By blending physical and digital realms, the Internet of Things (IoT) vastly expands the reach of information technology. The myriad possibilities that arise from the ability to monitor and control things in the physical world electronically have inspired a surge of innovation and enthusiasm. The sweeping changes that IoT can bring to how companies manage physical assets, how consumers attend to their health and fitness, and how cities operate have also inspired visions of a very different future, as well as a good deal of hype. McKinsey has been involved in the Internet of Things over the years and we have seen how rapid advances in technology and know-how have exceeded our expectations\u2014and yet how difficult it will be to obtain the greatest benefits of IoT implementations, which require creating highly complex systems and coordinating technology, investment, and talent across both space and time. This research is a collaboration between the McKinsey Global Institute and McKinsey\u2019s Telecommunications, Media, and High Technology Practice. It builds on more than five\u00a0years of previous research as well as knowledge developed in work with clients across industries. Our goal has been to determine more clearly how IoT applications create value for companies, consumers, and economies. To distinguish between the hype and the reality, we focus on actual \u201cuse cases\u201d that exist today or are likely to be implemented in the next 10\u00a0years. We also estimate potential value using a \u201csettings\u201d perspective\u2014how IoT technology is used in physical environments such as cities or factories. This allows us to see how much additional value can be captured when IoT applications interact with one another and with other information systems.<\/p><\/blockquote>\n
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