Internet of Things: Challenges, Breakthroughs and Best Practices

Internet of Things: Challenges, Breakthroughs and Best Practices

IT executives and business decision-makers report just 26% of IoT initiatives are a complete success. What are the critical factors?

“When you are the fastest decision-maker, you win,” Bob Bennett, the chief innovation officer of Kansas City, Mo., told Cisco. “The Internet of Things allows companies and cities to quickly analyze data from sensors and connected products and link it to a decision.”

Most business and technology leaders would agree. In a world where insight and connectivity rule — and connected devices are expected to number 20 billion1 by 2020 — nearly all organizations see the Internet of Things as critical to capturing success and overcoming disruption.

In a Cisco study, 61 percent of 1,845 business and IT decision-makers said that we have barely scratched the surface of what IoT technologies can do for our organizations.2

But despite its status as a key strategic priority, IoT is rarely smooth sailing. Only 26 percent of companies surveyed in a Cisco study could call at least one of their Internet of Things initiatives a complete success.

Only 26 percent of companies surveyed could call at least one of their IoT initiatives a complete success.

What are the reasons for that gap? And equally important, what separates those 26 percent of successful companies from the ones that struggle?

Understanding the obstacles and successes that companies have experienced when adopting IoT sheds light on what for many remains uncharted territory. Our analysis reveals some key challenges, breakthroughs, and best practices that can help guide other organizations on their journeys to IoT value.

IoT is just getting started

IoT is already transforming the world in which we live. It’s difficult to imagine ordering a package that can’t be tracked online. Or not receiving real-time driving directions with an accurate estimate of the arrival time.

The last reliable coordinates for the lost Malaysian Airlines Flight 370 came not from the plane’s transponder, but from its engines, which were transmitting performance data back to the manufacturer.3

But that’s just the beginning.

Automakers, to cite just one industry, are experimenting with sensors that monitor a driver’s wellbeing.4 The car can recommend a rest stop if it detects signs of fatigue or if it senses high stress levels that could lead to road rage. We can already foresee a time when autonomous cars take us to lunch and place our orders along the way. They might even prompt us to consider healthier options based on those wellbeing sensors.

At the same time, everything around those cars stands to be transformed by IoT, from the supply chains and factories that create them to the cities and towns where drivers commute, fight traffic, and waste time and energy searching for parking spots.

IoT means different “things” to different people


IoT encompasses all projects designed to connect “things,” extract data from them, analyze that data, create meaningful insights, and then take action. But for any company actually undertaking an IoT initiative, context matters.

Manufacturers are concerned about remotely monitoring their production lines, automating fulfillment of depleted inventory, and enhancing physical security. Retailers focus on mobile payments, customer apps, and loss prevention. Energy companies want to address smart metering, fault detection, and smart lighting. The list goes on—and we’ll evaluate IoT trends and successes by sector elsewhere— but the point is this: IoT, like any other set of technologies, is a tool. Its real value is in how you use it.

Just as priorities vary from industry to industry, so does experience with IoT. While energy, for example, was an early mover in IoT through smart meters, others have now taken the lead. Manufacturing and healthcare led in their claims to know something or a lot about IoT, at 81 and 80 percent respectively. Transportation and energy, two industries that have experienced less digital disruption in recent years, lagged at 69 and 65 percent, respectively.

Whether in terms of IoT expertise, the percentage of initiatives that have moved from pilot to production, or the percentage of completely successful IoT initiatives, three industry leaders emerged: retail and hospitality, healthcare, and manufacturing.



Sectors with more knowledge and experience with IoT initiatives also have greater success.

Base size: Total Global = 1,845; Manufacturing = 309; Local Government = 309; Retail/Hospitality = 302; Energy = 307; Transportation = 307; Healthcare = 311


The competitive pressures faced by both retail and manufacturing clearly drive investment and experimentation in IoT. Healthcare is less obvious. Rather than disruptive competitors, healthcare providers face more fundamental challenges: the need to improve patient outcomes and simultaneously reduce costs. IoT, with its ability to track and analyze what’s happening throughout the system, is a powerful tool in the healthcare arsenal.

Who’s doing what, and why

Despite the distinct types of IoT initiatives within each industry, just about everybody shares the same overarching goal: staying innovative and competitive.

But it’s important to take a more specific look at what is driving IoT initiatives, what benefits are being captured, and some of the unanticipated advantages that arise after implementation.

Here are the top five drivers of IoT intiatives across all sectors:

  • Employee satisfaction
  • Customer/citizen satisfaction
  • Operational efficiencies
  • Product (or service) quality
  • Time to market

On the whole, this top five list was fairly consistent across industry sectors. When forced to choose the single most important driver of IoT initiatives, however, responses varied. Even so, only two priorities dominated the list: operational efficiencies and the experience or satisfaction of citizens and customers.


Primary drivers of IoT initiatives vary by sector
Base Size: Manufacturing = 309; Local Government = 308; Retail/Hospitality = 302; Energy = 306; Transportation = 306; Healthcare = 310

Similarly, the expected benefits of IoT are largely consistent across industry sectors, and in line with the main drivers behind IoT investments.


Expected benefits achieved in IoT are aligned with primary drivers
Base Size: Total Global = 433-1085


Once companies embarked on their IoT journeys, however, initiatives yielded many unanticipated benefits. Operational efficiencies may have been a key driver and expected benefit. But employee satisfaction and better decisionmaking were among the top unanticipated benefits.



Unanticipated benefits achieved in IoT sweeten the deal

Base Size: Total Global = 433-1085


In short, quality, customers, efficiency, and, to echo Bob Bennett, decision-making are key benefits of companies on their IoT journeys — whether those advantages were planned for or were pleasant surprises.


Cloud Is a Critical Foundation for IoT

A main priority for IoT projects across industries is cloud technology for IoT data management: storage, easy sharing, and accessibility.

And these capabilities are viewed as fundamental to more advanced stages of IoT evolution. Cloud was the top-ranking initiative in manufacturing and placed second in healthcare, retail-hospitality, and local government.

Cloud technology clearly emerges as both a key initial enabler for IoT implementations and an accelerating factor. Sixty-seven percent of respondents stated that having a cloud-based platform as a service is essential for selecting their partners to scale IoT initiatives.

None of this is surprising. As they advance on their IoT journeys, organizations are challenged to leverage data in new ways. Cloud is the only option for managing and storing the huge volumes of data generated by IoT with its rapid proliferation of endpoints, sensors, and mobile users.



The vast majority of respondents in all industries have prioritized cloud

Base Size: Manufacturing = 309; Local Government = 309; Retail/Hospitality = 302; Energy = 307; Transportation = 307; Healthcare = 311


But IoT also demands the kind of modernized, foundational infrastructure that enables data to be processed instantly and securely at the edge of the network, without a roundtrip to the cloud. This requires combining cloud with fog computing to allow IoT data to be managed locally at first, moving from data to decisions with speed and agility. As we’ll discuss later in more detail, this is a key benefit of IoT.

Building the network foundation for IoT is critical to later success. “As an IT leader,” said Peter High, president of the CIO advisory firm Metis Strategy, “you need to simplify the infrastructure in ways that will make sure that the foundation that you are laying can be built upon with much greater confidence. That’s number one.”

Where are they going?

But what about IoT initiatives that companies are planning to implement? In many cases these future plans draw on the wisdom, lessons, and data of previous IoT projects.

From such “table-stakes” initiatives as cloud storage and mobile payments (essential for traditional retailers and hotels to compete with online disruptors), we see a move toward more ambitious leveraging of IoT data and network capabilities (real-time analytics, customer-facing mobile apps, smart meters, etc.). Figures 6 and 7 illustrate this progression in IoT ambitions.



Percent of industry IoT initiatives completed or piloted

Top IoT initiatives completed or in pilot stage, by industry


Top IoT initiatives completed or in pilot stage, by industry


Top IoT initiatives completed or in pilot stage, by industry

Base Size: Manufacturing = 309; Local Government = 309; Retail/Hospitality = 302; Energy = 307; Transportation = 307; Healthcare = 311



Percent of planned industry IoT initiatives

Top planned IoT initiatives by industry


Top planned IoT initiatives by industry


Top planned IoT initiatives by industry

Base Size: Manufacturing = 309; Local Government = 309; Retail/Hospitality = 302; Energy = 307; Transportation = 307; Healthcare = 311


An organization might, for example, set an ultimate goal of connecting devices to artificial intelligence, but it won’t happen before the foundational elements of IoT are in place.

The good news is that even early IoT capabilities drive great benefits. Cloud storage may not be as visible as, say, smart parking or self-driving vehicles, but it links disparate networks and data sources. When digital signage accesses traffic data from the cloud, for example, it can provide realtime information on road conditions. And in a hotel or retail store, IoT sensors combined with pervasive Wi-Fi drive efficiency and productivity for workers. All of which creates better customer service.

The progression from early to more complex initiatives highlights the importance of taking a phased approach to IoT.

Smart utility meters, as well, are often introduced in a limited capacity. Ultimately, they could impact business models, by enabling dynamic pricing tied to peak times of consumption. But by initially offering more detailed data on those consumption patterns, they provide utilities with a much clearer picture of when spikes in demand will occur.

Of course, inflexible legacy architectures, a lack of consistent standards, and interoperability challenges will drag down even initial IoT implementations.

“The network is really a platform for us to build the future,” said Jeff Eckard of International Hotels Group, “We’re going from seamless, turbo-charged connectivity around the globe to layering on the Internet of Things.”

Key steps to IoT value

1. Tap the partner ecosystem, early and often

What is slowing IoT progress? Key obstacles include time to completion, quality of data, lack of internal expertise, IoT solution integration, and budget overruns.

And, of course, complexity.

IoT initiatives can be hamstrung by everything from inadequate network or compute capabilities to underestimating the skill sets and resources required to develop and scale a project. A lack of consistent standards, along with legacy architectures that can’t interoperate with new technologies, also slow progress.

60% of respondents stressed, IoT initiatives always look good on paper but prove much more difficult than anyone expected.

IoT initiatives can be hamstrung by everything from inadequate network or compute capabilities to underestimating the skill sets and resources required to develop and scale a project. A lack of consistent standards, along with legacy architectures that can’t interoperate with new technologies, also slow progress.

Engaging outside expertise is a top success factor globally and across all industries. In one, transportation, it was cited as the top factor among those who deemed their IoT initiative a complete success.

Our study also found that the most successful organizations engage the IoT partner ecosystem at every stage. They used partners beginning with strategic planning and design and architecture through to maintenance, technical consulting, and data analytics after rollout.

Since 74 percent of global respondents viewed strategy and planning as the most relevant phase to their ultimate success, it’s no surprise that engaging the right vendors early on also loomed in importance.


Companies with successful IoT initiatives engaged outside vendors in each phase

Base Size: Those who considered their IoT initiative a complete success = 482; All others = 1,363


A full 60 percent of companies with successful IoT initiatives engaged outside vendors in the strategic planning phase. This rose to 68 percent in local government, and 65 percent in healthcare. Among successful manufacturers, the highest number (63 percent) turned to external vendors during the implementation and deployment phase, while 59 percent engaged during strategic planning.

Again, the best practices of successful IoT organizations underscore the critical importance of engaging with outside expertise in the earliest stages of a project — to eliminate guesswork and enable initiatives to scale smoothly.

For some organizations, this may go against tradition. Many IT organizations pride themselves on their own capabilities, while keeping costs down. So, it’s not always easy to engage outside help.

To cite one example, many organizations are not prepared for the onslaught of data that floods in from IoT initiatives, whether from video, Wi-Fi, social media, sensors on physical objects, or combined sources. Turning that data into real-time insights that are easily accessed through a “single pane of glass” solution is essential — but beyond the internal capabilities of many organizations.


“You have to embrace partners. You have to bring more folks to the table. In our case, it was Cisco, it was Sprint, it was Exact, it was Smart City Media. It was our area transit authority. It was three different fiber providers. It was a whole host of folks, all of whom had a stake in making sure that this city is ready for the next 20 years.”

Bob Bennett, chief innovation officer, Kansas City, Missouri


2. If security isn’t a top priority, make sure it is

Cybersecurity didn’t rank as a major factor slowing IoT progress according to survey respondents, but that doesn’t mean it’s not keeping business and technology leaders up at night. If you aren’t anticipating the importance of security from the very beginning, you’re setting yourself up for a rude awakening further down the line. It’s not a question of whether you’ll be compromised, but when.

Moreover, security strategies must be more than defensive. Security is essential to your organization’s confidence moving forward, and enables the bold, innovative culture that encourages risk-taking. In that sense cybersecurity is a true growth enabler.

In the IoT environment, new security strategies are essential. Given the complexity of the IoT ecosystem, with its ever-expanding endpoints and mobile users, it’s no longer possible to rely on a walled-garden approach. In this environment, pervasive security must span the edge of the network, a task that in most cases will demand partner expertise.

In short, just as IoT is an ecosystem play, so too is IoT security.


3. Know what you are looking for, and leverage data right from the start

IoT is all about data. And data leads to clear goals and metrics on progress. The most successful organizations established clearly defined key performance indicators (KPIs) and business outcomes from the start of their IoT projects — and continued to leverage data throughout the process.



KPIs varied by stage, but were critical to success


Base size: Total Global = 547 – 1,374

As a Chicago enterprise executive stated at a Cisco focus group: “The research process starts with: What is the outcome that we want? What is the outcome that we expect to achieve here? Is it increased revenue? Is it a new line of business? Is it half the head count to do the same work? I mean that’s transformative.”

In the strategy and planning phase, our survey respondents cited budget and time as key indicators that led to success. Further on, they leveraged data to measure progress in the design and pilot rollout phases. As the initiatives began to be scaled more fully, integration and analysis of data was leveraged to track the impact on revenue, customer experience, and operational efficiency. In the refinement phase, KPIs were focused on tracking the impact on all major areas of the business.

87% of those who considered their IoT initiatives a complete success knew that they would leverage data from the outset of the project.

Organizations must know how to create value as data begins flowing in from their IoT initiatives. This emerged as a key success factor for IoT projects as they scale. While 59 percent of organizations overall reported using IoT data when moving from pilot to production, this number increased to 72 percent for the most successful ones.

Without clear definitions of what constitutes success at every stage, progress can lag. This may be partially responsible for some interesting results in our country breakdown. We found that U.S. firms were most likely to move through implementation stages without delays. In the United Kingdom, most delays occurred during rollout and while scaling. India faced the most significant challenges and delays, especially during the latter phases.



Successful companies are far more likely to use IoT data when moving from pilot to production

Base Size: Those who considered their IoT initiative a complete success = 482; All others = 1,363

In the end, all stakeholders — whether business, IT, financial investors, or executive leadership — must agree on the definition of success. And the strategic plan must be business-outcome centric and end-user focused. Goals could be increased productivity, lower expenses, new offerings, greater efficiency, or improved citizen or customer experience. Regardless, it’s essential that all agree on the definition and metrics of success.

“I see one of my principal responsibilities,” said Nick Rockwell, chief technology officer of the New York Times, “as making sure that we’re completely aligned, in our case, both to the goals of the newsroom and the goals of the business. But any gap that shows between what we as technologists think we should be doing and what the business is committed to doing is just going to end badly, and it’s going to spell trouble.”


4. Don’t neglect the human factor

IoT may sound like it’s all about technology, but human factors — culture, organization, and leadership — loom large in any IoT success story.

For starters, people-related outcomes are key drivers for undertaking IoT projects. Among those cited by global survey respondents were employee satisfaction (59 percent), enabling a mobile workforce (49 percent), and employee productivity (38 percent). These percentages were mostly consistent across industries.

The ultimate success of those initiatives transcended pure technology as well. In Cisco’s survey, this comes through in three of the four top factors behind those IoT initiatives considered most successful:

  • Collaboration between IT and the business side was the number one factor, as cited by 54 percent of survey respondents.
  • A technology-focused culture, stemming from top- down leadership and executive sponsorship was cited by 49 percent.
  • IoT expertise, whether internal or through external partnerships, was favored by 48 percent.

In short, organizations with the greatest success at implementing IoT initiatives have a culture focused on technology at the highest levels, while relying on experts from both inside and outside the organization.

Guy Brassard, CIO of Southwire, a leading cabling manufacturer, spoke of bringing IT, business, and outside experts to the table, literally.


Without buy-in from the leadership team, the whole company suffers.

“Imagine us around a table,” he said. “I’ve got partners that are specialists, who have international reach, which we need. I’ve got IT folks that understand extremely well the legacy system, but understand what the talent gaps are. The third party is the business people, who know what they want out of the system. So, all three parties understand what each other can bring to the table.”

Smart companies also gain executive sponsorship of IoT initiatives in the earliest stages, to offer critical investments and support. Indeed, a full 71 percent of surveyed organizations believed that executive support is necessary to move IoT initiatives past project hurdles.

One way to capture and keep executive sponsorship is with clear metrics of success. Once goals are set, the leadership team knows what outcomes to expect. And the earlier data and benefits begin to flow in, the sooner their decisions will be affirmed. From there, continued support, investment, and resources are more likely to ensure that the project continues to scale.

Without buy-in from the leadership team, the whole company suffers. An executive from a midmarket New York firm complained of just such a problem at a Cisco focus group: “Our CEO and every executive there, they’re not really in tune with new technology in their industry because our industry has been doing the same thing the same way.


5. Align your IT organization and the business

Despite strong agreement on the importance of collaboration among IT and business decision-makers, they don’t always see things the same way.

IT and business decision-makers set out with the same goals for their organizations: to streamline operational efficiency, enhance customer experience, and improve product and service quality.

But despite the shared importance of collaboration between IT and business units — it was considered the most critical success factor regardless of country, role, or company size — there remains a disconnect between technology and business outcomes:

  • IT decision-makers place more importance on technologies, organizational culture, expertise, and vendors.
  • Business decision-makers place greatest emphasis on strategy, business cases, processes, and milestones.

As Figure 11 illustrates, there was also a disconnect in how each group perceived the success of IoT initiatives.



IT and business decision-makers have different views of IoT success

Base size: ITDMs = 1,014; BDMs = 831
Base size: ITDMs = 751; BDMs = 603

In an IoT world, it’s essential for IT to gain a better understanding of customers and business outcomes. Beyond its basic (and ever-important) mission to “keep the lights on,” IT is increasingly tasked with driving innovative new customer experiences and methods of capturing customer insights. The disconnect in the survey numbers indicates that IT decision-makers may not be as aligned with their business colleagues — and the ultimate success of their technology initiatives — as they may think.

Again, alignment between IT and business must begin at the earliest stages of an initiative, along with outside expertise. Often an outside vendor with deep industry experience can provide an objective view of what is possible and what goals should be set. If metrics for business success are clear, early benefits or savings can be leveraged to help fund and drive momentum for subsequent phases and scaling.

In a Cisco focus group, a New York enterprise leader expressed the importance of IT-business unit alignment this way: “It’s all about the business. You need business leadership. As a matter of fact, I would argue with you that it’s business-led IT. It needs to be business-led. It needs to be linked to the strategic plan.”

6. Experiment, and learn from your mistakes

Though organizations have much to learn from one another, there’s simply no substitute for direct experience.

More and more, success depends on a willingness to try out new ideas. In Cisco’s survey, the most successful organizations undertook more initiatives across the board. But while they started and completed more, they also had two to three times as many stalled or failed initiatives.

In addition, 85 percent of those who were successful agreed or strongly agreed that “learnings from stalled or failed initiatives helped accelerate our investment in IoT,” compared to 57 percent among everyone else.

A clear idea of the desired outcomes, a solid alignment between business and IT, and outside help will lessen those failures. But some missteps will be an inevitable part of the journey to IoT value. Smart organizations will turn them into an advantage.


Companies that are most successful with IoT are trying—and failing at—more initiatives


Base Size: Those who considered their IoT initiative a complete success = 482; All others = 1,363


Reap the benefits

Reap the benefits

When critical success factors come together, organizations are in position to reap a windfall in smart-data insights.

Again, those benefits accrue whether the initiatives are foundational or more advanced. But it’s still important to compare the advantages between companies with more successful IoT projects and the rest of the pack.

Those with successful IoT initiatives were far more likely to build the kinds of transformational capabilities that allow them to respond to — or drive their own — disruption. That is, those capabilities that go beyond operational benefits, to alter the way companies do business. That can mean leveraging data to enable new ways of understanding and interacting with customers, creating new revenue streams, identifying disruptive new business models, and so on.



Successful companies are driving impact from IoT data

Base Size: Those who considered their IoT initiatives a complete success = 339; Total Global = 1,354


Given these kinds of advantages, smart companies build foundational IoT capabilities and then expand their scope and ambition.

“We have deployed temperature and humidity sensors at certain key areas of our shop floor and our warehouse,” said Michael Spandau, senior vice president for global information services at Fender Musical Instruments. “They make a big difference, and they are used to monitor a particular area and send alerts if a particular threshold is being exceeded.”

But Spandau is looking beyond those initial IoT initiatives. He envisions sharing IoT data throughout the company’s partner ecosystem, including the makers of industrial machines that carve and paint Fender guitar necks and bodies.

“We are having a lot of discussions with our manufacturing facilities about implementing additional IoT devices,” he said, “and we have plans to extend some of these sensors to our OEM manufacturers.”

Such benefits are the realization of the IoT promise: combine automation with analytics to create insights that drive action. That includes decision-making, which, if not fully automated, is empowered with real-time insight. These outcomes also arise from greatly enhanced visibility, the result of sensors, smart metering devices and other connected “things” that can sense, measure, and even act on the data.

When done correctly, IoT accelerates processes, allowing organizations to respond faster to customer desires, citizen demands, patient needs, or market disruptions. While improving the lives of workers. The end result is a highly competitive organization that can drive its own disruption.

Culture and leadership are critical to IoT success. A culture that rewards bold innovation and risk taking, while accepting some degree of failure as an inevitable part of the learning process, is in a better position to win.

When done correctly, IoT accelerates processes, allowing organizations to respond faster to customer desires, citizen demands, patient needs, or market disruptions.

So, too, is an organization whose leadership commits to the foundational elements of IoT, like an agile modernized network and cloud, then leverages the right expertise from inside and outside the company. As we have seen, these elements can make the difference between an IoT initiative that flourishes at scale or flounders in the early stages.

Despite the challenges, many in our survey are optimistic for the future of IoT — a trend that, for all its forward momentum, is still in its nascent stages of evolution.

For companies with forward-looking IoT strategies, the benefits are clear.

“Before they implemented IoT,” said Maciej Kranz, vice president of Cisco’s Corporate Strategic Innovation Group, “Harley-Davidson used to take 18 months from the time they took an order for a custom bike till the time they finished building the product. Then they connected and optimized all of their operations, and reduced this time to two weeks. That’s IoT in action.”

Top tips for winning at IoT

Build the Foundation

Given IoT’s complexity and data intensity, an upgraded, agile network, along with cloud access and storage, are essential first steps.


Bridge the IT-BU Schism

The business understands business outcomes better than IT. IT must align with the business side before any initiative gets rolling.


Know What Success Means

Be sure that success metrics and KPIs are clearly defined. At the start.


Don’t Do It Alone

Successful IoT initiatives employ internal and external expertise at every stage of implementation, from planning and strategy to data analytics.


Learn from Your (Inevitable) Mistakes

Create a culture in which bold innovation is rewarded and mistakes are seen as valuable learnings.


Let Benefits Beget More Benefits

When data, savings, or productivity increases show up in the early stages of an implementation, be sure they drive continued investment and executive buy-in.


The authors gratefully acknowledge the important contributions of the following people to the development of this paper:

Bob Bennett

Joseph Bradley

Guy Brassard

Braeden Chicase

Jeff Eckard

Jessica Hill

Shaun Kirby

Stefanie McCann

Inbar Lasser-Raab

Luisa Rebolini

Rick Ripplinger

Nick Rockwell

Michael Spandau

Duval Yeager