Evolution of the Internet The first phase – about 20 years ago – was the connectivity phase – just getting connected to a very limited online world was miracle enough.A lot of people in this room most likely helped create the next wave – the Networked Economy, which was characterized by the development of things like ecommerce and digitally connected supply chainImmersive Experiences came next – dominated by things like Social Media, collaboration and widespread mobility on a variety of devices.We are now entering the Internet of Everything, which builds on each of these previous phases – connecting people, data, process and things to create even greater value. As “everything” comes online, organizations are realizing the benefit of this increased connectedness through operational efficiency and improved customer experiences.
We define the Value at Stake as the potential bottom-line value (higher revenues and lower costs) that can be created or will migrate among companies and industries based on their ability to harness IoE over the next decade (2013-2022)$14.4 Trillion is the Value at Stake for the Internet of Everything$9.5 trillion (or 66%) from industry-specific use cases such as Smart grid, Connected commercial vehicles, etc$4.9 trillion (or 34%) from cross-industry use cases such as future of work (telecommuting), travel avoidance, etc.IoE has the potential to grow global corporate profits by ~21% in aggregate by 2022 Value at Stake includes: Shifts of benefits between competing firms in an industryShifts of benefits between different industriesNew-to-the-world revenue growth from innovationCost savings from more efficient processesAllowances for implementation costsValue at Stake does not include: Extent of losses at firms that don’t transform Consumer or government value creation – this is a private sector analysisSocial benefits Value estimates for reduced risk of operations The Five Drivers that Fuel the Value at StakeAsset UtilizationSelling General & Administrative Expenses (SG&A) and Cost of Goods Sold (COGS) reduction from improved business process executionImproved capital efficiencyEmployee ProductivityImproved labor efficiencyFewer or more productive man-hours Supply Chain/Logistics EfficiencyImprove process efficiencyReduce waste in supply chainImproved Customer ExperienceImproved customer lifetime valueAddl. Market share (more customers)InnovationImprove Research Development & Engineering (RD&E) speed, reduce Time to Market (TTM) Create new business models and new sources of revenue
Which Types of Connections Matter Most?While machine-to-machine connections (45%) are increasingly important, person-to-person and person-to-machine (55%) still represent the majority of the Value at Stake in the IoE Economy.
By geography, the amount of Value at Stake is well distributed across the major geographies: United States at $4.6 trillion, Western and Eastern Europe at $4.32 trillion, China at $1.73 trillion, Japan at $0.72 trillion, Canada at $0.43 trillion and the rest of the world at $$2.6 trillion. From an industry perspective, four out of 18 industries make up more than half the total Value at Stake. The amount includes manufacturing at 27 percent, retail trade at 11 percent, information services at 9 percent, and finance and insurance, also at 9 percent. The remaining 14 industries range between 7 percent and 1 percent. Use cases that have the most relevance for Cisco. Smart grid: Electrical grid using network connections—from production to customers—to better understand user behavior and improve the reliability, economics, and sustainability of the production and distribution of electricity.Smart buildings: Intelligent and converged IP network of electronic devices that monitors and controls facilities services, including mechanical, electronics, HVAC, and lighting systems in a building to achieve greater energy efficiencies and cost savings.Connected healthcare and patient monitoring: Better-connected device and data-driven patient management, resulting in improved healthcare effectiveness and efficiencies.Smart factories: Manufacturing factories where adding connectivity in processes and applications increases automation, reduces inventories with real-time inventory supplies, and cuts production and supply-chain costs.Connected education: Better application of technologies helps scale teachers, faculty, and educational content; increase new ways of learning; and transform the educational model—giving students curriculum flexibility to learn at their own pace, anywhere / anytime / using any device.Connected commercial vehicles (ground): Commercial fleet ground vehicles using an integrated platform of control systems to automate tasks such as navigation, path optimization, and logistics improvements.Connected marketing and advertising: Broad IT and social applications for marketing and advertising transform the way companies can engage with customers, analyze their behavior, and optimize the impact of their interactions. Examples include location-based services, viral marketing, and mobile advertising. Enablers include Big Data analytics and cloud.Connected gaming and entertainment: Includes SP and software vendor revenues and cash flows from all applications of online gaming and entertainment; does NOT include non-revenue-generating gaming activities (such as subsidized advertising).
We found that business leaders in emerging countries clearly expect to leverage IoE to their advantage. According to the research, these executives are the most bullish on capturing value (on a scale of 1-10).