The Internet of Things (IoT) is an increasingly prominent concept in today’s digital transformation landscape. According to Wikipedia, the Internet of Things refers to “devices with sensors, processing ability, software, and other technologies that connect and exchange data with other devices and systems over the Internet or other communication networks. The Internet of Things encompasses electronics, communication, and computer science engineering. ‘Internet of Things’ has been considered a misnomer because devices do not necessarily need to be connected to the public internet; they only require connectivity to a network and the ability to be individually addressable.”
As organizations continue to adopt IoT technologies, it becomes increasingly important to evaluate the financial impact of these investments. Specifically, assessing the Return on Investment (ROI) of IoT initiatives is critical to determining their effectiveness and long-term value.
To accurately measure ROI, it is essential to first define the key metrics and success criteria that will be used. Establishing a clear “as-is” baseline is crucial prior to implementation, allowing organizations to track improvements and validate the benefits achieved through IoT deployment.
Below are several suggested metrics for measuring the ROI of IoT projects. While it may not be feasible to adopt all of them, organizations should select those that are most relevant and appropriate for their specific use case.
| No. | Metric | Details |
|---|---|---|
| 1 | Asset Utilization | Evaluate and optimize the usage of industrial equipment to ensure assets are operating at maximum efficiency. |
| 2 | Customer Satisfaction | Monitor improvements in customer satisfaction as a result of enhanced product quality, faster delivery times, or other value-driven outcomes enabled by IoT. |
| 3 | Cycle Time Reduction | Measure the reduction in time required to complete manufacturing cycles, which supports increased operational agility and responsiveness to market demands. |
| 4 | Downtime Reduction | Track reductions in unplanned downtime by leveraging IoT to monitor equipment health and enable predictive maintenance. |
| 5 | Energy Efficiency | Analyze energy consumption to identify opportunities for cost savings and efficiency improvements, especially as energy costs continue to rise. |
| 6 | Overall Equipment Effectiveness (OEE) | Assess equipment performance by tracking availability, performance, and quality. Enhancing OEE significantly contributes to the overall ROI of Industrial IoT (IIoT) projects. |
| 7 | Quality Improvement | Leverage IoT data to detect and resolve quality issues in real time, reducing defects and waste. Integration with Six Sigma practices can further enhance quality outcomes. |
| 8 | Supply Chain Visibility | Improve supply chain transparency by monitoring the real-time status of raw materials, work-in-progress, and finished goods. Enhanced visibility enables better management and timely decision-making. |
Note: It is recommended that these metrics be discussed and agreed upon with relevant business units to ensure alignment with organizational goals and operational priorities.
From a Governance, Risk, and Compliance (GRC) perspective, the establishment of appropriate metrics also supports regulatory adherence and provides operational teams with clear direction aligned to business requirements.
Conclusion
The implementation of Internet of Things technologies presents significant opportunities for operational optimization, cost savings, and enhanced service delivery. However, the success of such initiatives hinges on the ability to clearly define, track, and measure meaningful ROI metrics. By adopting a fit-for-purpose approach to performance measurement—tailored to each organization’s unique context—businesses can better justify their investments, guide continuous improvement, and ensure long-term value creation from their IoT strategies.
To learn more about how IoT can create measurable business impact for your organization, we welcome you to connect with one of our trusted consultants. Please reach out to us at info@cybiant.com to arrange a consultation.
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