What is the Internet of Things and What Does It Mean for the Economy?

People have been talking about the Internet of Things (IoT) for a while now. The concept, which was so revolutionary just a few years ago, is almost becoming commonplace now. Networked devices and connected products are sure to play an increasingly important role in product design going forward. So what exactly is the IoT, and what does it mean for the economy?

An Overview of Internet of Things

For pretty much every one of us, the Internet is now part of everyday life. Children use Internet-enabled tablets to play games, students use Internet-connected laptops to do homework, employees use smartphones to write down their work schedules, and some people live in smart homes filled with smart appliances. The Internet has become not only ubiquitous, but also seemingly inescapable — unless you decide you decide to go off-the-grid someday.

The Internet used to mean connected computers with the capability of sharing data. Now it has transformed into a gigantic network, both wired and wireless, that connects billions of devices all across the globe. When these smart devices collect, share, and communicate data with each other, they can process/analyze the data for multiple outputs and act based on the analysis results; and that’s what the Internet of Things is all about.

At its basic level, the Internet of Things represents the way modern smart devices are networked in order to communicate with one another and transmit and process data, both on their own and through user interfaces. Your smartphone alone is not IoT hardware, but when it collects data of your activity such as locations, schedules, or calendar, then share these data with a smart car, smart thermostat, smart refrigerator, and maybe a smart coffee maker, the collaborative work among all those devices and appliances are real-life examples of Internet of Things.

Those devices not only they share the data, but automatically execute certain commands based on the data and in accordance to your personal preferences or preset settings. Some devices are equipped with sensory systems to detect your presence, heart rate, and routine activities.

You need a lot of IoT products to achieve such convenience. Similar to other technological marvels, what was nly recently unobtainable is rapidly becoming assesible to more and more people. From the example above, we can see the purpose of the technology: it constantly sends and receives information for users’ benefits. Your home will be filled with interconnected devices that never cease to deliver comfort on-demand. Maybe it already is.

One of the most important technologies in the entire realm of IoT is the sensor. This is the part of every device that sends and receives data. The aforementioned example revolves around a user’s morning in a private home, yet there are many different sensors which can be planted to various devices for other purposes. For example, a factory can use smart devices to detect temperature and adjust the cooling system accordingly, so all machines always work to their full potential. Under an ideal temperature setting, those machines work better and are energy-efficient. The amount of energy used for cooling is easily offset by minimum machine-fuel consumption. In the field, even farmers are turning to Internet of Things to detect soil conditions for optimum yields. It is estimated that by 2020, there could be trillion sensor-equipped machines.

Potential Effects to the Economy

While the idea of IoT has been in existence for almost two decades now, its implementation is still in very early stage. The Internet of Things is still pretty much under-utilized by companies. An oil rig equipped with 30,000 sensors only uses 1 percent of all data collected for anomalies detection and control. Among the remaining 99% of the data, there is valuable information about optimization and prediction. Unfortunately, these data are left unused.

It is hard to disagree that IoT is a powerful idea that promises to broadly affect almost every aspect of everyday life, both personal and business. Despite its under-utilization, the effects of IoT on commerce and economy have been profound. When smart devices communicate with each other in large scale, all of them collect and receive data through the Internet. Analysis of the data can reveal a massive amount of information. For example, what products consumers want, what features are most desirable, and what services are required. Accumulation of data from all users all around the world is the power behind IoT. We have seen good examples from this in the form of online advertisements. Google collects your browsing behaviors and determines the right kind of advertisements to display the next time you browse, and Facebook does the same With the IoT, this tracking goes beyond your computer.

The Internet of Things opens the door for much better implementation of such data. Assuming we have policies to encourage privacy protections, true cross-platform smart devices, and major improvements in data security, it would not take long for IoT to reach its full potential. The ways companies pursue market research are changing significantly as they have readily available data that conveys consumers’ tendencies, shopping behaviors, and preferable services. This creates the potential for more efficient user-focused design. Proper products designed and manufactured in efficient ways lead to more affordable pricing, and this is where consumers have their benefits. And this, of course, leads to greater profits.

Constant analysis of data promises to increase productivity and creativity to a great extent. Innovations will happen at a faster rate. Productivity and efficiency run hand-in-hand. In manufacturing facilities, for example, connected equipment will detect any potential malfunction or defects in a batch of products in an instant, allowing for more efficient production. All factories that use robotic arms in assembly lines can also predict malfunction and address the issue accordingly, allowing the production to continue without any halt. It means manufacturers will need to invest in a large variety of IoT products, and this too will make the wheels of economy spins faster.

In small to mid-sized business, IoT makes it easier for startups to identify new profitable niches. Provided with the right technology to analyze big data, new entrepreneurs may be able to design inventive products intended for specific purposes for specific type of consumers. People can save money by purchasing only the right products designed for their specific needs. The data given by consumers will be sent to companies and analyzed, so general consumers actually play roles in product designing as well. It will take years before the IoT is executed fully implemented, but it is not impossible especially with the rate of technological advances we see today.