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March 2015

IoT basics: Getting started with the Internet of Things

Author – Knud Lasse Lueth

Executive summary

The whitepaper is aimed at people who are new to

the Internet of Things and seek to get a basic

understanding of the concept, its applications and

its technology.


1. Definition of IoT

2. History of IoT

3. IoT vs. similar concepts

4. Application/Segment overview

5. Technology overview

IoT Analytics

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March 2015

IoT basics: Getting started

with the Internet of Things

The internet is seen by many as the biggest technological disruption of

all time.

It has enabled entirely new forms of social interaction, activities, and

organization. There are only a handful of similarly important disruptions

in the 10,000+ years history of mankind (like the invention of the wheel

around 4500 BC or the printing press in 1450).

It looks as though the next major technological revolution is around the

corner: The Internet of Things.

1. What is the Internet of Things?

According to the McKinsey report “Disruptive technologies: Advances

that will transform life, business, and the global economy“, the Internet

of things (IoT) is one of the top three technological advancements of the

next decade (together with the mobile internet and the automation of

knowledge work). The report goes on to say that “The Internet of Things

is such a sweeping concept that it is a challenge to even imagine all the

possible ways in which it will affect business, economies, and society.”

Definitions for the Internet of Things vary. According to McKinsey:

“Sensors and actuators embedded in physical objects are linked through

wired and wireless networks, often using the same Internet Protocol (IP)

that connects the Internet.“

The idea is that not only your computer and your smartphone can talk

to each other, but also all the things around you. From connected

homes and cities to connected cars and machines to devices that track

an individual’s behavior and use the data collected for new kind of


“The Internet of things will involve a massive build-out of connected

devices and sensors woven into the fabric of our lives and businesses.

Devices deeply embedded in public and private places will recognize us

and adapt to our requirements for comfort, safety, streamlined

commerce, entertainment, education, resource conservation,

operational efficiency and personal well-being.”, according to Intel’s

report “Rise of the Embedded Internet”.

Figure 1: Disruptive technologies of the

next decade Potential economic impact

in 2025 (in $trillion annual)

(Source: McKinsey)

Figure 2: A definition for the Internet of


(Source: McKinsey)

“Sensors and actuators embedded in

physical objects are linked through wired

and wireless networks, often using the

same Internet Protocol (IP) that connects

the Internet“

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2. History of IoT

The term Internet of Things is 16 years old. But the actual idea of

connected devices had been around longer, at least since the 70s. Back

then, the idea was often called “embedded internet” or “pervasive

computing”. But the actual term “Internet of Things” was coined by Kevin

Ashton in 1999 during his work at Procter&Gamble. Ashton who was

working in supply chain optimization, wanted to attract senior

management’s attention to a new exciting technology called RFID.

Because the internet was the hottest new trend in 1999 and because it

somehow made sense, he called his presentation “Internet of Things”.

Even though Kevin grabbed the interest of some P&G executives, the

term Internet of Things did not get widespread attention for the next 10


The concept of IoT started to gain some popularity in the summer of

2010. Information leaked that Google’s StreetView service had not only

made 360 degree pictures but had also stored tons of data of people’s

Wifi networks. People were debating whether this was the start of a new

Google strategy to not only index the internet but also index the physical


The same year, the Chinese government announced it would make the

Internet of Things a strategic priority in their Five-Year-Plan.

In 2011, Gartner, the market research company that invented the

famous “hype-cycle for emerging technologies” included a new

emerging phenomenon on their list: “The Internet of Things”.

Figure 4: Gartner’s 2014 technology hype cycle (Source: Gartner)

The next year the theme of Europe’s biggest Internet conference LeWeb

was the “Internet of Things”. At the same time popular tech-focused

magazines like Forbes, Fast Company, and Wired starting using IoT as

their vocabulary to describe the phenomenon.

Figure 3: Keven Ashton Inventor of the

term “Internet of Things”

(Source: Twitter)

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In October of 2013, IDC published a report stating that the Internet of

Things would be a $8.9 trillion market in 2020.

The term Internet of Things reached mass market awareness when in

January 2014 Google announced to buy Nest for $3.2bn. At the same

time the Consumer Electronics Show (CES) in Las Vegas was held under

the theme of IoT.

Figure 5: Google Search Trends 2011-2015 IoT vs IoE vs M2M vs Industrial Internet vs

Industry 4.0 (Source: Google)

3. IoT compared to similar concepts

While the Internet of Things is by far the most popular term to describe

the phenomenon of a connected world, there are similar concepts that

deserve some attention. Most of these concepts are similar in meaning

but they all have slightly different definitions.

Figure 6: Concept disambiguation: IoT vs IoE vs M2M vs others

 M2M

The term Machine to Machine (M2M) has been in use for more

than a decade, and is well-known in the Telecoms sector. M2M

communication had initially been a one-to-one connection,

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linking one machine to another. But today’s explosion of mobile

connectivity means that data can now be more easily

transmitted, via a system of IP networks, to a much wider range

of devices.

 Industrial Internet (of Things)

The term industrial internet is strongly pushed by GE. It goes

beyond M2M since it not only focuses on connections between

machines but also includes human interfaces.

 Internet of Things (IoT)

IoT has yet a wider reach as it also includes connections beyond

the industrial context such as wearable devices on people.

 Internet (as we know it)

In the above graph, the internet is a fairly small box. In its core it

connects only people.

 Web of Things

The Web of Things is much narrower in scope as the other

concepts as it solely focuses on software architecture.

 Internet of Everything (IoE)

Still a rather vague concept, IoE aims to include all sorts of

connections that one can envision. The concept has thus the

highest reach.

 Industry 4.0

The term Industry 4.0 that is strongly pushed by the German

government is as limited as the industrial internet in reach as it

only focusses on industrial environments. However, it has the

largest scope of all the concepts. Industry 4.0 describes a set of

concepts to drive the next industrial revolution. It includes all

kinds of connectivity concepts but also goes further to include

real changes to the physical world around us such as 3D-printing

technologies, new augmented reality hardware, robotics, and

advanced materials.

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4. IoT application/segment overview

To the public, IoT currently appears to be a mixture of smart home

applications, wearables and an industrial IoT component. But actually it

has the potential to have a much wider reach. When the connected

world becomes reality, the Internet of Things will transform nearly all

major segments – from homes to hospitals and from cars to cities.

Figure 7: IoT market segments (IoT Analytics)

Most of these segments carry the name “smart” like Smart Home or

“connected” like Connected Health. Today’s major applications include:

 Smart home

Smart Home or “Home automation” describes the connectivity

inside our homes. It includes thermostats, smoke detectors,

lightbulbs, appliances, entertainment systems, windows, door

locks, and much more. Popular companies include Nest, Apple,

Philips, and Belkin.

 Wearables

Whether it be the Jawbone Up, the Fitbit Flex, or the Apple

Smartwatch – wearables make up a large part of the consumer

facing Internet of Things applications.

 Smart City

Smart city spans a wide variety of use cases, from traffic

management to water distribution, to waste management,

urban security and environmental monitoring. Smart City

solutions promise to alleviate real pains of people living in cities

these days. Like solving traffic congestion problems, reducing

noise and pollution and helping to make cities safer.

 Smart grids

A future smart grid promises to use information about the

behaviors of electricity suppliers and consumers in an

automated fashion to improve the efficiency, reliability, and

economics of electricity.

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 Industrial internet

Many market researches such as Gartner or Cisco see the

industrial internet as the IoT concept with the highest overall

potential. Applications among others include smart factories or

connected industrial equipment. In 2014 GE reported roughly

$1bn revenue with Industrial Internet products.

 Connected car

The battle is on for the car of the future. Whether it is self-

driving or just driver-assisted: Connectivity with other cars,

mapping services, or traffic control will play a part. Next

generation in-car entertainment systems and remote monitoring

are also interesting concepts to watch. And it is not only large

auto-makers that play a role: Google, Microsoft, and Apple have

all announced connected car platforms.

 Connected Health (Digital health/Telehealth/Telemedicine)

The concept of a connected health care system and smart

medical devices bears enormous potential, not just for

companies also for the well-being of people in general: New

kinds of real-time health monitoring and improved medical

decision-making based on large sets of patient data are some of

the envisioned benefits.

 Smart retail

Proximity-based advertising, In-store shopping behavior

measurement and intelligent payment solutions are some of the

IoT concepts of Smart Retail.

 Smart supply chain

Supply chains are getting smarter. Solutions for tracking goods

while they are on the road, or getting suppliers to exchange

inventory information are some of the Supply chain applications

as part of the Internet of Things.

 Smart farming

The remoteness of farming operations and the large number of

livestock that could be monitored makes farming an interesting

case for the Internet of Things.

The Internet of Things is also expected to change business models in

baking, insurance, and government for example. These use cases,

however, are not yet as advanced as the business cases listed above.

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5. IoT technology overview

The Internet of Things builds on three major technology layers:

Hardware (including chips and sensors), Communication (including

mostly some form of wireless network), and Software (including data

storage, analytics, and front end applications).

Figure 8: IoT technology architecture (IoT Analytics)

The reason for the Internet of Things coming up so quickly right now is

that there have been major technological advancements in all three of

these technology layers:

 Hardware

Costs of sensors has declined by 54% over the last 10 years.

Moreover, form factors are shrinking quickly. Complete sensor

packages that are smaller than fingertips have become the


 Communication

Mobile devices have become a commoditiy for the wider public.

At the same time the cost of bandwidth has declined by 97%

over the last 10 years.

 Software

The cost of processing has even declined 98% in the same

timeframe. Moreover, a number of big data tools and big data

infrastructure such as efficient databases have emerged over

the last 5 years.

There are plenty of different technologies and competing products

in each of the boxes in the above graph. From MEMS accelerometers

to Raspberry Pi development boards, from Zigbee communication to

next generation LTE-M, and from column-based databases to

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streaming analytics engines. Each of these concepts, technologies,

and products could fill a whitepaper on their own.

If you are interested to further deep-dive into IoT, make sure to stop

by and check out our other whitepapers and


References 1.





About the author

Knud Lasse Lueth is the founder and CEO of IoT Analytics. He builds

on 5 years of strategy consulting in industrial companies at BCG and

a manufacturing background. His focus areas are the Industrial

internet and Industry 4.0

Knud Lasse Lueth

Knud Lasse Lueth

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