Internet of Things (IoT) and Week 4
Digital Transformation
Learning Objectives
Understand IoT capabilities and how they create business value
Analyse IoT impact on:
• Business functions
• Customer relationships
• Supply chains
Explain IoT-driven servitised business models
Discuss privacy and security risks
Identify implementation challenges
Apply an IoT implementation framework
What is Internet of Things (IoT)?
The Internet of Things (IoT) refers to
connecting physical devices (machines, cars,
sensors, wearables) to the internet so they can
collect data, share data and respond automatically.
Examples: Smart Devices, Smartwatch,
Smartlocks, SmartFactories, SmartHomes, Smart
logistics, etc.
IoT and Digital Transformation
Using digital technologies to create significant changes
in:
• business processes:
• products and services
• business models
IoT is a major digital technology because it generates
continuous data, it enables real-time decision making
and allows automation and predictive systems
Devices / sensors
Connectivity
Data collection
Key Building Cloud infrastructure
Blocks of IoT
Analytics / AI
Applications (dashboards, automation)
Security layer
real-time tracking (Monitoring)
remote monitoring (Continuous
Product Improvement)
remote control (Automation)
Core IoT
Capabilities predictive maintenance (Fix before
breakdown)
automation of decisions
data-driven product improvement
(Continuous Product Improvement)
Impact of IoT in Business Function
OPERATIONS / MARKETING HR FINANCE
PRODUCTION
CUSTOMER PRODUCT
SERVICE DEVELOPMENT
IoT and Customer Relationship
Real Time feedback
Improve Customer Experience
Data as Relationship Assets
IoT in Supply Chains
IoT improves supply chain performance through:
• real-time shipment tracking
• warehouse automation
• inventory monitoring
• better supplier coordination
• faster logistics decision-making
IoT influencing Business Models
Servitisation of Business:
• From Product Selling to subscription based
business.
• IoT makes service models measurable and
manageable.
Example: Instead of Selling Compressor, sell
compressed air as a service.
Discussion: Benefits?
Business Model Innovation Through
IoT
IoT allows firms to shift from:
One-time transaction model
To
Continuous revenue model
• Any futher Suggestions?
Security Issues with IoT
IoT collects sensitive information such as, location
data, health data, customer behaviour data,
household habits, industrial performance data.
In IoT, many devices are connected, More
connected devices can lead to larger attack surface.
Discussion: Real-World IoT Security Risks
Challenges in IoT Implementation
High initial cost
Lack of digital infrastructure
Lack of technical expertise
Data overload (too much data)
Poor integration with legacy systems
Resistance to organisational change
Framework for IoT Implementation in
Digital Transformation
Step 1 – Identify Strategic Business Value
Step 2 – Develop IoT Capabilities
Step 3 – Process and Business Model Transformation
Step 4 – Manage Risk (Security + Privacy)
Step 5 – Continuous Improvement
Case Discussion
Intelligence (AI) in Digital
Transformation: Capabilities, Risks
and Ethics
Artificial Intelligence (AI)
• AI simulates human intelligence using:
• algorithms
• data
• digital technologies
AI performs tasks normally requiring human intelligence:
• reasoning
• learning
• perception
• language understanding
AI models take inputs, process calculations, produces outputs.
Example: Loan approval decision based on income, age, expenses.
AI Categorisation
Intelligence level
Technology used
AI can be categorised by:
Function / type of
application
This helps managers select the correct AI tool for
business needs.
Intelligence Level
(1) Artificial Narrow Intelligence (ANI)
• Performs one specific task
• Example: Siri, Alexa, ChatGPT
(2) Artificial General Intelligence (AGI)
• Human-level intelligence across tasks
• Still hypothetical
(3) Artificial Super Intelligence (ASI)
• Beyond human cognitive capability
• Self-aware and conscious
• Could potentially make humans redundant
AI Technology Categories
Technology Typical Business Use
Machine Learning Marketing analysis
Deep Learning Self-driving, voice recognition
Neural Networks Credit & loan approval
NLP Translation, speech recognition
Expert systems Insurance underwriting
RPA Automated digital workflows
Robots Warehousing, production tasks
AI Categorisation by Function
Conversational AI
• Chatbots and virtual agents
• Uses human-like communication
Biometric AI
• Facial recognition
• Fingerprint recognition
• Retina scanning
Algorithmic AI: Machine-learning trained models for narrow
tasks
Robotic AI: Physical robots with sensing + learning
Fixed algorithms
• Do not change after release
• Strongly controlled and regulated
Fixed vs Adaptive algorithms
Adaptive • Learn continuously
• Retrain using new real-world data
Algorithms
• Useful when the environment is changing
Example: Adaptive models may become
common in medicine once regulators approve
updates.
How AI Transforms Business
1. Autonomy: AI can make decisions without human involvement.
Examples: loan approvals, medical diagnosis, product design idea generation.
2. Improves Performance: AI improves through experience and data analysis.
3. Increasing Scope: Entertainment industry, Controlling workplace temperature, product
design, etc.
4. AI in Sustainability and Circular Economy: Generative design to reduce material waste,
Better recycling traceability, Optimisation of resources.
5. Process Transformation: Marketing Automation, Fraud Detection
6. Product Transformation: AI-powered cars, Capability enhancing.
7. Capability Destroying: Makes existing skills obsolete, changes competition, threaten job
roles and legacy firms.
8. Marketing Transformation: Machine learning enables segmentation, customer profiling,
prediction to reactions to promotions.
9. Finance Transformation: AI is able to detect fraud, it does risk evaluation, transaction
monitoring.
10. AI in legal Profession: AI being used for contract analysis, due diligence, litigation
preparation, legal research.
Risk of Applying AI in Business
Algorithmic transparency: Decision making by Modern AI
cannot be fully understood, legal action risk, especially in medicine,
law and finance.
Algorithmic bias: Bias occurs when AI inherits unfair patterns
from training data. It is one of the most serious ethical risk.
Changing operating environment: AI models can fail, when real
world conditions change. Example: credit scoring trained in growth
economy fails in recession.
Core Ethical Concerns: Transparency and explainability, privacy
and surveillance, discrimination and bias
AI Risk Increases with Autonomy: accountability becomes
unclear, Dependability.
Framework: Integrating Business,
Technical & Ethical Issues
Framework that integrates Business, Technical
and ethical issues involved in implementing AI
in a digital transformation context:
• Planning Phase
• Implementation Phase
• Evaluation and Improvement Phase