Where is the value potential of the Internet of Things?

The Internet of Things has the potential to fundamentally shift the way we interact with our surroundings. The ability to monitor and manage objects in the physical world electronically makes it possible to bring data-driven decision making to new realms of human activity—to optimize the performance of systems and processes, save time for people and businesses, and improve quality of life (see Box E1, “Defining the Internet of Things”).

From monitoring machines on the factory floor to tracking the progress of ships at sea, sensors can help companies get far more out of their physical assets—improving the performance of machines, extending their lives, and learning how they could be redesigned to do even more. With wearable devices and portable monitors, the Internet of Things has the potential to dramatically improve health outcomes, particularly in the treatment of chronic diseases such as diabetes that now take an enormous human and economic toll.

A great deal has been written about the Internet of Things in the past five years, including by McKinsey, which began publishing its research on the emerging technology in 2010.1 IoTenabled developments such as self-driving cars have captured the popular imagination, and with fitness bands to monitor physical activity and Internet-connected devices to manage HVAC systems, appliances, entertainment, and security systems, consumers are getting a glimpse of what the IoT-enabled future may bring.

Manufacturers, oil and gas companies, and other businesses have already begun to see the initial payoff from IoT technologies in their operations.

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And technology suppliers are ramping up IoT businesses and creating strategies to help customers design, implement, and operate complex systems—and working to fill the gap between the ability to collect data from the physical world and the capacity to capture and analyze it in a timely way

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