This is a guest post for Internet of Business written by Wael Elrifai, director of enterprise solutions at business intelligence and data analytics software company Pentaho. Open source at its core, Pentaho was acquired by Hitachi Data Systems in 2015, but maintains its original brand, focus and wider technology proposition.
In 2014, Michael E Porter and James E Heppelmann set out their vision for IoT’s five-stage evolution in a Harvard Business Review article. Their thinking culminated in a ‘system of systems’ model, in which diverse systems are orchestrated and optimized in the form of wider constructs, such as smart factories, smart homes and smart cities.
In the example given by Porter and Heppelmann in their article, a traditional tractor moves from stage one to two, to become a smart tractor. From there, it moves to a third stage, to become a smart, connected tractor. In stage four, it’s part of a product system, connected with related products such as tillers, planters and combine harvesters. In the fifth and final stage, it’s part of a ‘system of systems’, integrating with a wide range of other smart farm devices and sensors, as well as related apps and information services.
This five-stage model is now generally accepted and it inspired me, along with co-authors Don DeLoach and Emil Berthelsen, to collaborate on a new book, The Future of IoT: Leveraging the Shift to a Data Centric World.
Live projects, real customer experiences
In the book, we draw on our experience with live projects, in order to position what we see happening on the ground today firmly within the context of Porter and Heppelmann’s five-stage model. The book also offers practical advice to enterprise IT and data leaders seeking to prepare their architectures for IoT’s future and gain as much value as possible from implementations.
My experience working with customers indicates that the most advanced are currently between stage three (smart connected product) and stage four (product system). In extended supply chains today, manufacturers own the data.
Some monetize the data, by granting limited access to it or selling it as a service in the form of embedded analytics further downstream (closer to the customer) in the supply chain. This is a well-established model that we can expect to remain in place for some time.
Fulfilling the ‘system of systems’ model
We risk, however, reaching a plateau at stage four because the leap to stage five is huge – both in terms of the transformation required and the potential payoff. In order to arrive at and fully benefit from the system of systems model, organizations will need to change their architectures and approaches to data ownership.
The big disruption involves transitioning from ‘closed loop’ systems, where manufacturers own all the data, to open data systems where businesses closer to the customer own and manage data.
This change is why Porter and Heppelmann posed the question in their HBR article: “How does the company manage ownership and access rights to its product data?” as a key strategic decision to be made when seeking competitive advantage from IoT. In short, the challenge becomes evolving from a company that used IoT-enabled products, to becoming an IoT-enabled organisation. This difference means everything in the context of gaining maximum leverage from data.
Introducing the ‘first receiver’
Our answer to that question is what we call a ‘first receiver’ – a reference architecture designed to underpin the system of systems model. A key player in this is the first receiver organization; this is the customer-facing organization (a factory, a hospital, or a retail store, for example) that acts as the host for the system of systems, and, as the name suggests, receives all sensor data first
This first receiver organization’s role extends to storing incoming data and managing the processes of cleansing, enriching and then distributing it to other related organisations (subscribers) on an ‘as needed’ basis.
This includes propagating the data to internal users locally and remotely within the organization, as well as to third-party partners or even regulatory bodies who also need this data. And so that these systems can be properly monitored and maintained, data must also be fed back to the various IoT devices involved (for example, heating systems).
To support this role, the first receiver organization would install an ‘edge device’ inside or behind one or more servers, or virtually within a distributed cloud architecture. These devices would serve to ingest all the sensor data from the various IoT subsystems, filter the important signals from the ‘noise’, trigger alerts in response to exceptional events and persist (permanently store) the data.
Below, we see how a first receiver architecture might look like from the perspective of a food retailer:
In our book, we explore the full role of the first receiver edge device and possible configurations in considerably more detail. We fully acknowledge that, in realizing the system of systems model, technology architecture and governance is only one piece of the jigsaw. The profound transformation driven by IoT and data-driven architectures will also require new ways of working, new skills and resources, new types of contractual arrangements and significant cultural change up and down the supply chain.
Fortunately, despite many people’s fear of change and the unknown, many are beginning to realise the stakes involved in not exploring and understanding IoT. In a July 2016 survey of over 420 US enterprise decision-makers, carried out by Machina Research (now owned by Gartner), 38 percent of respondents said their organizations were already actively using IoT technologies and 43 percent were planning to deploy IoT within the next two years.
Preparing now for the IoT future
Organizations that will gain the greatest and most sustainable competitive advantage from stage five IoT are those that start preparing now for its future. To help IoT executives ‘cross the chasm’ from stage four (a product system) to stage five (a system of systems), we have developed a checklist to outline the various people, process and technology initiatives involved.
We believe the benefits that IoT offers to organizations and society at large massively outweigh the risks, and that ultimately, people will have the will to overcome the challenges to make this system of systems vision become reality.