How to hold IIoT to its promise

The value of the IIoT (some estimates project it will add trillions of dollars to the global economy by 2030) derives from its aggregate effects in boosting productivity, driving the emergence of new markets and encouraging innovation. Already in the industrial sphere, sensor networks monitor capital goods and logistics, which increases cost-saving efficiencies throughout the business process. In agriculture, similar networks deployed across farmlands optimize the use of water and other resources and contribute to more plentiful harvests. And in the consumer sphere, the IIoT is creating entirely new markets worth billions, such as in digital health and “connected lifestyle” products.

However, the vast potential of the IIoT is by no means guaranteed.

Historically, some countries have been better able than others to capitalize on the economic potential of new technology. Take the introduction of electrification in the industrialized world at the turn of the 20th century. Although many countries were at similar levels of technological development, the United States became the world leader in electrification because it embedded the new technology across the wider economy and changed production and organizational structures around it.

In other words, the technological diffusion of electricity in different countries was not the same as its economic diffusion. In the United States, an entrepreneurial culture, coupled with a favorable business climate, drove the rapid expansion of electrification.

While technology diffusion describes a relatively limited process of technology adoption, economic diffusion carries broader implications. It requires technology diffusion, but suggests growth, innovation and financial reward spread across multiple sectors and industries. If countries do not recognize this difference and fail to create the conditions that enable economic diffusion, they run the risk of losing out on the economic potential of the IIoT.

Think of this economic diffusion of technology as a multilayered process comprised of four stages, with each stage built on the foundations laid in previous eras.

Technology emergence. Initially, the technology tends to be embryonic and available only to a limited number of users in certain niche markets or industries. Government intervention is often critical in helping the technology transition to the next stage of economic diffusion. It was crucial to the early development of the Internet, which would become the foundation for the IIoT.

Innovation and scaling. As the technology evolves, a process of standards setting (either by government or the market) begins. Other industries start to innovate around the core technology, generating value from it. We can see this dynamic with the IIoT as technology companies race to be IIoT leaders and connected products move into the consumer sphere. This process is sped up by the fact that much of the IIoT’s infrastructure piggybacks on existing telecommunications infrastructure networks. Thus, consumers, businesses and innovators can take advantage of the IIoT at relatively low cost.

Organizational and social transformation. Today, many of the world’s advanced economies are on the cusp of this stage, where the technology—in this case, the IIoT—truly begins to transform society. Again, the example of electrification is instructive: Once economies of scale were achieved, electricity became an integral feature of production, while new electric-powered consumer goods, from the vacuum cleaner to the radio, changed the way individuals lived their daily lives. A similar transformation is likely to accompany the growth of the IIoT

Self-sustaining innovation and development cycle. The new technology becomes so thoroughly diffused throughout an economy at this stage that everyday life can barely be imagined without it. Innovators exploit the technology’s ubiquity to develop advanced applications. Electricity led to electronics. Electronics led to modern computing. Modern computing led to today’s Internet and the IIoT.