Finding Europe's Edge in the Internet of Things

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Technology providers in the US seem to have captured a great deal of mindshare around the promise and possibilities of the Internet of Things. European technology providers, however, are no less enthusiastic about the IoT’s potential, even if they have been less assertive in promoting their vision to a global audience. In fact, research by Bain & Company finds that in many cases, executives in Europe are more ambitious and optimistic about their plans to deploy and integrate IoT solutions than their American peers, particularly in industrial and commercial applications. Interestingly, we also identified significant differences in the ways that executives in the two regions view the opportunities. 

First, Bain’s research finds a greater percentage of European executives plan to deploy IoT solutions over the next few years than their colleagues in other regions. In a survey of 500 executives across industries in Europe and the US, 27% of European executives said they are implementing or have already implemented IoT and analytics use cases, compared with 18% of US executives. Fully one-quarter of the Europeans plan to implement IoT solutions in multiple cases and integrate them with their IT systems by 2020, compared with 16% of the US executives. These numbers suggest European firms are further along in their journey from experimentation to a real commitment to integrate and scale, moving from pilots and trials to scale deployment.

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Second, Europeans and Americans appear to want different things out of the IoT:

Improved quality of existing products

Among executives who emphasized cost reductions from IoT, about two-thirds of European executives are enthusiastic about the potential to improve the quality of existing products based on IoT technologies and advanced analytics, while only about one-third of the American executives rate such quality improvements as a priority.

Cost reduction

On the other hand, three out of four executives in the US said they expect IoT and related analytics to help them reduce waste and input costs, while only 35% of Europeans highlighted this advantage. These differences suggest that because European executives are ahead in implementing IoT technologies, they may have a clearer view of what they want to pursue. European companies value their international reputation for superior quality and distinctive innovation, and executives want to use the IoT to extend their lead.

Security

Bain research also finds European executives more focused on security as a primary concern than are executives in the US. When asked, 39% of IoT customers in Europe rated security concerns as a major obstacle to IoT adoption, compared with 27% of US customers.

Compliance

The groups differed on their concerns over compliance, too, with 22% of Europeans rating regulatory barriers as a top barrier, while only 8% of US executives did. This awareness could become a competitive advantage for European firms as they develop cost-effective solutions that comply with a wide range of regulatory regimes and a user base that takes a sophisticated stance on security and privacy issues.

IT budget

Finally, our survey found some industries devoting more of their IT budgets to IoT in Europe than their counterparts in the US. For example, automotive executives in Europe are allocating 24% of their IT budgets to IoT, compared with only 19% of IT budgets within the US automotive industry. In retail, industrial and buildings, the percentages are also higher in Europe. As vendors respond to meet this demand, vertical solutions are likely to develop more rapidly in Europe than in other regions, particularly in some of the region’s traditional stronghold industries.

European executives should move rapidly and decisively to capitalize on these competitive advantages. Providers of IoT technology will not only have to get up to speed with their ability to develop and deploy IoT solutions (whether on their own or through acquisitions), but they also need to improve their understanding of their customers and their businesses, in order to ensure they provide solutions that boost their customers’ bottom line.

Among industrial and commercial customers, the changes will be no less dramatic. In many cases, these companies will need to adapt their business or operating models in order to avoid being disrupted by competitors—from Europe or elsewhere—who devise new and more compelling ways to engage their customers.

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