We define the Internet of Things as sensors and actuators connected by networks to computing systems. These systems can monitor or manage the health and actions of connected objects and machines. Connected sensors can also monitor the natural world, people, and animals. For the purposes of this research, we exclude systems in which all of the sensors’ primary purpose is to receive intentional human input, such as smartphone apps where data input comes primarily through a touchscreen, or other networked computer software where the sensors consist of the standard keyboard and mouse.
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We conducted this research to examine in detail how the Internet of Things can create value, and in the process we have uncovered novel findings about how that value can be captured by companies, people, and economies. Building on our earlier work, the McKinsey Global Institute, in collaboration with McKinsey’s Telecommunications, Media, and High Technology Practice and the McKinsey Business Technology Office, analyzed more than 150 IoT use cases across the global economy.
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Using detailed bottom-up economic modeling, we estimated the economic impact of these applications by the potential benefits they can generate, including productivity improvements, time savings, and improved asset utilization, as well as an approximate economic value for reduced disease, accidents, and deaths.
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These estimates of potential value are not equivalent to industry revenue or GDP, because they include value captured by customers and consumers. An important contribution of this research has been to demonstrate the importance of analyzing the applications of the Internet of Things in the context of settings—the physical environments in which these systems are deployed, such as homes, offices, and factories.
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A key insight from analyzing the benefits of IoT applications within settings is the critical contribution made by interoperability among IoT systems. On average, interoperability is necessary to create 40 percent of the potential value that can be generated by the Internet of Things in various settings.
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We also see that making IoT applications interoperable—linking a patient’s home health monitor to the hospital’s health informatics system, for example—is a complex systems design challenge that requires coordination on many levels (technology, capital investment cycles, organizational change, and so forth
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