Internet of Things
"Alexa, turn the living room lights off."
"Alexa, turn up the heater."
"Alexa, play 'Space Oddity'."
The Internet of Things isn’t coming – it’s already here.
Anything that can be digitised, will be digitised
Futurist Kevin Kelly tells the story of the first industrial revolution featuring the electrification of everything. Where once products and processes were built or produced by muscle power, the introduction of electricity meant these same products and processes could now be improved through electrification.
Today, just as the 20th century sought to electrify everything, the Internet of Things (IoT) will potentially connect everything – physical, virtual, human, animal, inanimate, and natural. Anything that can have a sensor embedded can produce data about behaviour and share that data on the internet.
By 2020 we are likely to have 50 billion different devices connected to the internet, possibly more.
Today your watch and phone – tomorrow the road. Soon, everything will have a sensor that connects to the Internet.
What is the Internet of Things?
Kevin Ashton, who lays claim to coining the term ‘Internet of Things’ in 1999, suggested in 2009 that the formative years of Internet information was mostly comprised of inputs from humans themselves. His vision of the Internet of Things (IoT) was letting computers track and gather data independently of humans, by embedding data gatherers in – well – pretty much everything.
Today, humans are no longer the only creators. Rather, walking sticks and doorknobs, fridges and windows and thousands, millions, billions of other newly cognified everyday items and gadgets are creating and transmitting data.
Unlike much of the human-generated data, though, this data has specific uses. It’s things ‘talking’ to each other; things triggering actions without human intervention; things automating previously manual processes. THIS is the Internet of Things.
Noun. cognification (uncountable)
The process of making objects smarter and smarter by connecting, integrating sensors and building software/artificial intelligence into them.
Why do we need an Internet of Things?
The IoT means improved automation, monitoring, measurement, insight, as well as new business opportunities and better product and service value.
- Devices communicating with each other can automate mundane processes. Using a service like IFTTT (IF This, Then That), we can trigger actions such as automatically saving Gmail attachments to OneDrive, or backing up photos to a Dropbox.
- Embedding sensors monitoring wear and tear in machinery means we can not only prevent downtime for machinery; we can predict it.
- A device’s data anonymously sent back to the manufacturer can help to improve product innovation (or reveal new product opportunities).
- New business models using ‘X as a Service’, where X is a product - potentially given away or leased for no upfront cost - with the user charged only for reported use (for example, a fridge that tracks door opens; a tennis racket that reports swings; a walking stick that tracks distance).
The four IoT markets
Someone you know is using a Fitbit. Or a Jawbone. Or an Apple Watch. These so-called ‘wearables’ are automatically tracking steps, activity, calories, and more. And then storing that information for review later. It’s not the user who’s entering the data; it’s the machine.
But there’s more to IoT than the usual devices we hear about.
IoT is split into four markets:
Logistics, healthcare, insurance – pretty
much every client you
Vehicle production, mining, agriculture and the like
Electricity grids, public transport, roads – the Internet-connected city
The real value of IoT comes from the networking of multiple devices across various platforms. This comes about when vendors think about the outcome a user wants to achieve.
For example, you have a shoe store as a client. Their desired outcome may be to always have the necessary stock required to make sales, but not too much stock. How that’s achieved isn’t necessarily important; more that it’s achieved at a good price and in a timely and effective manner.
IoT comes into play by:
- Monitoring physical stock levels – through POS software recording sales
- Monitoring shoe popularity - sensors on the boxes or storage shelves that track how often a box is removed for a customer to try the shoes. Similarly, shoes on display with sensors that record how often they’re handled.
- Tracking store traffic – not just counting the number of customers through the door, but where those customers spend the most time in-store
- Analysing store and sales data from local and overseas locations
- Leveraging low-cost logistics – booking freight options that report discount rates for half-full runs
Prepare to fail
At this relatively early stage of the Internet of Things, there will be many failed projects. The idea might be clever, but the value not immediately apparent. As IoT evangelist Bruce Sinclair says: “If an IoT product does not create enough incremental value, then no one is going to pay more for the product.”
In other words, if a consumer cannot see the value in paying 10x the price of a normal toaster for the ability to track the progress of your toast on your phone, chances are that IoT toaster will fail to sell.
The IoT Extensibility Framework
A device that provides only the consumer with data.
In other words, the information from the device is not
shared with other devices or back to the manufacturer. An
example is a video security system that allows the user to
monitor events remotely. This technology is passive in-so-
much-as it doesn’t provide value outside of what it records.
Whereas level 1 devices work passively (i.e. not providing
value outside of what they record), level 2 devices provide
very basic adjustments and improvements. Examples include
fitness devices that upload data to a portal. Basic rules are
them applied to provide insights for the user (one’s heartrate,
pace, and average number of steps, for example).
The previous two levels tend to work on a 1-1 model – the
device helps the user. Level 3 IoT sees network benefits
from multiple devices or sensors. Wind farm turbines
making constant, minute changes to blade angles as the
wind changes; a Tesla car ‘learns’ from the experiences of
Level 4 takes the concept of networking learning of a
single type of device and applies it to multiple different
devices and networks. In his book ‘The Amazon Way on
IoT’, Rossman offers the example of a firefighting team
using data from multiple sources to fight a fire, such as
firefighting equipment and the structure itself.
What are the risks?
The number one concern right now is the amount of data gathered about consumers and sent back to businesses. More than likely, this concern will slowly recede or fail to slow IoT advancement. The widespread acceptance and adoption of social media applications such as Facebook – which exist primarily to gather consumer data – show that humans are, in general, ok with sharing data so long as they feel they’re getting value from the relationship.
Security concerns are a prime concern, with relatively simple data encryption a potential vulnerability for businesses. Video surveillance systems are potential entry points for attackers.
Gartner predicts a black market selling fake data to enable criminal activity.
While not so much a risk, information overload may become an issue. Misunderstanding data or simply being unable to make sense of it could impact business owners unable to analyse data correctly or easily.
Optimising the accounting and bookkeeping practice
For the past 100 years or more, firms have focussed on optimising processes to maximise returns and efficiency. The introduction of cloud computing was the last great opportunity to find new efficiencies.
Soon, with sensors attached to every aspect of a firm’s workflow, a new age of efficiency will be upon us.
As an example, the efficiency gains from IoT-enabled calendars could have a huge impact on time management:
- You have a client meeting at midday. Your client’s calendar has been receiving information from their phone’s GPS, stating that traffic is busier than usual. In fact, the GPS has communicated with the road itself, which has reported an incident ahead - slowing the journey even further.
- Your client’s calendar has communicated with your calendar, suggesting moving your meeting to the precise time that the client is expected to arrive – bringing forward your scheduled lunch time.
- Meanwhile, your calendar has communicated with the coffee machine and microwave to start preparing your lunch.
- Instead of wasting time waiting for your client’s arrival, or starting a new project only to be interrupted by your client’s late arrival, you’ve optimised your schedule and lost no time at all.
Essentially, IoT brings better business planning and resource allocation, and will also help to optimize operational processes, minimize expenditures, and mitigate issues quicker.
The constant flow of real-time data will have a dramatic impact on transaction processing and advisory work. Not only will transaction data flow in real time - information gathered from non-sales-related IoT devices and sensors will provide the advisor with the ability to move from reactive advice based on historical data, to proactive and even prescriptive advice.
In other words, the advisor can use live data analysis to predict future outcomes and make smart business recommendations. This is the connected practice in action.
The client, then, has peace of mind knowing that any financial discrepancies and opportunities are monitored and acted upon by their trusted advisor.
A faster, better, continuous audit
Just as the blockchain may have immense effects on audit procedures, so too will the IoT. Real time data from multiple locations will provide deeper and more timely audit insights.
The live flow of information means much of the audit process can be automated and continuous, with accountants monitoring for unexpected variances.
The Analytics of Things
With so much information available, there’s a need to be able to analyse it – to put it to good use. This is possibly the biggest opportunity for accountants and bookkeepers to consider going forward. There will come a time when the zettabytes of existing Internet data - and right now it’s barely monitored, let alone used - will be reined in, controlled, processed, and put to productive and valuable use. Accountants and bookkeepers stand as the professionals closest to businesses that could make sense and add value from this literal wealth of information.
Accounting and bookkeeping practices will need to consider bringing in data analysts to help provide these data insights to their clients. Or risk losing the opportunity to a new service model outside of the industry.
A final word
Unlike some of the technology discussed in the Radar Report, the Internet of Things is here now and fast becoming mainstream. The ability to record, collect and act on data from previously ‘silent’ devices and objects is a momentous forward shift in technological progress.
With retail and the cognification of just about everything, the customer relationship no longer ends at the cash register – it’s where it begins. For many products, value will continue to be provided – and even improved – long after the product has left the store. That’s a seismic shift in customer lifetime value.
Similar benefits will come for commercial, industrial and infrastructure IoT. It’s to expand the accounting practice into data and information technology and analytics. Your clients need it.