Figure 2-3-2-1 State of data use and application by Japanese enterprises

(Source) "Study Report on a Structural Analysis of the ICT Industry in the IoT Era and Verification of ICT's Multifaceted Contributions to Economic Growth," MIC (2016)

being able to verify the outcomes of improvements visually, workplace motivation was boosted significantly and a virtuous circle leading to more improvements resulted. Overall, production efficiency was increased by about 30 percent.

The main goal of enterprises that adopt IoT to products is increasing sales. Initially, enterprises invest in R&D to a degree commensurate with the expected increase in sales and proceed with applying IoT to products.

## (2) Typical example of IoT adoption to products

The main target of enterprises adopting IoT up to now has been cutting process costs, but expectations are mounting that adopting IoT to products will increase sales. IoT adoption to products is typically done in several stages.

The first stage is to equip the product with sensors and communications modules so it can connect to the Internet. The next stage is to use data obtained from the product to add more value to the product. The final stage is to either develop new services using the data obtained from the product or to use the enterprise's internal ICT platforms, or else laterally develop applications, to collect and analyze data from the product.

### 3. International comparison of IoT initiatives by enterprises

Based on the state of IoT initiatives and examples given in the previous paragraph, we conducted a survey of enterprises (in all industries) in 6 countries (Japan, the United States, the United Kingdom, Germany, South Korea, and China) to verify the actual state of IoT adoption as well as the benefits and issues with IoT adoption.

## (1) IoT adoption rate

We first confirmed the current state of IoT adoption among enterprises and their intentions to introduce IoT in the future (around 2020). The current adoption rate in the United States is far ahead, with over 40 percent of companies adopting ICT to both processes and products. The United States enjoys rates double the other 5 countries, including Japan, which are around the 20-percent level.

As for the intention to adopt IoT by 2020, IoT adoption rates are projected to double or triple current rates in both processes and products. Comparing countries, however, finds that Japanese enterprises have lower intentions to adopt IoT in the future. Therefore, there is a real possibility that the current gap will grow with not only the United States but also other countries (Figure 2-3-3-1).

## (2) Views on IoT markets

Japanese enterprises showed less enthusiasm, on the whole, than their counterparts in other countries when asked for their forecasts about how much IoT would add to the market size of their respective industry in the coming years (i.e., their expectations for IoT to increase market sizes). There was also a considerable gap between Japanese ICT enterprises and non-ICT enterprises on this question, suggesting that non-ICT enterprises have rather low expectations for IoT (Figure 2-3-3-2). It is possible to surmise that this gap in IoT expectations may be a factor why Japan's IoT adoption rate and investment trails that of other countries.

## (3) Issues with IoT progress

We compared issues complicating IoT progress between the 6 countries. The countries have common issues in the area of IoT infrastructure build-out. On the other hand, the countries had diverging perceptions of issues in the areas of creating new markets or raising capital. These differences may influence the state of IoT progress in each country. Japanese enterprises, in particular, tended to view “personnel training” as an issue more than those in other countries (Figure 2-3-3-3 and Figure 2-3-3-4).