In the business world, IoT technologies are enabling rapid advancements in the fields of automation and analytics, which is lowering production costs and making new products possible. According to recent research, European executives appear to be embracing IoT solutions at a faster rate than their competitors across the ocean.
What is the Internet of Things?
Mantras like “The world is becoming more connected” get repeated so often that they’ve become trite, yet many people don’t realize just how connected their lives are to the internet. Physical devices are increasingly being equipped with electronics that allow them to collect and exchange data. Cameras, cars, refrigerators and even pets often have some degree of digital connectivity. Of course, this phenomenon isn’t new; the term “the internet of things” was coined by Kevin Ashton way back in 1999. However, thanks to declining costs and innovations in the tech world, entrepreneurs are starting to envision how the IoT will shape the future.
The IoT in Europe vs The IoT in America
In 2017, Bain & Company conducted a survey of 500 executives in the US and Europe, which found that 27 percent of the European respondents have already begun implementing IoT use cases for analytical purposes. Only 18 percent of the US respondents could say the same. Furthermore, 25 percent of European executives plan on integrating multiple IoT solutions with their IT systems by 2020 compared to just 16 percent of US executives.
There’s also a difference in how executives in the two regions think about the future of IoT. For example, two-thirds of the European respondents who cited cost reduction as a major benefit of IoT solutions also expressed enthusiasm about how IoT technologies and advanced analytics could improve the quality of their products.
Americans were less optimistic in that regard. Only one-third of the American respondents said that their companies are currently looking into how IoT solutions could help improve their products; however, the American executives foresaw greater cost-reducing potential compared to the Europeans. About 75 percent of executives from the US expect IoT solutions to reduce waste and input costs, but only 35 percent of the Europeans emphasized those particular advantages. In their analysis, the authors of the Bain study claim that the Europeans’ excitement about improving their products suggests that they have a clearer vision of the full potential of the IoT. Since Europe is ahead of the US in implementing IoT technologies, they can see further into the future.
The Benefits of IoT: Quality Up, Cost Down
How can the IoT simultaneously drive down production costs and improve quality? Aside from the declining costs of electronics in general, manufacturers can now combine sensors with analytic tools that monitor their production process at every step. Such real-time feedback can direct optimization efforts and allows for making adjustments on the fly.
IoT solutions even allow manufacturers to keep collecting data about how their products perform in the field. Executives can monitor how customers engage with their products, which can inform decisions about which features to add or remove in the future. Of course, this trend has raised concerns about customer privacy, so companies are trying to figure out how to best assure buyers that their products are secure.
Obstacles to Implementing IoT Technology
Overall, European executives expressed more concern about the security challenges of implementing IoT solutions. Only about one-quarter of American executives cited security as a concern while nearly 40 percent of the Europeans said that security vulnerabilities are a major hurdle to adopting IoT technologies. This fact is unsurprising since cyber crime is a greater threat in Europe, especially in the wake of the massive malware attack last May that crippled computers in 74 countries spanning from the UK to Russia.
Europeans were also more worried about regulatory barriers to IoT adoption. Just 8 percent of American executives expressed concern over compliance obstacles compared to 22 percent of their European counterparts. While those Europeans are currently frustrated, having a greater awareness of compliance issues can serve as an advantage because it might drive innovation. In this regard, European companies will ultimately be setting compliance standards and forging a path for other regions to follow in their footsteps.
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Investments in IoT Solutions Across Europe
Given that European businesses are leading the way for the internet of things, it’s no surprise that they are spending more money on IoT solutions. Some European automotive executives allocate a quarter of their IT budgets to IoT solutions. Outside of manufacturing, IoT investments are also up in the retail and construction industries, so the world will see more vertical solutions coming from Europe than anywhere else in the coming years.
Speaking of investments, Siemens has already put more than €8 billion into IoT-related acquisitions. The majority of those funds have gone to its American subsidiary, electronic design software developer Mentor Graphics, to create software that will monitor and improve the manufacturing process for their other products.
Similarly, Schneider spent €8 billion on an energy efficiency platform called EcoStruxure to manage its smart grid distribution networks. ABB has also invested millions of euros into IoT solutions aimed at optimizing their operations.
The Future of IoT: Europe vs US
Given all of the current obstacles to implementing IoT solutions, it’s natural for executives to adopt a “wait and see” approach. However, as European companies learn to navigate these challenges, they become freer to imagine ways that IoT technology can practically improve the lives of their customers. This competitive edge may also help them court bigger investors, so American executives may be looking to Europe for inspiration for years to come.
About Jason Hope
Jason Hope is an entrepreneur and investor who focuses on the fields of technology and philanthropy. As a futurist, he specializes in analyzing markets to systematically predict how technological developments will impact the world for generations to come.
Now residing in Scottsdale, Hope is an Arizona native with a degree in finance and an MBA from Arizona State University’s W.P. Carey School of Business. In addition to his philanthropic initiatives, Jason Hope is also a respected commentator on the intersection of business and politics in the US.