Expert Answer:Kelley School of Business Case Memo: IoT The Inter

  

Solved by verified expert:Case Memo OverviewThe Internet of Things (IoT): Applications, investments, and challenges for enterprises. You will need to write a Case Memo for YOUR company using the Case Memo template provided in this course about the The Internet of Things (IoT): Applications, investments, and challenges for enterprises Case Study.Please write this ONE PAGE Case Memo as if you are writing this with modern technologies and solutions. In this Case Memo, your company is determining if it should deploy IoT monitoring solutions remote access to homes, monitoring commercial real estate, and monitoring automobile use.You will need to address:Will IoT investments in technology pay off? Why or why not?How will this expansion of IoT scale globally?Who are the external customers for this IoT project – please identify the potential users of these IoT solutions.What do you believe the requirements for the architecture to support your vision for IoT integration with hardware, software, and cloud technologies will be?Create a high-level two-year budget to support this rollout.These items should be detailed in an Exhibit(s) as well.Your recommendation should specifically highlight:What is the business value and benefits for this IoT project if you move forward?How can you leverage new businesses models and IoT technologies in your environment for a competitive advantage?Should you partner with existing infrastructure companies? Build your own? Why?How much will this project cost and when do you believe the company will see a return on investment?
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Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
BH 685
Business Horizons (2015) 58, 431—440
Available online at www.sciencedirect.com
ScienceDirect
www.elsevier.com/locate/bushor
The Internet of Things (IoT): Applications,
investments, and challenges for enterprises
In Lee a,*, Kyoochun Lee b
a
b
School of Computer Sciences, Western Illinois University, Stipes Hall 442F, Macomb, IL 61455-1390, U.S.A.
Olin Corporation, Clayton, MO, U.S.A.
KEYWORDS
Cloud computing;
Internet of Things;
Radio frequency
identification;
Real options;
Supply chain
management
Abstract The Internet of Things (IoT), also called the Internet of Everything or the
Industrial Internet, is a new technology paradigm envisioned as a global network of
machines and devices capable of interacting with each other. The IoT is recognized as
one of the most important areas of future technology and is gaining vast attention
from a wide range of industries. This article presents five IoT technologies that are
essential in the deployment of successful IoT-based products and services and
discusses three IoT categories for enterprise applications used to enhance customer
value. In addition, it examines the net present value method and the real option
approach widely used in the justification of technology projects and illustrates how
the real option approach can be applied for IoT investment. Finally, this article
discusses five technical and managerial challenges.
# 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
rights reserved.
1. The Internet of Things (IoT)
The Internet of Things (IoT), also called the Internet
of Everything or the Industrial Internet, is a new
technology paradigm envisioned as a global network
of machines and devices capable of interacting with
each other. The IoT is recognized as one of the most
important areas of future technology and is gaining
vast attention from a wide range of industries.
The true value of the IoT for enterprises can be
fully realized when connected devices are able to
communicate with each other and integrate with
* Corresponding author
E-mail addresses: i-lee@wiu.edu (I. Lee),
kyoochun@gmail.com (K. Lee)
vendor-managed inventory systems, customer support systems, business intelligence applications, and
business analytics.
Gartner (2014) forecasts that the IoT will reach
26 billion units by 2020, up from 0.9 billion in 2009,
and will impact the information available to supply
chain partners and how the supply chain operates.
From production line and warehousing to retail
delivery and store shelving, the IoT is transforming
business processes by providing more accurate and
real-time visibility into the flow of materials and
products. Firms will invest in the IoT to redesign
factory workflows, improve tracking of materials,
and optimize distribution costs. For example, both
John Deere and UPS are already using IoT-enabled
fleet tracking technologies to cut costs and improve
supply efficiency.
0007-6813/$ — see front matter # 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.bushor.2015.03.008
This document is authorized for use by Orzhen Rushanyan, from 2/22/2019 to 4/12/2019, in the course:
ISTM661.OL SP19 – Enterprise Architecture with Professor Demetrios Lazarikos (Laz), Pepperdine University.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
432
I. Lee, K. Lee
In addition to manufacturers’ adoption of the IoT,
various service industries are in the process of
adopting the IoT to increase revenue through enhanced services and become leaders in their markets. Disney’s MagicBand is a new wristband with
RFID chips that serves as a ticket and connects to
Disney’s data repository regarding park visitors.
Kroger’s new IoT-based system, Retail Site Intelligence, is one complete retail platform of video
analytics, wireless devices, POS devices, handheld
sensors, IP cameras, and video management software that was designed to help customers have a
better shopping experience by more easily finding
the products they want and saving time at checkout.
The adoption of this technology is rapidly gaining
momentum as technological, societal, and competitive pressures push firms to innovate and transform
themselves. As IoT technology advances and increasing numbers of firms adopt the technology, IoT
cost-benefit analysis will become a subject of great
interest. Because of the potential but uncertain
benefits and high investment costs of the IoT, firms
need to carefully assess every IoT-induced opportunity and challenge to ensure that their resources are
spent judiciously.
This article begins with a discussion of the five
essential IoT technologies used for the deployment
of successful IoT-based products and services and
identifies three IoT categories for enterprise applications. Then, it examines a net present value approach and a real option approach widely used in the
justification of technology projects and discusses
how real option valuation can be applied to IoT
investment. Finally, this article discusses five technical and managerial challenges: data management,
data mining, privacy, security, and chaos.
waves, a tag, and a reader. The tag can store more
data than traditional barcodes. The tag contains
data in the form of the Electronic Product Code
(EPC), a global RFID-based item identification system developed by the Auto-ID Center. Three types of
tags are used. Passive RFID tags rely on radio frequency energy transferred from the reader to the
tag to power the tag; they are not battery-powered.
Applications of these can be found in supply chains,
passports, electronic tolls, and item-level tracking.
Active RFID tags have their own battery supply and
can instigate communication with a reader. Active
tags can contain external sensors to monitor temperature, pressure, chemicals, and other conditions.
Active RFID tags are used in manufacturing, hospital
laboratories, and remote-sensing IT asset management. Semi-passive RFID tags use batteries to power
the microchip while communicating by drawing power from the reader. Active and semi-passive RFID tags
cost more than passive tags.
2.2. Wireless sensor networks (WSN)
3. middleware;
Wireless sensor networks (WSN) consist of spatially
distributed autonomous sensor-equipped devices to
monitor physical or environmental conditions and can
cooperate with RFID systems to better track the
status of things such as their location, temperature,
and movements (Atzori, Iera, & Morabito, 2010). WSN
allow different network topologies and multihop
communication. Recent technological advances in
low-power integrated circuits and wireless communications have made available efficient, low-cost,
low-power miniature devices for use in WSN applications (Gubbi, Buyya, Marusic, & Palaniswami, 2013).
WSN have primarily been used in cold chain
logistics that employ thermal and refrigerated packaging methods to transport temperature-sensitive
products (Hsueh & Chang, 2010; White & Cheong,
2012). WSN are also used for maintenance and
tracking systems. For example, General Electric
deploys sensors in its jet engines, turbines, and
wind farms. By analyzing data in real time, GE saves
time and money associated with preventive maintenance. Likewise, American Airlines uses sensors
capable of capturing 30 terabytes of data per flight
for services such as preventive maintenance.
4. cloud computing; and
2.3. Middleware
5. IoT application software.
Middleware is a software layer interposed between
software applications to make it easier for software
developers to perform communication and input/
output. Its feature of hiding the details of different
technologies is fundamental to free IoT developers
from software services that are not directly relevant
2. Essential IoT technologies
Five IoT technologies are widely used for the deployment of successful IoT-based products and services:
1. radio frequency identification (RFID);
2. wireless sensor networks (WSN);
2.1. Radio frequency identification (RFID)
Radio frequency identification (RFID) allows automatic identification and data capture using radio
This document is authorized for use by Orzhen Rushanyan, from 2/22/2019 to 4/12/2019, in the course:
ISTM661.OL SP19 – Enterprise Architecture with Professor Demetrios Lazarikos (Laz), Pepperdine University.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
The Internet of Things (IoT): Applications, investments, and challenges for enterprises
to the specific IoT application. Middleware gained
popularity in the 1980s due to its major role in
simplifying the integration of legacy technologies
into new ones. It also facilitated the development of
new services in the distributed computing environment. A complex distributed infrastructure of the
IoT with numerous heterogeneous devices requires
simplifying the development of new applications
and services, so the use of middleware is an ideal
fit with IoT application development. For example,
Global Sensor Networks (GSN) is an open source
sensor middleware platform enabling the development and deployment of sensor services with almost
zero programming effort. Most middleware architectures for the IoT follow a service-oriented approach in order to support an unknown and dynamic
network topology.
2.4. Cloud computing
Cloud computing is a model for on-demand access to
a shared pool of configurable resources (e.g., computers, networks, servers, storage, applications,
services, software) that can be provisioned as Infrastructure as a Service (IaaS) or Software as a
Service (SaaS). One of the most important outcomes
of the IoT is an enormous amount of data generated
from devices connected to the Internet (Gubbi
et al., 2013). Many IoT applications require massive
data storage, huge processing speed to enable realtime decision making, and high-speed broadband
networks to stream data, audio, or video. Cloud
computing provides an ideal back-end solution for
handling huge data streams and processing them for
the unprecedented number of IoT devices and humans in real time.
2.5. IoT applications
The IoT facilitates the development of myriad
industry-oriented and user-specific IoT applications.
Whereas devices and networks provide physical
connectivity, IoT applications enable device-todevice and human-to-device interactions in a reliable and robust manner. IoT applications on devices
need to ensure that data/messages have been received and acted upon properly in a timely manner.
For example, transportation and logistics applications monitor the status of transported goods such
as fruits, fresh-cut produce, meat, and dairy products. During transportation, the conservation status
(e.g., temperature, humidity, shock) is monitored
constantly and appropriate actions are taken automatically to avoid spoilage when the connection is
out of range. For example, FedEx uses SenseAware
to keep tabs on the temperature, location, and
433
other vital signs of a package, including when it is
opened and whether it was tampered with along the
way.
While device-to-device applications do not necessarily require data visualization, more and more
human-centered IoT applications provide visualization to present information to end users in an intuitive and easy-to-understand way and to allow
interaction with the environment. It is important
for IoT applications to be built with intelligence so
devices can monitor the environment, identify problems, communicate with each other, and potentially
resolve problems without the need for human
intervention.
3. IoT applications to enhance
customer value
Despite growing popularity of the IoT, few studies
have focused on categorization of the IoT for enterprises (e.g., Chui, Löffler, & Roberts, 2010). Based
on the technology trends and literature review,
this article identifies three IoT categories for enterprise applications: (1) monitoring and control, (2)
big data and business analytics, and (3) information
sharing and collaboration. Understanding how these
three IoT categories can enhance the customer
value of an organization is a prerequisite to successful IoT adoption. This article next discusses the
three IoT categories, along with an illustration of
real-world IoT applications developed to enhance
customer value.
3.1. Monitoring and control
Monitoring and control systems collect data on equipment performance, energy usage, and environmental
conditions, and allow managers and automated
controllers to constantly track performance in real
time anywhere, anytime. Advanced monitoring and
control technologies such as smart grid and smart
metering reveal operational patterns, spot areas of
potential improvement, or predict future outcomes
and optimize operations, leading to lower costs and
higher productivity.
The smart home is known to be at the forefront of
innovation regarding IoT monitoring and control
systems. The primary value propositions are family
and property protection and energy savings. For
example, the Verizon Home Monitoring and Control
network uses a wireless communications technology
designed specifically for remote control applications in home automation. IoT-enabled home appliances and devices can be monitored and controlled
outside the user’s home through a computer, tablet,
or smartphone. The Verizon Home Monitoring and
This document is authorized for use by Orzhen Rushanyan, from 2/22/2019 to 4/12/2019, in the course:
ISTM661.OL SP19 – Enterprise Architecture with Professor Demetrios Lazarikos (Laz), Pepperdine University.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
434
I. Lee, K. Lee
Control network allows users to adjust the lights,
control the climate, manage the security system,
receive automatic event notifications, and even
lock and unlock doors.
The IoT is also used to monitor and control various
components in cars. The primary customer value
propositions are drivers’ personalized experience
and satisfaction. Ford and Intel teamed up in 2014
to explore new opportunities to personalize the user
experience using facial recognition software and a
mobile phone app. The joint research project,
called Mobile Interior Imaging, incorporates perceptual computing technology to offer improved
privacy controls and to identify different drivers
and automatically adjust features based on an individual’s preferences. The in-car experience is
then personalized further by displaying information
specific to the driver, such as his/her calendar, music,
and contacts. The customer value propositions
are appropriately integrated into the connected
car environment to provide another revenue stream
for Ford.
3.2. Big data and business analytics
IoT devices and machines with embedded sensors
and actuators generate enormous amounts of data
and transmit it to business intelligence and analytics
tools for humans to make decisions. These data are
used to discover and resolve business issues–—such
as changes in customer behaviors and market
conditions–—to increase customer satisfaction, and
to provide value-added services to customers. Business analytics tools may be embedded into IoT
devices, such as wearable health monitoring sensors, so that real-time decision making can take
place at the source of data.
The IoT and advances in business analytics now
make it possible to capture vast amounts of individual
health data. The IoT enables healthcare service
providers to personalize patient care. New IoT technologies provide data about a patient’s everyday
behaviors and health, creating opportunities for care
providers to influence patients far more frequently
and effectively. For example, Humana’s Healthsense
eNeighbor1 remote monitoring system reports
changes in the member’s normal patterns of movement and activity to Humana care managers–—via inhome sensors that measure routine daily activities
with data analytics–—to help trigger interventions and
help prevent adverse events from escalating to emergency room visits or hospital stays.
IoT-based big data are also transforming the
healthcare product industry. For example, Proctor
& Gamble developed the Oral-B Pro 5000 interactive
electric toothbrush to provide users with a smarter,
more personalized oral care routine. The interactive
electric toothbrush records brushing habits with mobile technology while giving mouth-care tips alongside news headlines. This innovation provides users
with unprecedented control over their oral care.
Tests of the interactive electric toothbrush have
shown that when connected, brushing time increases
from less than 60 seconds with a manual toothbrush
to 2 minutes and 16 seconds with an electric toothbrush, surpassing the 2-minute session recommended
by dental professionals.
3.3. Information sharing and collaboration
Information sharing and collaboration in the IoT can
occur between people, between people and things,
and between things. Sensing a predefined event
is usually the first step for information sharing
and collaboration. In the supply chain area, information sharing and collaboration enhance situational awareness and avoid information delay and
distortion. For example, if sensors are placed
throughout a retail store where refrigeration is necessary, alerts can be sent to the store manager’s
mobile device whenever the refrigerators malfunction. The manager can then check the employee
status report to see who is available and send
task assignments to that employee via his or her
IoT-enabled mobile device.
To enhance information sharing and collaboration
with shoppers, Macy’s is deploying shopkick’s shopBeacon technology, an enhanced mobile locationbased technology that uses ultrasound Bluetooth
Low Energy (BLE). ShopBeacon provides shopkick
app users with personalized department-level
deals, discounts, recommendations, and rewards.
As shoppers enter Macy’s, shopBeacon reminds
those shopkick app users who have opted in. This
enhancement in Macy’s information sharing with
shoppers allows for increased consumer engagement and promotional and marketing relevancy that
lead to higher customer satisfaction and increase
revenues. In September 2014, following a pilot test
of the application, Macy’s decided to roll out shopBeacon in all of its 4,000 U.S. locations. Other major
retailers such as Target, American Eagle Outfitters,
and JCPenney also partnered with shopkick and
launched shopBeacon in 2014. Due to competitive
pressure, there is expected to be a rapid adoption of
shopBeacon at other national retailers, too.
4. Evolution of the foundational IoT
technologies
Various types of IoT applications have emerged, and
the willingness of enterprises to utilize them is
This document is authorized for use by Orzhen Rushanyan, from 2/22/2019 to 4/12/2019, in the course:
ISTM661.OL SP19 – Enterprise Architecture with Professor Demetrios Lazarikos (Laz), Pepperdine University.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
The Internet of Things (IoT): Applications, investments, and challenges for enterprises
growing rapidly. According to Bradley, Barbier, and
Handler (2013), the IoTwill generate $14.4 trillion in
value; the combination of increased revenues and
lower costs will migrate among companies …
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