Approach the measurement of ROI for IoT projects with care
As interest in IoT soars, organizations must avoid sliding into the shiny new object syndrome and validate their IoT investments by showing the investment will create revenue or save. A year ago, I wrote about this in an article for IndustryWeek headlined “IoT and ROI: Two acronyms that need to go together.”
I still believe this to be true, but with an asterisk: Don’t get too hung up on the initial ROI.
In the last year, IoT’s momentum has continued to advance. Two-thirds reported working on IoT projects or will be in the next 18 months, according to the IoT Developer Survey 2019 by Eclipse Foundation. “IoT development is expanding at a rapid pace, fueled by the growth of investments in predominantly industrial markets,” the study said.
As more companies embark on their IoT journeys, I’ve noticed a tendency by some to obsess on IoT ROI. They become overly granular and nit-picky in their attempts to quantify its value to the C-suite.
This can be as debilitating as failing to prove IoT’s worth in the first place by blocking the journey with excessive analysis and slowing development of new applications that could have increased efficiency, enhanced customer services, and created entirely new business models. This approach puts the company at risk of falling behind competitors that are emphasizing experimentation and agility over an abundance of caution.
As I wrote last summer and which still holds true today, IoT is “still a relatively nascent technology for most companies” and “its benefits aren’t as well understood as more established technologies such as cloud or data analytics yet.”
That means IoT advocates inside companies must work harder to demonstrate how the technology helps drive and achieve important corporate goals so they can garner the executive support and funding to move projects forward.
However, I’ve seen a few organizations slide into analysis paralysis, where they spend months filling spreadsheet after spreadsheet with calculations of an IoT project cost and return when, in fact, as with any new technology, these details are seldom as easy to predict as our data-centric minds would like.
I’ve seen some organizations try to evaluate down to the nickel what items like software costs, maintenance, support and updates might cost — items that are very difficult if not impossible to plan for with any precision because there are so many unknowns in the emerging IoT market they are trying to capture.
Think of it this way: Does anyone do an ROI study before joining a gym? There is no guarantee they’ll lose weight or feel better, but it sure seems like a reasonably certain outcome. Why not just start, participate and see where you are in a year based on a thoughtful plan?
This is how companies need to look at IoT: Its game-changing potential is so evident that there is danger in letting the perfect — an unreasonable pursuit of totally buttoned-up ROI forecasting — be the enemy of the good — simply proceeding, with reasonable expectations of success.
So to refine what I wrote last year, it remains essential to show the C-suite that IoT is key to the future of the business and justify why it’s worth strategic investment.
Get into the game with proof-of-concept pilot projects that demonstrate IoT’s value. Build up IoT-adjacent skills in data science, artificial intelligence and security across the organization.
But all the while, don’t waste too much time spinning up exhaustive ROI models. It’s a fool’s errand given the inherent unpredictability of any new technology, and it could mean being late to the game and having to play catch up, which can be a loser’s game.
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