The Internet of Things (IoT) is all about Internet-connected devices. It’s a huge and important technology trend that is catapulting new services and innovation in various industries including energy, healthcare, retail, and manufacturing. Like all technology, IoT needs to offer incremental value, which must exceed the cost and time savings required to harness its potential. In the IoT evolution, are we there yet?

The value stack of IOT can be thought of as having four layers:

Two-Way Data Transmission is the foundation of the IoT value stack. The ability for a device to exchange data packets with a remote server is, by definition, the only layer needed to be part of the IOT ethos. Regardless of how that device connects to the Internet whether it be Wi-Fi, ZigBee or Z-Wave, as long as it is able to both send and receive packets from a remote server, you’ve done it – you have added a new device to billions of its brethren’s. For example, if the Thing you connected was a light bulb, then you will be able to monitor its status – if it’s currently on or off.

The value in this layer is data exchange, such as a monitor. The healthcare industry is a heavy player in this space. Using the Internet as an enabler of remote monitoring is big business. All of a sudden a specialist does not have to be in the same building (or country) as the patient. Data feeds can be transmitted in near real time.

The business model in this layer is all about the hardware, internal communication components, and device management that lives in the cloud. It is no small feat to keep a thing continuously connected, extract a specific data set, and then send it across multiple layers of protocols and into the hands of the user. Today, companies are spending and making billions off this piece of critical infrastructure.

User to Machine (U2M) Remote Access/Manipulation is the second IoT layer. When we talk about user to machine, a user is not restricted to be being a person; it can also be another device or thing. Utilizing the foundation of the two-way data transmission layer, a defined set of control signals can be sent from the remote server to the device, and the device responds accordingly. The connected light bulb just got a little more interesting. Now you can both monitor its status and use your smartphone as the long-range remote control to turn the light bulb on and then off.

Within the consumer space, this new revolution of remotely connected things has significant momentum but it pales in comparison to the wave of innovation out of the manufacturing, mining, oil and gas, transpiration, or utility industries.

The value of manipulating the thing just increased substantially, but is it enough to recover the cost of investment? Is it worth it? And what else can be accomplished with a thing I can communicate with via my phone?

The third layer is Data Conversion to Knowledge. What if every time your light bulb turned on and off, the data was stored on a remote server? The combination of a talented data scientist and one of the many increasingly common big data analytics packages, the data could reveal patterns and insights. These insights can be repurposed to inform and educate about the individual thing or in aggregate for a collection of things.

The value is not necessarily with the user of the thing, but rather in the benefactor of the insights. For example, by knowing the usage patterns of the light bulb, the construction of future light bulbs could be improved, and user behavior could be altered to maximize light bulb longevity or perhaps predict when the light bulb may need to be replaced.

Machine to Machine (M2M) Adaptive Control is the final and highest is the IoT value stack. By maximizing the potential of the three previous foundation layers, exponential value can be achieved. M2M adaptive control utilizes the knowledge and understanding that comes from crunching all that raw big data with the ability to remotely manipulate the thing. The opportunity is not about how to manipulate the thing, but rather when and by how much.

Now that the light bulb has become “smart,” does it offer greater value than one produced 150 years ago? The bulb still turns on and provides light as before, so what is the incremental value? To get this right, we have to go back to understanding what the end user values. It could be convenience, it could be reduction in operating cost, or it could be both. If this new connected and “smart” thing obtained awareness of when it should be on or off, it is conceivable that it could automatically and effortlessly reduce its operating cost, increase its usable life, and even add a level of convenience to the end user of not having to use a phone to turn it on and off. This layer is all about automation.

The IOT space is full of “we do because we can” initiatives. But it is the combination of connectivity, data management, and analytics that create the opportunity for hardware and software to meet its full potential of providing the end user the benefit of self-correcting operational efficiency.