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December 2016 (15:4) | MIS Quarterly Executive 279

The Internet of Things Has the Potential to Reshape Businesses 1

In 1932, Jay Nash wrote:

“These mechanical slaves jump to our aid. As we step into a room, at the touch of a button, a dozen light our way. Another slave sits twenty-four hours a day at our thermostat, regulating the heat of our home. Another sits night and day at our automatic refrigerator. They start our car, run our motors, shine our shoes and curl our hair.”2

Eight decades later, the world Nash foresaw is now at our doorsteps. He envisaged mechanical “slaves,” but today the extraordinary progress of silicon-based electronics, driven inexorably by Moore’s Law, is resulting in Nash’s imagined assistants becoming ubiquitous in the form of “robots.” Increasingly, these devices are described as the “Internet of things” (IoT).

These “robots” tap into the digital data streams (DDSs)3 that are all around us to safeguard our homes, monitor our energy consumption and order products for us. With just your voice,

1 Federico Pigni is the accepting senior editor for this article. 2 Nash, J. B. Spectatoritis, Sears Publishing Company, Inc. 1932, p. 265. 3 Piccoli, G. and Pigni, F. “Harvesting External Data: The Potential of Digital Data Streams,” MIS Quarterly Executive, (12:1), 2013, pp. 143-154; Pigni, F., Piccoli, G. and Watson, R. “Digital Data Streams: Creating Value from the Real-Time Flow of Big Data,” California Management Review (58:3), 2016.

Enhancing Customer Service through the Internet of Things and Digital Data Streams Organizations are facing a new era of low-cost, small electronic devices with sensing, communications and computing capabilities, commonly known as the “Internet of Things” (IoT). Changes driven by the IoT will likely be far more profound than those brought about by previous IT eras. In particular, the digital data streams (DDSs) gen- erated by the widespread adoption of IoT devices will create opportunities to trans- form the business landscape. This article describes how organizations can apply the Customer Service Life Cycle (CSLC) framework to harness the IoT to enhance customer experiences.1

Blake Ives University of Houston

(U.S.)

Biagio Palese Louisiana State University

(U.S.)

Joaquin A. Rodriguez Louisiana State University

(U.S.)

Enhancing Customer Service through the Internet of Things and Digital Data Streams

your personal assistant reserves an Uber taxi, locates your kids or reads personalized news reports to you. They monitor our bodies when we exercise, audit our prescription drug usage4 and report heart abnormalities to our cardiologists.5

But “Smart homes and other connected products won’t just be aimed at home life. They'll also have a major impact on business.”6 Already, enhanced devices economically water and fertilize farmers’ ields, monitor the condition of industrial

machinery and automatically suggest the best timing for the maintenance of elevators; they autonomously drive huge mining vehicles, steer tiny drones and are beginning to drive motor vehicles.

Observers warn that “Like any company that blissfully ignored the Internet at the turn of the century, the ones that dismiss the Internet of Things risk getting left behind.”7 One of the most consistent indings of the information systems literature is that the increasing computational power and connectivity of IT-enabled devices and products shapes, and then continually reshapes, customers’ service expectations. Those who witnessed, or participated in, the introduction and evolution of the Internet and the World Wide Web recognize the parallels to the roll- out of the IoT. Business organizations are again challenged to understand how to evolve their value propositions to remain attractive to their customers as rapid technological evolution raises customers’ expectations.

Uber is a compelling example of how the previous technology era, mobile IT, transformed industries. Uber is now the world’s largest private taxi company, with a valuation of $62.5 billion.8 Traditional taxi companies and unions strenuously resist Uber’s expansion, but use

4 Furchgott, R. “It’s Your Lipitor on Line 2,” Gadgetwise, April 1, 2009, available at http://gadgetwise.blogs.nytimes.com/2009/04/01/ hey-your-medicince-called/#more-2947. 5 Sweibel, S. and Trelfa, M. “The Use of Mobile Cardiac Telemetry to Improve Diagnostic Accuracy and Enable More Effi cient Patient Care,” US Cardiology (9:1), Spring 2012, pp. 43-46. 6 Newman, J. “Right Now, the Internet of Things is Like the Inter- net of the 1990s,” Fast Company, March 3, 2015, available at http:// www.fastcompany.com/3044375/sector-forecasting/the-future-of-the- internet-of-things-is-like-the-internet-of-the-1990s. 7 Ibid. 8 Isaac, M. and Picker, L. “Uber Valuation Put at $62.5 Billion After a New Investment Round,” The New York Times, December 3, 2015, available ay http://www.nytimes.com/2015/12/04/busi- ness/dealbook/uber-nears-investment-at-a-62-5-billion-valuation. html?_r=0.

of its taxis continues to grow, even as similar ride-sharing services enter the market. Reeling from market share lost to this new entrant, taxi companies are beginning to leverage technology to compete with emerging ride-sharing services. For many, it will be too late; their dominant position has already been undermined. But, as we enter the new IoT era, the emergence of self- driving vehicles is forcing Uber to reconsider its own, driver-centered, business model.

Before the mobile IT era, in the 1980s, the Internet similarly transformed businesses. A good example is travel agencies, where, in the 1990s, almost overnight, a plethora of online travel agents, including Travelocity, Expedia, Priceline and Orbitz, aggressively entered the market. The Internet severely disrupted the travel agency sector, with the number of agencies in the U.S. today being half of what it was in the mid-1990s9

and employment in those agencies having fallen even more steeply.10

There is clear evidence, across these and other industries, that major IT shifts in the past have endangered and sometimes destroyed an incumbent’s value proposition. Coupling that evidence with the premise that the IoT portends a shift at least as disruptive as the commercial Internet and mobile IT, then CIOs and IS professionals must prepare to answer two key questions: (1) How can my irm improve its value creation effort as more and more physical objects incorporate computational capabilities and (inter)connectivity? and (2) How can we leverage the emerging IoT capabilities to improve customer value and customer service? While the outcomes will vary by company and industry, we help structure the answers to these questions by drawing insights from analyzing the initiatives of 191 IoT pioneers. (The Appendix lists the initiatives by industry sector.)

Our research focuses on creating value by concentrating on the customer side of the value equation. Thus, we speci ically examined the IoT in customer-facing activities, including customer service and the design of products and

9 Olenski, S. “Are OTAs Really Killing Brick and Mortar Travel Agencies?,” Forbes, April 27, 2015, available at http://www.forbes. com/sites/steveolenski/2015/04/27/are-otas-really-killing-brick-and- mortar-travel-agencies/#5c3f. 10 DePillis, L. “Travel agents: We do exist!,” The Washington Post, August 30, 2013, available at https://www.washingtonpost.com/news/ wonk/wp/2013/08/30/travel-agents-we-do-exist/.

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services. The IoT can, and will, create operational ef iciencies, frictionless supply chains and many other internal bene its, but those are beyond the scope of our research. If, as Web pioneer and venture capitalist Marc Andresseen has observed, “software is eating the world,”11 CIOs must lead the way in creating value at the “front-of-the- house”—i.e., through IT-enabled customer value creation.

The Internet of Things and Digital Data Streaming

The term IoT refers to “the network of physical objects—devices, vehicles, buildings and other items embedded with electronics, software, sensors and network connectivity—that enables these objects to collect and exchange data.”12 The promise of the IoT is substantial. Gartner placed it at the peak of its technologies Hype Cycle for 2014 and 2015, claiming that the IoT had “the potential to transform industries and the way we live and work.” Gartner predicts that 6.4 billion IoT connected devices, constituting a $235 billion industry, will exist worldwide by the end of 2016, up 30% from 2015.13 But to harness the IoT to business strategy, CIOs must focus not on chips and protocols, but rather on the business value that the IoT enables. The creation of such value does not depend on knowledge of the technology adopted, but rather on the stream of data generated in real time by its usage. Previous work has identi ied ive archetypes of value creation through DDSs: DDS Generation, DDS Aggregation, Service, Ef iciency and Analytics.14 We contend that the DDS stemming from the widespread adoption of the IoT can produce value in each of these areas.

For instance, the core of Uber’s value proposition hinges on real-time geolocation of drivers and passengers, which generates new service value. By exploiting the location sensors in smartphones to match up ride demands and offers, Uber solves the pain point vexing the

11 Andreessen, M. Why Software Is Eating The World, August 20, 2011, available at http://www.wsj.com/articles/SB1000142405311190 3480904576512250915629460. 12 https://www.thefsforum.co.uk/knowledge-centre/event/the- internet-of-things/. 13 “Gartner Says 6.4 Billion Connected “Things” Will Be in Use in 2016, Up 30 Percent From 2015," Gartner, Inc., November 10, 2015, available at http://www.gartner.com/newsroom/id/3165317. 14 Piccoli, G. and Pigni, F., op. cit., 2013.

taxi business: customer service. While many commentators focus on price comparisons between Uber and conventional taxis, we argue that, thanks to real-time data streaming, Uber has vastly improved the rider’s experience. Before (virtually) hailing a ride the customer can estimate the fare and get information about the driver. Most importantly, after requesting a pickup, the passenger can monitor the arrival of the car with convenience and ef iciency improvements that traditional taxi companies, who have been stagnant for decades, simply cannot match.

IoT Elements The IoT is irmly rooted in tangible objects

with their “mind” in the cloud. While the objects are physical and resemble common everyday things, they are augmented by software capabilities. In their simplest form, IoT applications are based on a three-layer architecture, where the objects can communicate with an application layer through a network infrastructure. More importantly, to deliver their value proposition IoT devices need four capabilities deployed in concert: identifying, sensing, communicating and computing.15

Identifying Capability The creation of services based on connected

devices requires each one to be uniquely identi iable. A device can be identi ied through an ID or name, or an address, like an IPv6 address. Electronic product codes (EPCs) and ubiquitous codes (uCodes) can uniquely identify physical objects. EPCs have been broadly used in supply chain and manufacturing, leveraging the popularity and cost ef iciency of radio frequency identi ication (RFID).

Sensing Capability Sensing relates to monitoring the internal

states of a device as well as the context in which the device is embedded. Sensors are essential components of the IoT. Today’s newest smartphones include 15 to 20 sensors, with two or three more added with each new generation

15 Al-Fuqaha, A., Guizani, M., Mohammadi, M., Aledhari, M. and Ayyash, M. “Internet of Things: A Survey on Enabling Technolo- gies, Protocols, and Applications,” IEEE Communications Surveys & Tutorials (17:4), 2015, pp. 2347-2376.

Enhancing Customer Service through the Internet of Things and Digital Data Streams

of phones. The economies of scale accompanying the inclusion of digital sensors in hundreds of millions of phones, coupled with Moore’s Law, has driven the cost of sensors down precipitously, thus fueling their use in special-purpose devices. A single accelerometer chip, for instance, can be purchased for less than a dollar—and for much less if bought in volumes. Sensors are at the heart of the DDS generation trend because they now enable previously ephemeral events to be digitally captured and represented.16

Communicating Capability Communicating is the ability to exchange

information between devices. This capability requires connectivity and interoperability. The different communication protocols suitable for IoT purposes vary in relation to their range, power consumption, data transmission speed and coverage. Wi-Fi communicates through radio waves that reach approximately 100m. On the other hand, Bluetooth and IEEE 802.15.4 share data at far shorter distances to reduce power consumption. Based on GSM/UMTS network technologies, the LTE-Advanced mobile communication standard offers ubiquitous coverage, low latencies and superior bandwidth. Other commonly used communication standards are shared with the RFID and near ield communication (NFC) domains.

The design of the communication technology enables and constrains its uses. Consider the passive tag attached to the ear of a cow; lack of transmission power restricts communication to times when the tag passes near a reader— perhaps one attached to a cattle feeding station. Or a carton of exotic lowers equipped with a sensor might report back an accumulated history of its temperature and humidity as it passes near a reader at various stages in the distribution channel. For powered sensors, but where battery life is problematic, sensors might communicate via low-power transmitters to nearby sensors rather than to a central server. This type of peer- to-peer networking approach, for instance, has been suggested as a possible mechanism when monitoring for forest ires.

16 Piccoli, G. and Watson, R. T. “Profi t from Customer Data by Identifying Strategic Opportunities and Adopting the 'Born Digital Approach,'” MIS Quarterly Executive (7:3), 2008, pp. 113-122.

Similarly, the Tile fob, a small device that harnesses network connectivity, can be attached to a keychain or another valued object. If the object is mislaid or lost, it can usually be found, via its attached Tile, locally with Bluetooth; it can also be tracked globally via a Tile user’s phone app connected to a wireless network. By leveraging the network of customers, Tile (and Trackr, its main competitor) provides real-time location of lost items without having to include a GPS transceiver in the device—an addition that is not practicable in terms of both cost and battery life.

Computing Capability Computing represents the capability to

process instructions and “actuate” an object connected to the IoT. In 50 years, Moore’s Law has driven the migration of computing from mainframes, to minicomputers, to personal computers, to mobile devices and, now, in this ifth generation, to tiny, intelligent, programmable

gadgets. With each new era, the cost of computing power declined by a factor of ten or more, while the potential user base increased at a similar exponential rate. More importantly, the cloud has changed the paradigm of computation, offering on-demand access to a pool of resources previously only accessible via considerable capital expenditures and expensive IT expertise.

Amazon, for example, is exploiting the potential of cloud computing through Amazon Web Services (AWS), which provide individuals, startups and enterprises with on-demand access to the elements of an IT infrastructure. Other large IT providers, from Microsoft to Google, have followed Amazon’s pioneering effort in the cloud; today the cloud is the new standard for computing infrastructure. This is a particularly relevant trend for the IoT because it would not be feasible for everyday objects to have signi icant local computing capability. For example, Amazon Echo, the increasingly ubiquitous natural language assistant, was designed on the assumption that its hardware would never need to be upgraded because all its capabilities would be driven by software running in the cloud.

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Using the Customer Service Life Cycle to Identify IoT Business Opportunities

In 1978, IBM, in describing an internal planning methodology called Business System Planning,17 identi ied a resource life cycle (requirements, acquisition, stewardship, retirement) and a set of organizational resources (money, personnel, material, facilities) that “a business consumes or uses in meeting its goals.” Information processing is required at the intersection of each life cycle stage and resource. For instance, acquiring new personnel might require a process for recruiting and perhaps another for transferring employees within a irm. Similarly, the retirement of facilities requires a process for disposing of equipment, while proper stewardship of material requires a system of inventory control.

In 1984, Ives and Learmonth refocused IBM’s resource life cycle from internal resources onto the products or services a irm provides to its customers.18 They called their modi ied approach the Customer Resource Life Cycle (CRLC). This model helped businesses to address the following questions: How does your customer learn that they require your product (requirements)? How do they obtain it (acquisition)? How do they use it (stewardship)? How do they recycle it (retirement)? Again, information processing is needed at each intersection of a resource and a life cycle stage, and for each intersection, a irm might use information systems to provide better customer service while differentiating its product or service offering.

To better capture the model’s customer orientation, it was later renamed the Customer Service Life Cycle (CSLC).19 Since then, the CSLC framework has helped managers identify how the Internet and IT can impact their irm’s relationships with its customers, improve

17 “Information Systems Planning Guide,” International Business Machines Corporation, 1978, available at http://bitsavers.trailing- edge.com/pdf/ibm/generalInfo/GE20-0527-2_Information_Systems_ Planning_Guide_Oct78.pdf. 18 Ives, B. and Learmonth, G. “The Information System as a Competitive Weapon,” Communications of the ACM, (27:12), 1984, pp. 1193-1201. 19 Piccoli, G., Spalding, B. R. and Ives, B. “The Customer Service Life Cycle: A Framework for Internet Use in Support of Customer Service,” Cornell Hotel and Restaurant Administration Quarterly (42:3), 2001, pp. 38-45.

customer service and provide a competitive advantage. The CSLC’s four main phases were renamed as requirements, acquisition, ownership and retirement. Each phase is subdivided into stages that capture the elements of the irm- customer interaction that characterize each stage (see Figure 1).

The CSLC has been used in information systems research as a framework to understand customer service and strategic differentiation. However, its primary value is in guiding managers in envisioning new initiatives by providing examples of how they can use advanced IS at each stage both to enhance the service offered and to create value. Using a slightly modi ied version of the CSLC20, below we describe and illustrate with examples new opportunities that open up as organizations deploy IoT-enabled devices to enhance their products and services. We also demonstrate how the IoT is changing the customer experience even as it raises service expectations. Managers, attracted by the tempting growth and dimensions of the IoT market, are encouraged to consider how they might exploit IoT innovations to enhance customer service at one or more of the CSLC stages.

Phase 1: Requirements In the irst phase of the CSLC, the potential

customer identi ies new product and service needs. Attributes and characteristics of that offering are then speci ied according to customers’ preferences.

1. Establish Requirements Stage. The cycle starts when a customer establishes the need for a product or a service. Sometimes the customer is already aware of the need; sometimes a supplier or service provider can help a customer discover new needs. Examples are:

● Carrefour’s Beacon Initiative. French retailer Carrefour installed 600 Onyx Beacon devices in 28 hypermarkets in Romania to allow customers to receive customized discounts, or to shop based on personalized maps on their phone or tablet computers attached to their shopping carts. While offering other advantages such as ef icient routing through the store, a key value proposition is discovery. Customers entering a

20 Ibid.

Enhancing Customer Service through the Internet of Things and Digital Data Streams

department receive ad hoc promotions based on items already in their shopping cart. A customer purchasing spaghetti sauce might, for instance, receive a coupon for, and directions to, parmesan cheese or pasta. More generally, IoT initiatives at the requirements stage can stimulate customers’ needs by suggesting a variety of products and services located nearby or perhaps reminding them of an unmet requirement.

● CropX. CropX is an ag-analytics21 company that aims to reduce the amount of water required to grow crops. By combining the data from moisture sensors placed in the ield with topographic data, the service automatically ensures that water requirements are satis ied in an ef icient manner.

2. Speci ication Stage. After customers recognize the need for a product or service,

21 Ag-analytics, or agricultural analytics, refers to the use of advanced statistical methods and data analysis techniques in the agri- cultural industry. Ag-analytics solutions aim at increasing crop yields.

they must specify the exact model, components or features they require. IoT devices enable unprecedented levels of customizability and lexibility of physical products. Interestingly,

customization is not con ined to the product selection stage: IoT products can be recon igured as many times as needed even after the customer has taken possession. Examples are:

● Quitbit Lighter. This smart cigarette lighter helps customers to quit smoking. Using the associated con iguration app on their phones, smokers set parameters in the lighter, such as the number of lighting events per day or the time between lightings. A timer reveals the time left to the next cigarette and, once that time has expired, reactivates the lighting functionality. The Quitbit is a physical lighter, but with functionality that can be speci ied by the user. Smokers customize the lighter to enforce a quitting plan by specifying limits to the amount and frequency of daily cigarette consumption.

Figure 1: Customer Service Life Cycle Phases and Their Stages

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● Sleep Number. Sleep Number’s smart beds are equipped with sensors, activators and communication capabilities that, when combined with the SleepIQ app, enable tracking and analysis of customers’ sleep patterns. Using the app, customers can analyze their sleeping habits and change the speci ications and shape of their beds to produce a full night’s rest.

Phase 2: Acquisition The customer now knows the details of the

desired product. In the acquisition phase, they must decide where to buy it, and how to order and pay for it; after that, they will take possession and test its functionality.

3. Source-Selection Stage. Customers must identify the source from which they can acquire the product or service. IoT solutions can facilitate this process by providing novel ways to interact with the environment and software applications. Examples are:

● Amazon Echo. Echo, released in late 2014, uses an array of directional microphones, a quality speaker and a cloud-based natural language processing engine to interact with customers. People speak their commands and Echo responds. A primary use of Echo is for selecting news or music; Echo can play music from services like Pandora, Amazon Music and Spotify, and read news from multiple newspapers, magazines and blogs. Customers simply select a source and ask Echo to play or read it.

● Points.22 Points is a “smart sign” system that displays information about sights, ongoing events and activities around a city. It has an integrated menu that changes throughout the day (e.g., locations of breakfast restaurants in the morning). Points simpli ies source selection for customers. For example, tourists who are new to town can more easily ind a place for lunch or, hours later use the same sign, repositioned and relabeled, to ind some night life.

4. Ordering Stage. Having identi ied a provider, the customer must place the order. Mail

22 For a demonstration of Points, see https://pointssign.com/.

order, introduced in the 1800s, was followed in the next century by orders executed via telephone, the Internet and, more recently, mobile devices. IoT solutions introduce a further range of possibilities for ordering a product or service. Examples are:

● Flic. Like Amazon’s Dash button, Flic is a wireless, programmable button, but one that can trigger up to three con igurable actions. Its users can program three different functionalities: single click, double click or press and hold. Ordering is the most common and straightforward use of Flic. For example, customers can summon an Uber taxi by a single click or order a pizza delivery with a double click.

● Brita’s smart water pitcher. This device tracks the amount of water that passes through the water ilter and monitors ilter conditions. As necessary, the water

pitcher connects through Wi-Fi to the Amazon Dash Replenishment service to automatically order replacement ilters. Ordering is seamless and customers don’t need to worry about checking ilter status.

5. Authorization and Payment Stage. IoT devices can dramatically enhance the purchasing process by making it quicker and easier for customers to acquire products or services. The greatest potential, though, is for a smart physical object that the customer could carry easily, or is using anyway, that can seamlessly take care of authorization and payment. Examples are:

● Disney Magic Band. Magic Band is a rubber wristband with an RFID tag. Visitors to Disney theme parks can access their hotel rooms, skip lines to attractions or make payments by passing by or tapping the band on receivers. Once con igured with a customer’s credit card details, the band enables purchases in Disney stores, restaurants and hotels. The band also enhances Disney World’s “magical” experience as guests move seamlessly between attractions without being distracted by the need to pay or authorize payments.

● Avis e-Toll. This service, offered by the U.S. subsidiary of the global car rental company, takes advantage of the electronic

Enhancing Customer Service through the Internet of Things and Digital Data Streams

toll collection infrastructure available on most American toll roads. Avis cars are equipped with a transponder that wirelessly communicates with toll booths in the regions included in the program (e.g., EZ Tag in Texas or Sun-Pass in Florida). When a customer opts-in to the service, Avis uses the credit card on ile at the time of the rental to seamlessly authorize and pay for the charges incurred by its customers—drivers don’t need to sign up with the toll authority.

6. Acquisition Stage. In this stage, customers take possession of the product or service and begin to use it. IoT solutions can be used to ease the access to the product or service or to improve the customer’s experience. Examples are:

● Poppy. Poppy is a smart pet feeder. Customers can locally, or remotely, set feeding schedules for their domestic pets. Sensors measure the pet’s food quantity and dispense it based on a schedule and provide noti ication when the food is inished or unexpectedly becomes unavailable.

● Autolib. Autolib, a car sharing company located in Paris, has a leet of over 3,000 electric cars distributed throughout the city. Using a smartphone app, customers can identify and reserve a nearby vehicle or just walk up to an available car and use their RFID-enabled badge to drive it away. Autolib has drastically reduced the lag time associated with taking acquisition of a rental car.

7. Testing and Acceptance Stage. Once the product has been acquired, customers want to ensure that it works according to speci ications. IoT devices can revolutionize the food industry, and logistics in general, because out-of-spec conditions can be identi ied and enforced prior to delivery. Examples are:

● CargoSense. This service equips shipping containers with a set of sensors measuring temperature, light, tilt, humidity, shock and atmospheric pressure. A CargoSense- enabled container allows clients to test and verify whether the shipment is meeting requirements while still in the supply chain. This is particularly

valuable for sensitive goods, such as pharmaceuticals, wines or perishable food. The customer is alerted in real-time if the goods have encountered adverse conditions.

● See Your Box. This company offers a device called SYB that includes sensors measuring temperature, vibration/ acceleration, light, sound, CO2 and location, and can be placed in any package used for shipping or holding goods. While similar to CargoSense in functionality, it operates at a higher level of resolution. SYB allows any individual shipping any product using any shipping package to identify logistics issues within the supply chain.

Phase 3: Ownership Having taken ownership of the product,

the customer must integrate it with existing resources, monitor its use, modify its characteristics when conditions change and repair it if it malfunctions.

8. Integration Stage. Products and services that customers acquire usually must be integrated into their existing inventory of resources. IoT solutions that aim to positively impact this phase need to facilitate the integration of new devices or services with customers’ existing ones. Examples are:

● Zuli Smartplug. This product is one of many emerging smart home IoT devices. It sits between a regular electrical outlet and household devices such as lights and appliances, seemingly turning traditional electronic devices into smart ones. From anywhere in the world, customers can set a schedule for turning devices on, changing the brightness of lights and enabling lights on/off when people are in/out of the room.

● Saks Shoe Inventory. This RFID tagging system dramatically transformed the management of the shoe inventory at Saks Fifth Avenue store (and its other stores). It’s harder to sell a customer a shoe if the desired pair is in backroom inventory rather than on a store shelf. With 3,000 pairs of shoes in its 15,000 square foot warehouse and 5,000 new pairs arriving

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weekly, ensuring that store shelves re lect the available inventory is a big challenge. Through use of this IoT system, stores can better integrate arriving, backroom and showroom inventories, with big payoffs in customer value. Stock-outs were reduced by 50% while revenues climbed by between 2% and 7% depending on the category.

9. Usage-Monitoring Stage. Customers need to ensure that resources remain acceptable while being used or during the time they receive services. The most visible implementation of the IoT is “sensorization”—i.e., including sensors in physical products. Thus opportunities to create value during the monitoring stage abound. Examples are:

● AdhereTech Smart Bottle. This pill bottle has a pressure sensor that enables it to know how many pills it contains at any point in time. After being con igured with a patient’s protocol, the smart bottle can monitor adherence and, thanks to its connectivity (3G and LTE), send reminders to the patient and possibly alerts to the doctor. The primary value proposition of AdhereTech Smart Bottle is its ability to monitor adherence to a customer’s pharmaceutical protocol.

● Nest Learning Thermostat. This smart device allows customers to reduce energy consumption. It automatically learns customers’ habits and preferences, while monitoring the temperature and cost of energy. In collaboration with Con Edison in New York City (and other American energy providers), Nest launched the Rush Hour Rewards initiative. The Nest thermostat monitors for alerts from participating utilities, which in an effort to avert outages and usage spikes, rewards customers who lower consumption during spikes. Instead of keeping an exact temperature as traditional thermostats do, the Nest thermostat attempts to optimally lower the temperature before the incentivized time slots while reducing energy use during times of high demand. Leveraging its superior monitoring capability, Nest

strives to maximize customers’ comfort while reducing their energy bills.

10. Upgrading Stage. One of the problems customers face during the ownership phase is the need to upgrade the product or service when it becomes obsolete or as environmental conditions change. The connectivity and self-monitoring capabilities of IoT devices make this phase one of the most appropriate for value creation. Examples are:

● Tesla cars. Tesla vehicles are equipped with all-inclusive 3G connectivity that enables over-the-air software updates. Like computers, Tesla cars can be upgraded without dealer intervention. Performance enhancements, like the sporty “ludicrous” mode, increased range on a single charge or autopilot navigation, can be downloaded from home any time after acquiring a Tesla car.

● Amazon Echo. This product is designed to continuously add new capabilities and is thus less likely to become obsolete. It uses high-end microphones and speakers, but its software architecture is cloud based and open, making the device in initely upgradable. The Amazon Skill Kit (ASK) and Alexa Voice Services (AVS) enable any developer interested in creating new Echo capabilities (a.k.a. skills) to do so.

11. Maintain Stage. During this stage, the supplier provides maintenance or repair services for its goods or services. IoT-enabled devices are often manufactured with an eye to ongoing maintenance, where products can self-heal or provide preventive maintenance alerts. Examples are:

● GE Brilliant Manufacturing Software. This IoT solution is able to increase ef iciency and optimize industrial operations. It requires the installation of sensors in locomotives, wind turbines, aircraft engines and the adoption of the Brilliant Manufacturing Software Suite. The software, coupled with an online virtual twin for every major piece of GE industrial equipment delivered, lets GE offer, among other services, preventive maintenance to its clients to stop equipment from failing and disrupting activities. The IoT

Enhancing Customer Service through the Internet of Things and Digital Data Streams

has allowed GE’s industrial equipment business to evolve from selling “big iron” (e.g., a jet engine or a medical scanner) to providing guaranteed services (e.g., an aircraft take-off or a medical scan).

● Tetra Pak. Tetra Pak manufactures and installs industrial food packaging machinery and the consumables used in the machines (i.e., proprietary packaging material). Tetra Pak machines are equipped with sensors that continuously stream data for instant analysis, thus facilitating preventive maintenance and fast maintenance when failures do occur. For example, by analyzing data from milk carton illing machines, Tetra Pak can determined the state of deterioration of the blades that cut the packaging material to form individual containers. The IoT- enabled machines alert customers when blades are dulling, thus avoiding spills and costly work stoppages.

Phase 4: Retirement In the last phase of the CSLC, customers must

decide if they will need to replenish, replace, recycle or dispose of the product. There may also be an opportunity to account for the cost and expenses derived from its usage.

12. Transfer or Disposal Stage. Once there is no longer a need for the product or service, customers will eventually transfer, resell, return or dispose of it. As with the acquisition stage, IoT-enabled products and services offer great potential to streamline this stage and reduce customer frustration. Examples are:

● Car2Go. This car-sharing rental service is a subsidiary of global car manufacturer Daimler AG, which has operations in European and North American cities. Each car has a key holder integrated with a touch screen display. At the end of the rental, the customer deposits the keys inside the touch screen display’s key holder. They then have a few seconds to exit the vehicle, after which the car is returned to the “available car” pool and the customer is billed.

● GSETrack. This system, which has been implemented at Amsterdam’s Schiphol

Airport, monitors and tracks baggage carts as well as other non-motorized ground support equipment (GSE). GSETrack uses a low-power peer-to-peer communication network to generate real-time location, usage and equipment data. The system simpli ies and speeds the transfer and disposal of equipment. For example, workers no longer need to report location and time when they return a baggage cart.

13. Auditing and Accounting Stage. In this inal stage of the CSLC, customers analyze the costs and expenses of using the product or service. IoT initiatives provide real-time consumption analysis and forecasts of future expenses, making this stage available during the entire life cycle. Customers can decide in real time to act to improve performance or reduce costs. Examples are:

● Automatic. This IoT-enabled device can be plugged into the onboard diagnostics port that comes as standard on modern automobiles to provide information about vehicle usage. Automatic can track mileage, time and fuel consumption in real-time for every trip, thus empowering customers and businesses to ef iciently manage their trips while improving driving behavior. Consider, for example, a self-employed professional who needs to track this data for tax purposes; with Automatic, the data collection process is seamless.

● Car2Go. When a Car2Go vehicle is returned (described above), trip information from the car, including the duration of the rental and the mileage, is automatically computed from GPS readings and is uploaded to the car-sharing provider. This information is immediately available for a customer audit via the Car2Go app.

Findings from Our Research Above, we described individual examples

of how the CSLC can be used to identify opportunities for creating customer value with the IoT. Now we present what we learned from an aggregate inspection of 191 unique IoT initiatives, which were identi ied from public sources at the time of writing. We recorded

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and categorized the initiatives by CSLC phase, stage, industry and company type (startups vs. established incumbents). An IoT initiative or device was included in our analysis unless it replicated another one previously categorized from a different vendor (e.g., smart thermostat). Two members of the research team, operating independently, categorized each example. Where there were disagreements, a third team member served as the arbitrator.

Results of the Analysis of IoT Initiatives

We found that only two IoT initiatives impacted all four phases of the CSLC, and only 19 had an impact on three phases. The bulk of

the initiatives impacted only one (34.0%) or two (40.8%) phases (see Table 1). This inding is not surprising since the IoT functionalities built into products are often narrow and aimed at a speci ic customer need.

Frequency analysis showed that the number of initiatives is not evenly distributed across the CSLC phases. The Ownership phase accounts for the bulk of the examples (72.8%) followed by Acquisition (40.8%), Requirements (22.0%) and Retirement (14.1%). With regard to speci ic stages of the CSLC, usage monitoring was the most common, with 70.2% of initiatives involving some type of monitoring (see Table 2).

As mentioned earlier, equipping everyday physical objects with sensors is the de ining

Table 1: IoT Initiatives of CSLC Phases Impacted

One Phase Two Phases Three Phases Four Phases

Ini a ves 65 78 19 2

Percentage 34.03% 40.84% 9.95% 1.05%

Table 2: Number of Initiatives by CSLC Stage

Phase Stage Ini a ves*

Requirements Establish Requirements 31

Specifi ca on 13

Acquisi on Source Selec on 18

Ordering 10

Authoriza on and Payment 8

Acquisi on 24

Tes ng and Acceptance 41

Ownership Integra on 15

Usage Monitoring 134

Upgrading 5

Maintain 36

Re rement Transfer or Disposal 7

Audi ng and Accoun ng 20

None 27 *A single IoT ini a ve can impact mul ple CSLC phases.

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element of IoT innovation. This “sensorization” of devices enables unprecedented monitoring in terms of depth (the degree of monitoring) and scope (the variety of variables monitored). Monitoring is a central activity of IoT-enabled devices and often provides the data required in other stages. Thus monitoring can be thought of a irst-order effect of the IoT, on which other, second-order, functionalities are built. DDSs stemming from IoT initiatives could provide additional visibility on the state of multiple other objects, enable experiments with different con igurations based on the sensed data or facilitate coordinated action of the IoT-enabled objects.23

The testing and acceptance stage is a distant second with just 21.8% of the initiatives examined relevant to this stage. The ordering (5.2%), authorization and payment (4.2%), upgrading (2.6%) and transfer or disposal (3.7%) life cycle stages are even less well served by IoT initiatives. The emergence of consumer automatic or semi-automatic replenishment systems is still embryonic, which, in our opinion, prevents manufacturers from designing and producing IoT-enabled products that impact the ordering or authorization and payment stages. Companies have traditionally tended to neglect the upgrading and transfer or disposal stages. Not surprisingly, businesses appear to be giving priority to CSLC stages that have a high impact on the quality of the relationship with their customers.

When we categorized the IoT innovations, we identi ied 27 (14.1%) that do not appear to create value in any of the four CSLC phases (shown in Table 2 as “None”). These are examples of initiatives and IoT products that deliver value exclusively through product performance improvements or by performing new functionalities.

23 Piccoli, G. and Pigni, F., op. cit., 2013.

Our analysis inds that, despite the emerging status of the “industrial Internet,” consumer- oriented IoT initiatives outnumbered industrial ones by nearly 45% (101 vs. 70)—see Table 3. While this inding might suggest that the consumer space offers more opportunities to analyze the IoT by CSLC phases, it may be a byproduct of our methodology, which relied on public sources to identify IoT initiatives.

We also identi ied the source of the IoT initiatives we examined. While established organizations are active in IoT innovation and applications, technology startups accounted for the largest number (68.6%). By industry, we found the household durables and electronic equipment sectors were the biggest contributors, together accounting for 28% of the total. Only four other sectors—diversi ied consumer services, commercial services and supplies, food products, and health care equipment and supplies—have more than 10 initiatives (see Figure 2), while 23 sectors had less than four initiatives each (see the Appendix).

Lessons Learned For executives grappling with the IoT, the key,

as with most IT innovations, is inding a balance between innovation and control. The upside potential of the IoT is very signi icant, but IoT initiatives involve new technologies and are thus dif icult to control properly; organizations are still struggling to develop the expertise necessary to take advantage of the IoT. From our analysis of the 191 IoT initiatives, we have distilled ive lessons to help guide this uncertain IoT journey.

Table 3: IoT Initiatives by Consumer and Industrial Focus

Consumer Industrial Mixed

Ini a ves 104 70 17

Percentage 54.45% 36.65% 8.90%

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1. Create Direct Real-time Customer Relationships

The well-known e-commerce adage “own the customer interface”24 is well accepted and validated. The irm with the largest capitalization in the hospitality industry is neither Marriott ($18 billion) nor Hilton ($23 billion), but Priceline ($69 billion),25 which owns no properties at all. As the world’s largest online travel agency, Priceline owns the customer interface instead of property. The meteoric rise of Airbnb can be ascribed to the same dynamic. Airbnb’s most recent valuation ($30 billion)26 is not due to its ownership of rental properties, but rather its “ownership” of over 60 million guests and over two million property listings.27

Prior to the IoT, it was very dif icult for manufacturers to “own the customer interface.” Physical products were generally

24 Evans, P. and Wurster, T. S. "Blown to Bits: How the New Economics of Information Transforms Strategy", Harvard Business Press, 2000. 25 Source: Yahoo! market capitalization data retrieved from http:// fi nance.yahoo.com/quote/PCLN?ltr=1. 26 "Airbnb’s Latest Investment Talks Could Value It at $30 Billion", Fortune, June 28, 2016, available at http://fortune. com/2016/06/28/airbnb-funding-value/. 27 "About Us", Airbnb, August 11, 2016, available at https://www. airbnb.com/about/about-us.

sold through intermediaries and, because the products lacked any computational ability or connectivity, manufacturers found it almost impossible to provide any value after purchase or to learn from their customers’ experiences. For most manufacturers, the relationship ended if and when customers registered their products. However, when IoT sensors and connectivity augment physical products, manufacturers can harness the digital data streams the devices create to produce customer value, thus facilitating direct customer relationships and loyalty.

We believe the emergence of the IoT presents as great an opportunity for business model innovation as the rise of the commercial Internet did in the early 1990s. Consider car manufacturing, which has long been reliant on an extensive network of dealers that limited any chance of a direct relationship with car owners. Contrast this with Tesla, whose “sensorized” and connected cars are in constant contact with the irm’s data centers. This enables direct- to-customer value propositions, including the over-the-air upgrades described earlier, as well as real-time diagnostics and a wide array of premium services (e.g., automatically dispatching emergency services when a car is in a crash).

Figure 2: Number of Initiatives by Sector*

*Sectors with less than 10 ini a ves are included in the “Others” category.

Enhancing Customer Service through the Internet of Things and Digital Data Streams

The 124-year-old Coca-Cola company provides another example. By installing sensors (e.g., Beacons, NFC) in its vending machines, the company receives a constant digital data stream that it can leverage to create new services and obtain insights about customers’ preferences. For instance, vending machines located on college campuses can now report spikes in product sales coincident with the airing of certain TV shows, thus giving Coca-Cola a nearly immediate measure of advertising effectiveness.28 Beacon- enabled vending machines are also able to identify approaching customers and send them tailored adverts via their phones. For example, students entering the gym may be encouraged to buy a Powerade sports drink, and on leaving be encouraged to try a Core Power milk shake.

2. Leverage IoT Digital Data Streams and Communities of Users

The distinctive characteristics of IoT devices—identifying, sensing, communicating and computing—allow physical products to be thought of as platforms for data generation. At each stage of the CSLC a irm has the ability to provide value to existing customers. At the same time, it has the opportunity to generate data about its customers’ behavior. The most immediate implications of this ability are already apparent in organizations packaging and selling the data their devices generate. Consider General Electric’s commitment to including sensors in the large industrial equipment it sells. This innovation not only provides enhanced customer service, but also helps GE to grow its software and consulting practice. For instance, the real- time data generated from the many sensors on locomotive engines is employed by Movement Planner, a GE software offering, to provide customers with a network traf ic control system.29

As the computational power of IoT-enabled products increases, whether locally or through cloud services, arti icial intelligence (AI) capabilities are increasingly being embedded in the products. Tesla’s Autopilot feature, for

28 Woods, D. How Internet Of Things Data Improves Product Development, Forbes, May 15, 2015, available at http://www.forbes. com/sites/danwoods/2015/05/15/how-internet-of-things-data-im- proves-product-development/#751a7744320e. 29 Golson, J. “The Tech That Makes GE’s New Locomotive Its Cleanest Ever,” Wired.com, May, 12, 2015, available at http://www. wired.com/2015/05/tech-makes-ges-new-locomotive-cleanest-ever/.

instance, leverages navigation sensors (e.g., radar, GPS) to negotiate traf ic without driver input. Because of the connectivity of Tesla vehicles, the learning gained from a vehicle is shared with other Teslas. In areas where Tesla has a high- density of cars, such as San Francisco or Houston, a brand new vehicle bene its from the learning generated by Teslas already traveling on the same roads.

Amazon, as described above, has effectively turned its voice-driven Echo into a platform. Using the Amazon Skill Kit (ASK) and Alexa Voice Services (AVS), developers can improve on the existing 2,000 or so Echo capabilities—called skills.30 More subtly, Amazon is leveraging the community of users to improve the AI algorithms that power the AVS natural language processing engine. Enabling third-party developers not only creates value by increasing the number of useful things that Echo can do, but also contributes to improving its quality.

3. Leverage Your Existing Competitive Position and Competencies

IS entrepreneurs wax lyrical about the potential for IT-enabled information systems to disrupt traditional industries—with Unilever’s purchase of Dollar Shave Club in mid-2016 illustrative of things to come.31 Our indings show that startups and new entrants introduce a signi icant share of IoT products or services. For instance, Oombrella is a Kickstarter-funded32

project seeking to revolutionize the umbrella, a product created in China almost 2,000 years ago. While the Oombrella product has the familiar umbrella form factor, it also contains in its handle a small weather station used to measure “hyper- local weather conditions.” By sharing real-time readings with nearby Oombrellas, the product promises to improve the accuracy of forecasts, thus enabling the company to send real-time precise alerts to Oombrella owners.

30 Higginbotham, S. "Developers Expand Amazon Alexa’s Skills— Exposing Both Its Potential and Its Limitations", MIT Technology Review, August 11, 2016, available at https://www.technologyreview. com/s/602125/developers-expand-amazon-alexas-skills-exposing- both-its-potential-and-its-limitations/. 31 Thompson, B. "Dollar Shave Club and The Disruption of Every- thing", stratechery LLC, July 20, 2016, available at https://stratech- ery.com/2016/dollar-shave-club-and-the-disruption-of-everything/. 32 Kickstarter is the world's largest funding platform for creative projects.

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Unencumbered by legacy processes and infrastructure investments, new entrants have an unprecedented opportunity to leverage inexpensive IoT components (i.e., sensors) and the pervasive on-demand infrastructure provided by a cloud vendor to offer highly differentiated products that have the potential to disrupt legacy manufacturers.

The CSLC can also stimulate thinking about how incumbents with distinctive competencies or established value propositions can harness the IoT to leverage their competitive advantages. For example, Tetra Pak, the dominant player in packaging machinery, has a global footprint and a high density of installations across the world. By embedding sensors in its packaging machines (e.g., to monitor the temperature of oil in the hydraulic cylinder driving the cutting knife) it is able to gather relevant preventive maintenance data. It can also collect data on the environmental conditions (e.g., humidity levels in the factory) in which the machines operate. The combination of these two data streams makes Tetra Pak’s preventive maintenance superior to that of smaller competitors. In other words, Tetra Pak’s IoT initiative is predicated on, and leverages, its scale—one of the barriers that prevent the erosion of its competitive advantage.33

4. Create seamless Interoperability as a Prerequisite for Value Creation

Connectivity is a central element of the design of IoT-enabled products. As is typical with emergent technologies however, a proliferation of IoT communication protocols has emerged as different vendors attempt to establish their technology as the standard. The devices we researched used a wide range of communication protocols, including ZigBee, Z-Wave, Thread (by Nest) and LoRa WAN. Each provider is touting the bene its of its technology and actively signing up partners. Unfortunately, while standards wars are common in the early development of innovations, without interoperability or consolidation, the potential of the IoT is constrained. These constraints are evident in our analysis. Many of the initiatives focus on delivering value through a single device, with innovators constrained to

33 Piccoli, G. and Ives, B. “Review: IT-dependent strategic initia- tives and sustained competitive advantage: a review and synthesis of the literature,” MIS Quarterly (29:4), 2005, pp. 747-776.

standalone solutions. Ideally however, smart devices should be able to interact with each other and offer a seamless experience to users. Without such interoperability, customers have to acquire a plethora of different apps with limited functionality—an inconvenience that dissipates value.

Our research uncovered two emerging approaches providers are taking to cope with the current lack of cross-device interoperability: one-stop solutions and retro itting. Pioneers such as SmartThings (recently acquired by Samsung) and Wink (owned by Flextronic) have attempted to create a standard one-stop solution by introducing an array of devices in multiple categories as well as hubs for ensuring integration with other vendors’ devices. Wink for example has produced an array of IoT devices (including lighting, security and monitoring) and a proprietary communication protocol. Other vendors, such as Zuli described earlier, pursue a retro itting strategy by creating devices such as smart wall plugs that enable IoT functionality for traditional physical devices. Automatic, the plugin device for a vehicle’s onboard diagnostics port described earlier, is another example of this strategy. It enables every car built since 1996 to have interoperability with smartphone apps and turns older cars into IoT nodes.

5. Beware Reliability, Security and Privacy Traps

Many of the most interesting IoT-enabled applications are emerging from small irms. Promised bene its are loudly trumpeted by those with a inancial interest in the success of an initiative; only later do unintended negative consequences emerge. The most prominent problems are in the areas of reliability and threats to security and privacy. Reliability is a concern for any information system. The problems encountered by Delta Air Lines in August 2016 after a six-hour global technology outage are a stark reminder of the consequences of an IT failure. Delta had to cancel about 1,800 lights in

Enhancing Customer Service through the Internet of Things and Digital Data Streams

the next two days;34 by some accounts the losses could cut Delta’s quarterly earnings by 10%.35

Reliability is a key concern for successful IoT initiatives that customers come to rely on. As we described earlier, much of the computing power for IoT devices is cloud based. Indeed, this is one of the de ining features and advantages of the IoT. However, this means that IoT services face reliability issues that the physical products they are replacing did not have to contend with, as PetNet painfully discovered. PetNet is a startup pet feeding IoT service similar to Poppy (described above). It relied on cloud-based software to manage food dispensing following customers’ prede ined feeding schedules. When the Google servers hosting PetNet’s infrastructure went down for 10 hours the irm had to inform customers, many of whom were likely traveling, that they “may experience a loss of scheduled feeds and failed remote feedings.” Moreover, reliable operations would require a local restart.36

Pets went without food, and the press had a ield day at the startup’s expense; customers

counting on the device during multi-day trips had to scramble to ensure the well-being of their animals.

Security problems are emerging as an even bigger concern, one that threatens to slow the adoption of IoT-enabled products and services while perhaps bene iting more established irms. Large irms like GE are sensitive to, and

hopefully, able to meet security challenges. Small irms, however, are more focused on signing

up customers and surviving than on ensuring the security of their systems. Even if security is on a startup’s agenda, it likely lacks the skill sets required to counter a determined hacker. The problem is compounded by the fact that IS security is a “negative deliverable.”37 That is, no business unit or department in the organization ights for security investments as they don’t have

34 Isidore, C. and Tanglao, L. “Delta still digging out on Day 3,” CNN Money, August 10, 2016, available at http://money.cnn. com/2016/08/10/news/companies/delta-fl ight-cancellations/. 35 Sasso, M. and Black, T. “Delta System Failure Marks Wake-Up Call for Airline Industry,” Bloomberg Technology, August 9, 2016, available at http://www.bloomberg.com/news/articles/2016-08-10/ delta-s-systems-failure-marks-wake-up-call-for-airline-industry. 36 Chalkley, C. “PetNet smart pet feeders break, leaving pets with- out food,” The Independent, July 28, 2016, available at http://www. independent.co.uk/life-style/gadgets-and-tech/news/petnet-smart-pet- feeders-break-leaving-pets-without-food-a7160726.html. 37 Piccoli, G. and Pigni, F. Information Systems for Managers: Text and Cases, Prospect Press, 2016.

an explicit ROI. Rather, security investments simply ensure that the irm is insulated from the effects of a probable, but uncertain, negative fallout of a security breach.

Many stories are emerging of hackers or security researchers taking control of IoT devices, including home lighting systems, thermostats, ire alarms and door locks. A 2016 study, for instance, found that 75% of Bluetooth-enabled hotel door locks are easily compromised.38 The sensors and actuators in automobiles have also been hacked by researchers; the consequences of remotely directed motor vehicles or drones being hacked and controlled by terrorists are truly frightening.

Closely related to security is the issue of privacy. Privacy concerns arise from systems such as Amazon’s Echo, which constantly monitors a customer’s home for spoken commands. In a similar vein, one of the authors purchased a robot vacuum cleaner that is equipped with a network connection and a home security camera. Such “call home” devices are a real threat to both privacy and security.

Moreover, as the IoT increasingly relies on cloud computing services, more and more data streams can be repackaged and sold in creative ways. The experience of TomTom, based in the Netherlands, is instructive. TomTom sells navigation equipment to consumers and, in a classic double-sided market opportunity, traf ic data to third parties. However, its traditional customers were incensed when they discovered that TomTom was selling data to help police in the Netherlands establish speed traps that generated large numbers of speeding ines.

Concluding Comments The IoT promise is substantial. There are

already over 6 billion IoT-enabled devices, constituting a $235 billion industry that is forecast to grow at increasing rates. Considering the size of the market and the depth and variety of the digital data streams generated, companies have an unprecedented opportunity to accelerate value creation and to improve customer service. Nevertheless, exploiting the IoT’s potential is not an easy task for managers due to the novelty of the phenomenon, security concerns and the

38 Wollerton, M. “Have a smart lock? Yeah, it can probably be hacked,” CNET, August 9, 2016, available at http://www.cnet.com/ news/have-a-smart-lock-yeah-it-can-probably-be-hacked/.

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disruptive changes it may bring in multiple industries.

Our research provides managers with a framework for envisioning how the IoT can be integrated in existing irms or startups. We believe that the Customer Service Life Cycle (CSLC), along with the many examples described in this article can stimulate managers’ creative thinking, enabling them to exploit the opportunities offered by the IoT. Our categorization of almost 200 IoT initiatives by CSLC phase provides an overview of the current state of the IoT industry. While studies on DDSs have identi ied templates for value creation, the CSLC model provides managers with a tool for discovering where customer value can be created, thus enhancing the relationship with the customer.

Our analysis shows that the majority of IoT- enabled innovations come from startups. While understandable, given the agility of these hungry newcomers, we believe incumbents must, as GE and Tetra Pak have, be aggressive in pursuing the advantages of digital data streaming via the IoT. Incumbents will ind they have many advantages over startups. Among these are the ability to leverage their larger scale and scope, combine data streams from the IoT with existing data, give customers greater assurances of security, reliability and privacy, take advantage of the trust and brand loyalty they have already established with customers and offer customers a richer array of services. Perhaps, most importantly for many established businesses, the IoT can open up previously nonexistent communication channels with customers as they use products or services on a day-to-day basis.

Our research con irms that for many organizations, even innovative ones, the IoT may be more hype than reality. But irms are beginning to see through the hype and are creating new business models, customer value propositions and pro its. The IoT is becoming, and will become over the next few years, as important, and as disruptive, as previous eras of IT innovation. The IoT is an opportunity but also a threat to CIOs and other members of the business leadership team. We believe that the CSLC framework and the IoT initiatives described in this article will help CIOs and business leaders

focus on IoT-enabled opportunities that add value to customers.

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Appendix: Number of Initiatives by Industry Sector

Industry Sector Ini a ves Percentage Household Durables 29 15.18%

Electronic Equipment, Instruments & Components 22 11.52%

Diversifi ed Consumer Services 19 9.95%

Commercial Services & Supplies 14 7.33%

Food Products 14 7.33%

Health Care Equipment & Supplies 13 6.81%

Leisure Equipment & Products 8 4.19%

Electrical Equipment 8 4.19%

Road & Rail 8 4.19%

Internet So ware & Services 7 3.66%

Air Freight & Logis cs 4 2.09%

Electric U li es 4 2.09%

Automobiles 3 1.57%

Beverages 3 1.57%

Health Care Technology 3 1.57%

Hotels, Restaurants & Leisure 3 1.57%

Independent Power Producers & Energy Traders 3 1.57%

Machinery 3 1.57%

Communica ons Equipment 2 1.05%

Food & Staples Retailing 2 1.05%

IT Services 2 1.05%

Professional Services 2 1.05%

Specialty Retail 2 1.05%

Transporta on Infrastructure 2 1.05%

Capital Markets 1 0.52%

Construc on & Engineering 1 0.52%

Construc on Materials 1 0.52%

Energy Equipment & Services 1 0.52%

Gas U li es 1 0.52%

Health Care Providers & Services 1 0.52%

Internet & Catalog Retail 1 0.52%

Life Sciences Tools & Services 1 0.52%

Mul line Retail 1 0.52%

Oil, Gas & Consumable Fuels 1 0.52%

Water U li es 1 0.52%

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About the Authors

Blake Ives Blake Ives ([email protected]) holds the C.T. Bauer Chair in Business Leadership at the University of Houston. A distinguished scholar in the ield of information systems, he has held prestigious fellowships at Harvard Business School and Templeton College, Oxford University. He is a former editor-in-chief of MIS Quarterly as well as a former research director for SIM’s Advanced Practices Council. Blake is the author of more than 100 research articles and case studies.

Biagio Palese Biagio Palese ([email protected]) is a Ph.D. student in information systems and decision sciences at Louisiana State University. He earned an undergraduate degree in economics of international markets and a master’s in international business and economics from the University of Pavia. His research interests are customer service, digital data streams and text mining.

Joaquin Rodriguez Joaquin Rodriguez ([email protected]) is a Ph.D. student in information systems and decision sciences at Louisiana State University. He earned his master’s degree in international business and economics from the University of Pavia, and his bachelor’s degree in business and economics from the University of Ferrara. His main research interests are strategic information systems and digital data streams.

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