The world discovered how volumes can bring down the prices of goods. The IoT increased the reach of sellers like never before. A person in the US could buy something from India at the most competitive prices due to the volume of demand, as well as the number of suppliers offering to sell. In effect, the IoT created the ideal or perfect market for buyer/seller transactions. Prices plummeted, volumes hit the roof, new sellers emerged, old sellers who loaded on the IoT bandwagon found new frontiers to conquer. 

Those who could not afford to buy, could now do so. And those who could not sell to a larger audience, could now do so. The variety expanded on both the ends – buyers and sellers. All this happened at a minimum investment. All that one needed was to buy a laptop/ mobile phone to connect to the IoT and start transacting. Companies could start businesses by simply creating websites, and then connecting with backend suppliers, and meeting the demands of an often unknown customer. It was not mandatory for the buyer and seller to meet. The world was open for business. 

Amazon, currently a plus $ 450-billion company, is perhaps the biggest icon. It has spawned many others in its wake, but still outdoes others in innovating new business models. Its cloud business was another blockbuster, which used the IoT to offer a safe and secure space for companies to transact electronic messages. For a fee, of course. The IoT has spawned many new concepts and businesses – cloud computing, eCommerce, channel selling, web-based commerce, electronic payments systems, remote controls and access, and so on. In fact, a whole new world has opened up. What are the reasons why the IoT succeeded the way it has? 

For one, the infra was already in place. Years of work had led to the creation of a worldwide satellite communications system. This was augmented by the developments in telecom. Undersea cables, fibre optic cables, wireless transmission were all well developed by the time IoT came into town. IoT was designed to ride on all these media. The creators were often not those who operated IoT based services. While they were telecom companies, satellite companies etc., they were not the Googles, Apples, Metas, who used the infra to connect the earth at the speed of light. IoT promoters do not incur the infra cost, they merely use the available infra. They build on it, like the cloud servers. The data centres dotting the globe were all mostly built by telecom companies, which then were used by the IoT riders. 

Second, because of the volumes and the reach, the cost of usage was low. This was a unique situation, where someone created the infra, someone else created the use cases, and the whole of the earth participated. This unprecedented development led to new business models.

 

Third, the IoT industry gave a new meaning to the word ‘speed’. The story of startups and unicorns is largely a result of the IoT thinking. While HP was a pioneer in startups, starting in 1931, there were many others too, following the footsteps of HP. Apple, Microsoft, IBM are all ‘started in the garage’ stories, on shoestring budgets. But the real kickoff for modern day startups came after IoT, in the 1970’s and 1980’s. According to a study by the Kaufmann Foundation, USA, startups account for a significant portion of new job creation in the US. Between 1980 and 2015, nearly all net job creation in the US came from firms less than five years old. Between 2015 and 2023, in India, 102 unicorns were created. India ranks number 3 and 2 in the world and Asia in the 2024 rankings of unicorns from startups. 

Fourth, the development of IoT can be compared to that of electricity. When Edison invented electricity, it was not of much use. However, many others worked on it, and ‘socialised’ it, which then led to universal adoption of electricity as a bedrock of modern life. This ‘socialisation’ included the setting up of power plants, transmission lines, electric bulbs manufacturing, fans, motors and many such. The IoT, similarly, has been ‘socialised’, perhaps far more speedily than electricity. Millions of users, thousands of applications developers, have led to the ubiquitousness of the IoT. The UPI, a stellar application of the IoT, has put India on the world map of the country with the maximum number of transactions per day, and made a cashless economy a reality, to a good extent. 

Finally, IoT has been embraced by the manufacturing industry, with the advent of industry 4.0. It all began by a few automobile manufacturers in Germany who created an assembly line driven by Industry 4.0. It showcased how IoT and automation can improve productivity and reduce waste. These were made possible due to the usage of microprocessor-controlled devices embedded in the line, each talking to the other through the IoT, through inputs from censors. Censors formed the basis of collection and manipulation of data followed by actions triggered by the analysis of the inputs. Over time, development of algorithms to process the data and provide decisions based on rules, machine learning, feedback based continuous changes in the processing parameters (such as, speed, temperature, surface conditioning), were all possible due to the connectivity established by the IoT core. Connectivity was key, censors were the eyes and ears, algorithms partially/ fully replaced human actions, and feedback loops enabled continuous control on the inputs and outputs. 

An important application of IoT has been in the field of maintenance of equipment. While practices such as downtime maintenance, preventive maintenance, condition-based maintenance, life cycle maintenance, were all being practised to various degrees, the advent of IOT made the jobs much easier. Data gathering and storage in clouds, higher data processing speeds which could then handle big data, machine learning algorithms, all converged to make the process of maintenance a much more controlled and controllable job than in the past. 

Piecemeal data, varying quality of analysis, delayed attention to online problems, became a thing of the past. The features of the IoT that have been much appreciated in the manufacturing include: connectivity, big data analysis capability, cloud storage, speed of analysis, learning machines, algorithms for decision making. 

Another feature of IoT which the manufacturing industry adopted liberally was the linking together of the entire supply chain. In fact, in certain applications, the entire value chain – end to end – has been stitched together through IoT. The automobile industry leads in this field, due to the advances made in JIT (Just-In-Time) by Toyota. The JIT is unique to the auto industry, as the entire value chain has been designed and operated to get the best results. In India, Maruti practices this system. 

For high volume, highly diverse product mix output, the JIT, with connectivity at both the ends – the back-end supply chain coupled with the front end dispatch chain, with the manufacturing chain in the middle – is the ideal design. However, this design can be successfully operated for best results only if the JIT is operated to its optimum, which is not easy, as it demands co-ordination with various agencies of a high order. The application of IoT with the other paraphernalia can make the entire operation far easier to control. 

Overall, the IoT and Industry 4.0 have benefited from each other, with Industry 4.0 becoming an embedment in the IoT. IoT and the ‘riders on IoT’ have changed the world like never before, and, as Dr Govindarajan has observed in their book ‘Fusion Strategy’, in future, ‘products’ will not be merely ‘products’, but a bundle of ‘products and services’, due to the embedment of IoT. This is a new era, where each product is a combination of product and service, and hence, there is an urgent need of a new term for this new creature. My choice is ‘provice’, till a better name is found (?). 

R Jayaraman is the Head, Capstone Projects, at Bhavan's S P Jain Institute of Management & Research (SPJIMR). He has worked in several capacities, including Tata Steel, for over 30 years. He has authored over 60 papers in academic and techno economic journals in India and abroad. Jayaraman is a qualified and trained Malcolm Baldrige and EFQM Business Model Lead Assessor.