Internet of Philosophy: Enterprise

Last week I started in on a series of articles around three implementations of the Internet of Things: Municipal, Enterprise and Consumer.  I covered off on the Municipal side of things within that opening article and this week I want to dive into what Enterprise or Commercial IoT is all about.

Enterprise Internet of Things

The Basics

When the government is installing an IoT system, they are doing it under the auspices of better serving their constituency.  Business installations are different.  They are all about maximizing return, whether that is for the business owners or for the shareholders.  While there is certainly a cost saving side to governmental IoT, that's all that there is for businesses.  If it won't increase profits, why do it?

Profits, then: the difference between expenditures and earnings.  IoT can help the businesses increase profits in two ways: lower costs per unit produced and lower liability.


Lowering costs - This is a big one for larger companies, especially manufacturers.  The biggest cost to most companies is their payroll.  If they can find ways to reduce it without reducing their production volume (whether that be a hard good, customers served or items processed), then that's really good.  For the company.  For the shareholders if they can be patient enough for the cost of the new system to pay for itself.  Potentially good for the consumer of that company's output as it may reduce the cost of whatever it is they are selling.  Not so good for the employees laid off.

Payroll reduction via IoT installation can take a few different forms.  If there are a bunch of sensors and switches installed in an assembly line, then one employee may be able to monitor a much larger part of the system.  For retail, one of the biggest IoT innovations has been self-checkout as discussed in this article.  This has allowed a higher volume of customers through the checkout lanes with fewer employees.  In some retailers like Home Depot, often only the self checkout lanes are open during slower times.

Lowering Liability - This is a bit different, but it is the reason that many companies, especially those with employees driving around outside of an office, have adopted GPS tracking on their vehicles and other mobile assets.  It's why there are card scanners for entering various rooms within a building (sometimes even the bathroom) and definitely why there are login codes for cash registers and other order processing systems.  Now everyone knows who is where and doing what and there can't be any doubt about what was going on.  From a legal standpoint, this is great as it is easy to identify blame and properly assign it.  Whether the employee was actually using their code or had it stolen or whatever, they are responsible for anything that happens under that login or with that tagged asset.  Ultimately, this is also a cost saving measure as it lowers potential lawsuits and helps eliminate careless employees faster.  Again, this is great for the company and the share holders, less good for the employees who now have one more thing to be worried about.

Pros

• Lowers cost of manufacture or unit price or whatever it is that a particular company does to earn money.
• Lowers potential error rate by removing the 'human factor'.
• Lowers company liability by more accurately tracking assets and employees to ensure that they are doing what they say they are doing.

Cons

• Fewer people employed may be good for the company, but may not be good for the larger economy.  People without paychecks can't buy things that companies with low payrolls are trying to sell.
• High initial cost that takes long periods of time to pay for itself or get depreciated through tax write-offs.
• Pace of technology means that the new system may get replaced before it has paid for itself because a new system is even better or has been adopted as an industry standard.

Future Guidance

If I were a CTO looking in it an IoT system for my company, there is no doubt that my guiding principle would be 'how will this increase our returns?'  There's really no other way to look at it in a competitive landscape (which all business landscapes are at some level).

The trick here is to not only ask that question, but a few others as well.

• How will this affect my customers?  Is there a way to integrate them into this system at some level?  This can be integrating your shipping with their receiving, your accounts receivable with their accounts payable or something like self-checkout.  This question will also raise the issue of industry standards and how to work with them.
• When will I have to replace this system?  Can it evolve?  There is this image in the corporate mind that, as you automate out your workforce, then you will only ever have to pay this one time fixed charge and that's it.  That's simply not true.  Eventually, maintaining it will be more expensive than replacing it.  When is that?
• What is the value of the employee that is being replaced?  Is there something that that human being can do that increases shareholder value beyond the tasks performed?  What is it?  Is there another way to gain that value or am I going to lose it when I automate that position?  I freely admit that this is a plea not to fire everyone and replace them with robots.  Some, yes.  All, probably not.