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Report Home

<Previous Next>
  • 1. Executive summary
  • 2. General findings
    • 2.1 The state of the market
    • 2.2 The four phases of the Industrial Internet evolution
    • 2.3 Key near-term opportunities and benefits
    • 2.4 Major challenges and risks
  • 3. Convergence on the outcome economy
    • 3.1 From connected products to software-driven services
    • 3.2 The emergence of the outcome economy
    • 3.3 Delivering outcomes through connected ecosystems and platforms
  • 4. Shift towards an integrated digital and human workforce
    • 4.1 Enhancing productivity and work experience through augmentation
    • 4.2 Creating new jobs in hybrid industries
    • 4.3 Reskilling for digital industries
  • 5. Recommended actions for stakeholders
  • Appendix A: About the research
  • Appendix B: Glossary
  • Acknowledgments
Industrial Internet of Things Home Previous Next
  • Report Home
  • 1. Executive summary
  • 2. General findings
    • 2.1 The state of the market
    • 2.2 The four phases of the Industrial Internet evolution
    • 2.3 Key near-term opportunities and benefits
    • 2.4 Major challenges and risks
  • 3. Convergence on the outcome economy
    • 3.1 From connected products to software-driven services
    • 3.2 The emergence of the outcome economy
    • 3.3 Delivering outcomes through connected ecosystems and platforms
  • 4. Shift towards an integrated digital and human workforce
    • 4.1 Enhancing productivity and work experience through augmentation
    • 4.2 Creating new jobs in hybrid industries
    • 4.3 Reskilling for digital industries
  • 5. Recommended actions for stakeholders
  • Appendix A: About the research
  • Appendix B: Glossary
  • Acknowledgments

2. General findings:

2.4 Major challenges and risks

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Despite the great promise and new opportunities of the Industrial Internet, many factors could hinder future growth. Figure 3 shows our survey results on perceived adoption barriers. Not surprisingly, almost two-thirds of respondents agree with the widely-held view that security and interoperability are the two biggest hurdles. Other significant barriers cited include the lack of clearly defined return on investment (ROI) (53%), legacy equipment (38%) and technology immaturity (24%). In addition, survey respondents and workshop participants cite several other concerns and potential challenges based on their experiences, including:

  • Lack of vision and leadership
  • Lack of understanding of values among management or C-level executives
  • Lack of proven business models (e.g. outcome-based revenue sharing or profit sharing)
  • Rapid evolution of the technology causing companies to delay large investments
  • Requiring heavy upfront capital investment  
  • Requiring business process change   
  • Not enough awareness about the current state of technology
  • Inadequate infrastructure
  • Lack of application development tools
  • High cost of sensors.

Regarding risk, respondents single out vulnerabilities for cyberattacks as their most important concern, as more physical systems come online. As shown in Figure 4, 76% of respondents indicate that they believe the likelihood of such attacks is “very or extremely high.” A related but slightly different risk is privacy breaches of personal data, which are also ranked high (68%). Both are justified when one considers such impacts as attacking a power plant to deny electricity and the loss of public trust that could occur when any Industrial Internet-enabled system is compromised. A 2014 World Economic Forum report estimated $3 trillion in potential economic loss from cybersecurity issues by 2020. In the first half of 2014 alone, hackers accessed approximately 195 million identities from records associated with utilities, medical devices, transportation and more.15 Investments in countermeasures are increasing as a result. Gartner says more than 20% of enterprises will invest in security specifically for business initiatives using IoT devices by 2017.16

For many incumbent players, potential disruption to existing business models constitutes another significant risk, as noted by a vast majority of respondents (88%). The shift from products to services to outcomes will not only disrupt internal operations, but will impact how they go to market. Since access and control points are more open and fluid in a digital marketplace than in traditional markets, companies will face competition from a broader set of players, including digital pure plays founded on new models and platforms from their very inception. At the same time, companies will have the flexibility and opportunity to partner with many organizations across the ecosystem. In fact, such collaboration will be an imperative if companies want to meet the growing customer expectations around delivering results, i.e., it is difficult to see how one company can master the entire digital value chain. 

At a societal level, it is important to consider potential job displacement that will occur in some sectors due to increased automation. This process is similar to what happened in the communications industry when switchboard jobs were replaced by technology solutions. As intelligent machines become more widespread, more jobs will be impacted, even the ones long considered distinctively human. For example, with the current pace of technology improvement, self-driving cars may replace heavy truck drivers in the next 20 years.17 However, it is equally important to anticipate that many new and different types of jobs will be created – jobs that will require unique human attributes, such as creativity, critical thinking and collaboration. (See Section 4, “Shift towards an Integrated Digital and Human Workforce”, for more details.) 

For industry and government leaders, it is important to note that technology is constantly raising the bar for low-skilled jobs. As a result, the need for continuous skills upgrade is real. Actions are urgently needed to refocus attention on education, adapting the current educational systems and approaches to better prepare younger generations for the upcoming digital workplace.  

15
15 Cisco, 2014 IoT World Forum. http://www.iotwf.com.
16
16 Osborn, Charlie. “Future of the Enterprise: Heavy investment in Internet of Things Security”. ZDNet, Sept. 12, 2014. http://www.zdnet.com/article/future-of-the-enterprise-heavy-investment-in-internet-of-things-security.
17
17 Ito, Aki. “Your Job Taught to Machines Puts Half U.S. Work at Risk”. Bloomberg, March 12, 2014. http://www.bloomberg.com/news/2014-03-12/your-job-taught-to-machines-puts-half-u-s-work-at-risk.html.
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