Lesson 1: Internet of Things (IoT)

Welcome to Lesson 1. In this first section, you are going to learn what Internet of Things means.

Before we start, please have a look at what your virtual assistant wants to say:


Internet of Things can be identified probably as the core technology on which Industry 4.0 is founded: the interconnectivity of a wide range of different systems to exchange data in real time to improve the system efficiency and productivity.

The Internet of things (IoT) is the network of devices that contain electronics, software, actuators, and connectivity which allows these things to connect, interact and exchange data. IoT involves extending Internet connectivity beyond standard devices to any range of traditionally non-internet-enabled devices and everyday objects.

In the article published by the Economist “Siemens and General Electric gear up for the internet of things”, it is pointed out that linking the physical and the digital worlds via the IoT could create up to $11 trillion in economic value annually by 2025, estimates the McKinsey Global Institute. A third of that could be in manufacturing (01).

Engineering.com conducted a research sponsored by Siemens PLM Software, regarding the importance of IoT in Product Development (02). To develop this research report, 234 product development professionals have ben surveyed about their company’s intentions regarding adding IoT functionality to their products. The respondents came from a wide range of industries, representing processed goods, component and part manufacturers, and finished goods OEMs.
Here are a few highlights:

State of IoT
Figure 1: How important do you believe it to be for your company to adopt IoT functionality for your products? Scale ranges from 1-not important at all, 2-slightly important, 3-moderately important, 4-very important, or 5-extremely important. Source: Research Report: The State of IoT Adoption in Product Development 2019, Engineering.com, 2019, page 9

The importance of interconnect systems can be summarized in 4 concepts:

Data-driven decision making


Data-driven decision making involves making decisions that are backed up by hard data rather than making decisions that are intuitive or based on observation alone. As business technology has advanced exponentially in recent years, data-driven decision making has become a much more fundamental part of all sorts of industries, including important fields like medicine, transportation and equipment manufacturing.


The importance of communication in an organization can be summarized as follows:

  1. Communication promotes motivation by informing and clarifying the employees about the task to be done, the manner they are performing the task, and how to improve their performance if it is not up to the mark.
  2. Communication is a source of information to the organizational members for decision-making process as it helps identifying and assessing alternative course of actions.
  3. Communication also assists in controlling process. It helps controlling organizational member’s behaviour in various ways. There are various levels of hierarchy and certain principles and guidelines that employees must follow in an organization. They must comply with organizational policies, perform their job role efficiently and communicate any work problem and grievance to their superiors. Thus, communication helps in controlling function of management.

Using the same analogy, the importance of communication between physical assets can be described as follow:

Just in Time

JIT is a methodology aimed primarily at reducing times within production system as well as response times from suppliers and to customers. Its origin and development was in Japan, largely in the 1960s and 1970s and particularly at Toyota. Since within IoT systems communicate and share data in real-time, there is no waste of time between the sending and the receiving of the information. Moreover, IoT implies the use of other I4.0 technologies like e.g. AI and Autonomous robots so actions can be taken autonomously with almost no additional time required.


The downstream operations are influenced by upstream processes. Therefore, upstream changes mean effectively that downstream processes need to adapt themselves to new operating conditions. Techniques like Six Sigma, for example, aim to to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). However, especially in the context of high-personalization production, where products variation is increasingly higher, to achive this target is simply not cost effective. In this sense, IoT technologies will create a new process paradigma, where flexible and adaptable process will deliver high-quality products with less human effort.

History of Internet of Things

  • 1982

    The concept of a network of smart devices was discussed as early as 1982, with a modified Coke machine at Carnegie Mellon University becoming the first Internet-connected appliance able to report its inventory and whether newly loaded drinks were cold.

  • 1991

    Mark Weiser's paper on ubiquitous computing, "The Computer of the 21st Century", as well as academic venues such as UbiComp and PerCom produced the contemporary vision of IoT. In 1994, Reza Raji described the concept in as "[moving] small packets of data to a large set of nodes, so as to integrate and automate everything from home appliances to entire factories".

  • 1999

    The term "Internet of things" was likely coined by Kevin Ashton of Procter & Gamble, later MIT's Auto-ID Center, though he prefers the phrase "Internet for things". He viewed Radio-frequency identification (RFID) as essential to the Internet of things.

Industrial Internet of Things (IIoT)

IIoT is simply the application of IoT to industrial applications, including, but not limited to, manufacturing and energy management. Despite IoT, IIoT history begins earlier, in 1968, with the invention of the programmable logic controller (PLC) by Dick Morley, a General Motors employee. With the introduction of Ethernet in 1980, people began to explore the concept of a network of smart devices, and IoT era then started with the Coke machine, as explained before.

One of the first consequences of implementing the IIoT would be to create instant and ceaseless inventory control. Another benefit of implementing an IIoT system is the ability to create a digital twin of the system. Utilizing this digital twin allows for further optimization of the system by allowing for experimentation with new data from the cloud without having to halt production or sacrifice safety, as the new processes can be refined virtually until they are ready to be implemented. A digital twin can also serve as a training ground for new employees who won’t have to worry about real impacts to the live system.


01) Siemens and General Electric gear up for the internet of things, https://www.economist.com/business/2016/12/03/siemens-and-general-electric-gear-up-for-the-internet-of-things, 3 Dec, 2016

02) Research Report: The State of IoT Adoption in Product Development 2019, Engineering.com, 2019

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