The world now has more sensors collecting more data than ever, on everything from traffic patterns on the interstate to how many miles you ran this morning. The challenge is what we’re actually doing with that information. Right now, it isn’t much: Only 1% of the data cranked out by sensors and tags is actually used.
It’s easy to argue that maybe the so-called Internet of Things has been overhyped. But a new report from McKinsey Global Institute argues that the newly wired physical world could be generating $11 trillion a year in a decade.
There are obvious potential social benefits of data-driven life. “We know these techniques, when applied in the right ways, can improve human welfare, can improve efficiency and effectiveness of our health care system,” says Michael Chui, one of the authors of the new report. “They can reduce energy usage and pollution, and can improve water and air quality.” They can help businesses be more productive and help cities run more effectively.
But there’s no guarantee we’ll actually see the full value of the technology. One challenge is that data is most useful when it’s combined with other sources. On an oil platform, for example, in order to use sensors and tags to predict when a ship needs maintenance to prevent a potential oil spill, multiple devices need to be connected. Overall, 40% of the potential value of sensor systems will depend on this interoperability. And in many cases, those connections don’t yet exist.
Businesses will also have to change. “We know from previous research we know that most orgnaizations are not data driven in their decision making,” Chui says. “So significant organizational changes will have to happen as well.” As they begin tracking everything, companies (and cities) will also have to figure out how to keep that data secure.
A lot of media coverage has focused on consumer applications, such as home automation or wearable trackers. But Chui says that large organizations stand to gain more from the Internet of Things than individuals, especially companies with factories or complex supply chains. And some of the biggest users are likely to be in the developing world. The report estimated that 40% of the predicted economic value by 2025 will happen there.
Even if society doesn’t fully embrace the potential of the Internet of Things, the report predicts that it will still have a huge impact. At the low end, it may generate $3.9 trillion a year by 2025.