene- is applied to improve the customer expe- lyze, learn, and then act on information ration of new revenue streams and new rience by choosing the optimal water instead of only recording it. business models. For example, the In- temperature for a capsule while revenu- Finally, a range of technologies ternet of Things enables a new line of es for the retailer are increased by auto- that may be subsumed under the term “connected” products (e.g. cars, indust- matically reordering capsules whenever “digital reality” allow you to visualize rial machinery, coffee machines, and the consumer is running out of them. what is happening in the physical world smart home assistants) that allows com- around you based on augmented reali- panies to generate new revenue streams Although first announced ty, virtual reality and mixed reality. or sell their products at higher prices. years ago, IoT-empowered For example, as a maintenance techni- The third dimension relates to an im- smart and connected cian you can look at a production line proved customer experience where an household appliances have using an augmented reality headset and IoT solution augments the experience been slow to enter homes. see quality KPIs as well as mainte- and leads to higher customer satisfaction. Probably the most well-known nance instructions in real time. Digital example is the “smart” fridge. reality technology visualizes IoT in a Can you give us an example of Why do you think it is taking way that makes it easier for people to value creation by the Internet so much time for this appli- interact with the physical world and the of Things? ance to conquer the market? digital data associated with it. There are many industries where IoT is Especially for the smart fridge, I see a In summary, the complementary already creating value by improving couple of hindering factors. On the one technologies outlined above are boos- operational efficiency, driving new reve- hand, there is a lack of standardization ting IoT adoption and driving value nue streams, and improving customer across all the players involved, and this beyond an isolated IoT solution. experience. The manufacturing industry is a massive challenge. When looking at has applied IoT solutions for decades to RFID as a prominent product identifica- Where do you see IoT and improve operational efficiency of pro- tion technology, you would need to have its technologies creating the duction lines. IoT sensors allow detec- all products in your fridge tagged in the most impact? ting machinery malfunctioning and in same way no matter by which vendor

Fig. 1: Technological Innovation and Decreasing Cost Unlock the Full Potential of IoT Smart Devices Mobility Cloud Computing Analytics Data Security

· Devices are becoming · Mobile devices are · Cloud Computing is · Data from smart · Complexity of require- miniaturized and more used to control other used to drive business devices is collected ments is increasing affordable devices agility and speed-to- and monetized given the number · Away from “all-in-one” · With BYOD the focus market · Predictive analytics and types of devices devices towards moves from device · It provides an innovation helps businesses be · Increased regulation meeting specific needs management to app platform for mobile, more proactive in and focus on privacy management social, and big data driving decision-making Source: Deloitte 2019.

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Fig. 2: IoT Use Cases in Sales, Customer Service and Marketing Retail / Consumer Products Supply Chain Marketing Service & Adoption

· Connected stores (digital reality, · Product provenance / · Proximity-based · Remote condition online-offline experience) supply chain visibility marketing monitoring · IoT consumer devices (e.g. PMI iQOS, · Reverse supply chain / · Digital reality · Augmented reality for Nespresso Prodigio) customer service commercials service technicians · Smart shelves (e.g. Coca-Cola) · IoT for waste · Augmented reality · Remote service using · Store checkout optimization (e.g. Amazon Go) management & tracking marketing brochures mixed reality · Quick feedback through smart packaging / in-app surveys

Insurance Smart Home Crowd Smart City Management & Space Utilization · Connected cars · Smart fridge · Event management · Smart mobility · Wearables in sports · Connected · Retail banking concepts · Wearables in healthcare and entertainment systems experience · Smart parking homes / institutions · Smart home safety · Smart shop floor · Smart lighting (e.g. medication reminder) appliances · Warehouse management (e.g. remote door lock for home delivery) Source: Deloitte 2019.

they are provided. Ultimately, if you can- increase the acceptance to it. Whether it will be Google, Amazon not cover 100 percent of the products of smart and connected or any other player – at some point one of with a single solution, the customer ex- devices like the fridge? the big players will “own” the infrastruc- perience is completely blown. If I have to The first point to address is to ensure ture and lock consumers into their eco- separate the fridge contents into products standardization and connectivity with system. Many people are scanning the that have an RFID tag and can be identi- open ecosystems so additional compa- smart home market but not making in- fied by the fridge and other products that nies can actually be connected to the so- vestment decisions yet because they are cannot be identified, the added value di- lution and contribute to value creation. If not quite sure which player is going to minishes. Ultimately, you will need to you consider the broader smart home provide the leading platform for the align all players involved, from the food environment there are also increasing smart home. So if you want to win the producer to the fridge producer to the in- privacy concerns that need to be smart home market and establish a lea- frastructure provider, and this is a very addressed. Recently there was a lot of ding platform it might be a promising challenging endeavor. On the other hand, bad press regarding smart speakers like strategy to open up your ecosystem for there is the issue of tagging products be- Amazon Echo listening in on consumers, more partnerships and ensure your plat- cause food retail faces very low mar- who are getting more and more concer- form has the largest reach – and finally gins. The cost of putting an RFID tag on ned about this issue. In addition, both indecisive buyers will follow the trend. the products might eat up all the margin, companies and consumers have to be e.g. in the case of a yogurt. These are just convinced that the investment will pay Speaking about Amazon, two of the challenges that currently hin- off in the future. These days, smaller I have read that they removed der the adoption of smart fridges. producers of smart home appliances have their “dash button” which to bet on one of the big players to set the was a typical IoT example. Given these challenges, standard for the smart home infrastruc- Why do you think they no

Photos: Deloitte what can companies do to ture so they can align their own products longer promote this solution?

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That is a very interesting point and ac- workforce and future job There is a range of applications where tually a very recent discussion because profiles? IoT and AI converge. One of them is they officially stopped it in September The example of the service technician what we call “machine vision”. In ma- 2019. One of the reasons was signifi- relates to a future job profile in a com- chine vision, you basically have came- cant pressure on Amazon because the pany that provides services on a global ras that observe a space and then use dash button did not give the customers level. In the past, the company had to machine learning to train the system buying options and did not allow them send a highly skilled service technician and get better and better at recognizing to compare prices. After all, it was pre- to every global site to perform mainte- objects. This can be used for facial re- configured and provided limited trans- nance work. For example, if you had a cognition or to generate heat maps of parency regarding price fluctuations machine breakdown in rural Siberia you how a space is used. For example, as a on the market. There was even a court had to send someone out to fix that be- retailer you can use the information decision indicating that the device cause you were unlikely to have a from machine vision to understand the might violate German consumer pro- skilled person on the ground. Now, if demographics of your customers and tection laws, which added to the pres- you think about technologies like aug- how the customers move across the sure on Amazon. mented reality you can have unskilled shop floor. If you then correlate that workers on the ground executing the information with your sales data you Besides its impact on tasks while skilled workers connect can understand how different marke- products, do you also see an from a central control center to steer and ting messages impact buying behavior. impact of IoT on services? Yes, definitely. Customer service is al- ready undergoing a significant change “The Internet of Things: due to IoT solutions. As outlined above, you can use sensors to monitor the per- A new perspective beyond technology formance of your production line. This and towards the impact on also changes the way of providing cus- tomer service on production lines be- customer experience, revenue streams, cause you are moving from scheduled and operational efficiency.” maintenance to on-demand service. But it is not just about the sensors, it is also about the way a service technician inter- guide the unskilled workers. This ap- Image recognition is also important in acts with the physical environment. This proach will significantly cut costs and the field of public safety where we see is linked to the combination of digital reduce response times because instead an increasing amount of safety came- reality and IoT technology mentioned of going somewhere on a 20-hour trip to ras in public spaces like airports and earlier. We already see service technici- fix a machine the technician can log in train stations. These technologies al- ans using augmented reality headsets to within minutes and prevent a produc- low you to run very specific queries on receive additional information about the tion breakdown. That means companies video feeds such as: “I am searching machine they are servicing. As an ex- need to organize their workforce diffe- for a man that is 40 years old and wea- ample, at Thyssenkrupp technicians use rently because they no longer need to ring a brown coat”. This obviously re- a headset during elevator maintenance deploy skilled technicians all over the quires a sophisticated image recogniti- procedures, which gives them additional world. They can build a central center of on technology in combination with AI information on the specific work task, excellence that provides services on a to process the data. displays product information and allows global scale while deploying less skilled Smart homes are another field of AI them to connect to a remote colleague workers out in the field. applications, e.g. with regard to virtual for further assistance. assistants that interact with us and the Many people expect an surrounding smart home environment. Related to these examples, extraordinary impact of the As an example, I can instruct my virtual how do you see the impact combination of IoT and AI. Can assistant to close the window or to turn of IoT on the future of the you give an example of this? up the heating. In this example, we talk

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Fig. 3: The “Internet of Useless Things”

SMART UMBRELLA PET MONITOR SMART FORK SMART BOOKMARK An umbrella that can send The gadget can shoot Bluetooth-enabled fork Never lose your page again. its last known location treats out via smartphone. that vibrates when you are and weather updates. eating too fast. Source: Deloitte 2019. about the actuator side of IoT because Where do you see the main business value before engaging in the the scenario is not just about sensing (in challenges of implementing actual implementation. our example weather conditions) but IoT solutions? about actually triggering something in I would like to separate the main chal- Based on your experience, where the real world. That is what we call the lenges into three different categories. do you see the future of IoT? digital-to-physical loop of IoT. The first common misconception we At the beginning of our conversation, see in many organizations is that they we talked about the decrease in costs Does this mean that robots perceive IoT as a technology solution and the increase in standardization, and will take over all our jobs? instead of focusing on the business pro- both will boost IoT in the future. Even As in previous industrial revolutions, blem. Throwing technology at a prob- today, we can see an exponential growth there is a new technology wave coming lem for the sake of implementing tech- in IoT solutions. But the true value will in and it is not taking away but transfor- nology generates what I call the be realized when IoT is combined with ming jobs. Actually, if you look into the “internet of useless things”. One recent other emerging technologies like big third industrial revolution, you can see example is a smart umbrella that has a data, digital reality, and cloud compu- that it generated more jobs than it killed sensor that will tell you whether it is ting. Companies need to integrate these and massively changed the kind of raining. The second challenge is to fit technologies to achieve new solutions work we are doing. You already see ro- the new IoT solution into the existing that create more value than the sum of bots being heavily used in a production IT landscape. This is linked to selec- their parts. And last but not least, the and manufacturing context and in many ting the most suitable IoT platform for companies that will be most successful cases they are not simply used as a re- the problem at hand. Actually, a lot of in implementing IoT are the ones that placement for manual work but in colla- work is required to benchmark diffe- take the risk of moving beyond merely boration with human workers. You can rent IoT platforms and pick the right improving efficiency by a few percenta- see collaborative robots (so-called “co- platform based on a client’s individual ge points and start exploring disruptive bots”) working with humans on the needs. The third common challenge IoT-enabled business models. IoT is still same production line. For example, the relates to challenge one and the under- a new technology for many companies robot does the heavy lifting that hu- lying business case. The challenge lies and it takes a lot of guts to disrupt exis- mans cannot easily handle while hu- in the uncertainty about the actual be- ting business models with IoT. The mans carry out the very sensitive tasks. nefits of implementing an IoT solution. reward will be huge, though, as it will Therefore, when we see humans and If you are too technology-focused, you generate entirely new revenue streams. robots collaborating on a task there is a are at risk of losing sight of what is the change in the kind of work the human problem you are trying to solve. You Thank you very much for this in- carries out but not a replacement. need to know what is going to be the sightful discussion.

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