Unleashing the Power

of Data with IoT and

Augmented Reality
March 2020
By Zia Yusuf, Vladimir Lukic, James Heppelmann, Craig Melrose, Neeru Ravi,
Usama Gill, and Andres Rosello
Boston Consulting Group partners with leaders PTC unleashes industrial innovation with award-
in business and society to tackle their most winning, market-proven solutions that enable
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Unleashing the Power of Data with IoT
and Augmented Reality
Augmented reality (AR)—a technology with enormous promise—is
emerging as the key that will unlock the full potential of the Internet
of Things (IoT). AR applications are using the myriad kinds of data
generated by IoT devices and components to help employees be
more effective and productive.

To quickly kick off a virtuous cycle of cost savings, revenue This is where AR comes in. IoT devices capture data from
increases, and higher profits that can prompt a double- the physical world so that it can be analyzed, and AR
digit increase in top and bottom lines, companies should devices take that digital data and render it back on the
develop a joint IoT-AR strategy, rather than think about physical world for people to view and interact with. (See
these technologies piecemeal. This report includes a down- the sidebar “The Sweet Spots for IoT-AR Solutions.”)
loadable IoT-AR app that illustrates how companies can
capture these benefits. Unlike virtual reality applications, which require the user to
inhabit a virtual environment, AR applications overlay
digital information on top of the user’s physical environ-
Why AR Goes Hand in Hand with IoT ment. For example, an AR application could add digital
content to live camera feeds, making the content appear
Almost unnoticed, the number of IoT-connected devices as if it is part of the physical world. That capability would
rose from about 6 billion in 2016 to 11 billion by 2018, allow users to interact with data more intuitively.
possibly reaching 20 billion in 2020, according to Gartner.
That increase has resulted in a veritable Big Bang of data. Several companies have developed AR applications that
Cisco Systems and IDC estimated the volume of IoT- use artificial intelligence to distill vast amounts and vari-
generated data to be about 22 zettabytes (or 22 trillion ous types of data (including IoT data) into a few critical
gigabytes) in 2016. That volume more than doubled to actions, which are then presented to employees at the
52 zettabytes by 2019, and it is projected to reach 85 zetta- right time and place so that they can make informed deci-
bytes by 2021. sions and better execute tasks. In many industries, compa-
nies that aren’t experimenting with joint IoT-AR strategies
However, data volumes are rising so quickly that many cor- risk being left behind by rivals.
porations are unable to use all the data they collect. Huge
volumes result in slow processing times, and as a result, the
data becomes stuck in data lakes. Moreover, the data sets
lack a coherent sequence, and the databases have too many
sources to synthesize. Consequently, many companies are
finding it difficult to generate data-based insights that em-
ployees can use at the right time and in the right place.

The other, oft-overlooked challenge to effectively using big

data is the standard visualization tools; they aren’t always
effective at depicting data from many sources. Yet, most
people need to see data in a visual form to understand it
quickly.

BOSTON CONSULTING GROUP X PTC 1

The Sweet Spots for IoT-AR Solutions

IoT-AR solutions are most useful in business situations IoT-AR applications are also very helpful when the aggrega-
where employees (rather than automated systems) make tion of large volumes and various kinds of contextual data in
some or all of the decisions and where workers need digi- a single view would facilitate decision making, when employ-
tal data to more effectively interact with physical objects, ees need both hands to effectively interact with objects or
such as machines and spaces. their environments in real time, and when employees need
to interact with objects or parts that are not visible.

2 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY

IoT and AR Usage Is Rising Rapidly Microsoft HoloLens (39%), Google Glass (18%), custom
devices (17%), head-mounted displays (16%), RealWear
Using AR for business is becoming more widespread: in- wearables (11%), and the Magic Leap display (9%).
creasingly, companies are expanding the technology’s use
beyond the initial testing grounds of marketing and sales. • Organization Structure. Of the companies we sur-
(See Augmented Reality: Is the Camera the Next Big Thing in veyed, 85% already manage the development and
Advertising, BCG report, April 2018.) This expansion includes deployment of IoT and AR applications together, and of
other functions, particularly manufacturing, operations, those companies, 77% have dedicated AR budgets.
service, and training. (See “Rolling Out Augmented Reality
in the Field,” BCG article, October 2018.) The proliferation • Payback. About 80% of the companies surveyed said
of smartphones and tablets that can handle AR, rather that they expected a payback from their investments in
than the development of dedicated devices, has prompted IoT and AR within three years, and 26% recouped their
AR’s expansion. investment in one year or less. In fact, half the compa-
nies that have implemented the two technologies—or
To identify the prevailing trends, BCG and PTC conducted a are in the late stages of testing them—have already
quantitative survey of more than 200 executives from demonstrated their value internally, while about 35% are
companies using IoT or AR solutions, or both. We also on track to do so.
interviewed several senior executives. Strikingly, many see
IoT and AR as complementary. Of the companies surveyed, IoT and AR at Work
81% are using IoT and also exploring the possibility of
using AR, while about 76% of those developing AR-only Our survey and interviews identified more than 30 IoT-AR
solutions believe that adding IoT to their applications use cases. When we studied them, we found that they could
would have value. be meaningfully analyzed by considering how they aug-
ment human efforts and impact business. (See Exhibit 1.)
IoT-AR solutions help employees make smarter
decisions by combining a high volume and large IoT and AR applications can help people in three ways:
variety of context-specific data into a single view.
• Visualizing Data and Interacting with the Envi-
Using the combination of IoT and AR is a recent trend. ronment. IoT-AR solutions help employees visualize,
Although a few companies have been experimenting with analyze, and understand data, which, in turn, enables
IoT-AR solutions since 2010, the number doing so has risen them to better navigate their environments. People can
sharply since 2017. Moreover, more than 80% of the com- understand data more intuitively by viewing it in three
panies surveyed expect IoT-AR solutions to become the dimensions. Providing employees with relevant data or
norm in their industry in the next five years. The survey knowledge when they are solving problems is the most
highlighted other important trends in five areas: effective way to help them work, according to the learn-
ing sciences. Of the IoT-AR use cases that enable people
• Industry. Several industries are pioneering the use of to visualize data and interact with their environments,
IoT and AR technologies at the same time. Heavy in- 20% help workers manage spaces.
dustries are showing the way, followed by technology,
engineering, aerospace, telecommunications, and media. • Diagnosing Problems. IoT-AR applications combine
In functions such as equipment maintenance, we found various types of data into a single view, helping em-
that IoT and AR applications already represent the state ployees better analyze objects and spaces as well as
of the art. diagnose problems in physical objects and their sur-
roundings. For example, these applications help workers
• Design. According to our survey, 47% of IoT-AR experi- identify problems with complex machinery without hav-
ments started with the use of IoT; companies added AR ing to open it and locate a part without going through
later. However, in interviews, senior executives noted that every rack in a shelf. Of the IoT-AR use cases that enable
when their companies developed solutions that used a employees to better diagnose issues, 22% help workers
combination of IoT and AR technologies from the outset, manage equipment or objects.
it was easier to deploy the technologies, and they cap-
tured more value. • Taking Action. IoT-AR solutions help employees make
smarter decisions by combining a high volume and large
• Devices. In the companies we surveyed, many users variety of context-specific data into a single view. IoT-AR
of IoT-AR applications use more than one AR device. applications can also connect employees with remotely
The smartphone is the most popular (51%), followed by located experts who provide real-time guidance. Of the

BOSTON CONSULTING GROUP X PTC 3

Exhibit 1 - The IoT-AR Survey Identified 33 Use Cases

Use cases that augment human efforts

Visualize data and interact

with the environment Diagnose problems Take action

• Equipment assembly, use, • Insurance claims • Navigation by heads-up displays

and maintenance • Remote support • Consumer services
• Law and military training • Surgery
• Pilot training
Use cases that enhance business capabilities (%)

• Digital aviation
• Health care training • Personal health care assistance
Enhance human
capabilities 13% 9% 15%
• Functional space design and • Space and environment • Order picking
optimization (for warehouses, monitoring • Spatial optimization (for order
stores, and cities) • Farm monitoring packing and shipment
• Consumer navigation • Buildings and facilities organization, for example)
• Location-based digital inspection
marketing • Hospital rounds optimization
• Inventory monitoring
Manage spaces
• Safety and hazard response

20% 4% 3%
• Product design • Asset quality assurance • Assembly work instruction
• Construction design • Operations monitoring • Asset installation
• Equipment monitoring and • Maintenance instruction and
diagnostics guidance
• Quality control • Operator instruction (for
• Production line optimization precision processes and large
Manage equipment industrial equipment)
or objects
3% 22% 12%

Sources: BCG-PTC IoT-AR survey and expert interviews; BCG analysis.

Note: The percentages indicate the proportion of survey responses that related to a particular use case category; multiple responses were allowed.

IoT-AR use cases that help employees take action, 15% application could help companies train plant employees to
enhance human capabilities. assemble equipment or use machinery. Similarly, hospitals
could use these solutions to train health care technicians.
These three ways build on each other: To diagnose a prob-
lem, employees must visualize data and interact with their • Managing Spaces. IoT and AR technologies can help
environments. And to take action, they need to diagnose companies make sense of disaggregated data collected
the problem. from physical spaces, such as factories, warehouses, and
retail stores. Understanding disaggregated data is critical
IoT and AR technologies also impact business in three to better managing functional areas. For example, an
areas: IoT-AR application could help a company optimize the
use of a warehouse by determining the amount of space
• Enhancing Human Capabilities. Companies can use to allocate to high-turnover products, monitoring inven-
IoT-AR solutions to help employees learn how to perform tory health, and identifying aging stock to move out. The
complex tasks more easily. For example, by simulating application could also use IoT data and AR devices to
products and overlaying IoT data on them, an IoT-AR guide workers through the warehouse using the most

4 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY

IoT and AR applications already
represent the state of the art in
functions such as equipment
maintenance.

BOSTON CONSULTING GROUP X PTC 5

 efficient route. Implementing such an application could cian only after the current step has been digitally con-
reduce the amount of working capital needed, lower firmed as completed, increasing the quality of the repair.
energy costs, and improve labor productivity.
On shop floors, workers can wear AR devices that help
Similarly, companies could use AR to overlay foot traffic them visualize IoT data in the context of their work. For
data—collected using beacons, mobile apps, and video example, when IoT sensors are embedded in machinery
analytics—on retail store configurations to identify the on a production line, technicians wearing AR glasses can
optimal store setup. In addition, AR headsets could use walk the floor to get insights into how equipment is
live IoT data from in-store sensors to enable managers to functioning. The closer a technician is to a piece of
walk through a store’s aisles and spot problems. Alerts equipment, the more specific the information will be.
could pop up when products are out of stock, in the IoT-AR applications also make it easier to spot issues
wrong place, or incorrectly barcoded, for instance. across assembly lines.

• Managing Equipment. Companies can help employ- When designing equipment, companies can feed IoT
ees fine-tune complex equipment and make repairs by data into digital models and use AR to interact with
creating an AR application that superimposes IoT data those models at scale, giving designers a dramatically
on a visual representation of a machine’s components. more accurate representation of how a design will per-
Such a representation enables workers to “look” inside form in the real world. For instance, the representation
the machine at even hard-to-see areas so that they can may help designers locate the most commonly used
diagnose issues more easily. AR enables the application features so as to improve the design and performance of
to overlay step-by-step instructions on the image as well the machine. Similarly, remote IoT devices—such as
as display real-time guidance from remotely located ex- cameras and temperature sensors that are installed in
perts while workers are making a repair. In some cases, and around structures—enable data collection that can
the next repair instruction may be provided to a techni- help companies create digital twins. When such virtual

81% 76% 47%

Respondents that are using Respondents developing Respondents that started

IoT and also exploring the AR-only solutions that believe with IoT technology and
idea of using AR there’s value in adding IoT added AR later

85% 80% 50%

Respondents that manage IoT Respondents that expected a Respondents that have
and AR together; 77% of those payback from IoT-AR investments already demonstrated the
have dedicated AR budgets within three years value of using IoT and AR

6 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY

 models are paired with AR devices, architects, contrac- lower cost but also faster response times. In addition,
tors, and builders can interact with data to provide better many manufacturers must deal with a growing skills gap.
inputs, and, among other things, improve the placement Baby boomers are leaving the workforce, and companies
of plumbing and electricity. are losing experience and expertise en masse. Against this
backdrop, using an IoT-AR solution for equipment mainte-
nance can address multiple pain points:
Boosting Performance with IoT and AR
• Unexpected Downtime. IoT technologies can monitor
Deploying IoT and AR is one of the quickest ways that equipment constantly to provide early warning signals
companies can boost the bottom line. IoT-AR solutions can about the functioning of machines and production lines.
help companies improve performance in three ways, often IoT-AR solutions use IoT real-time performance data,
at the same time. advanced analytics, and AR technologies to deliver such
warnings to staff, enabling them to schedule preventive
• Reducing Costs. Companies can decrease costs by maintenance.
using IoT and AR technologies to improve labor produc-
tivity, reduce material waste, shrink asset downtime, and • Project Delays and Higher Costs. IoT data and ana-
optimize working capital—and that’s just for starters. lytics can determine when equipment downtime will be
Even a simple application—such as an IoT-AR solution less disruptive and which parts will be needed for service
that renders real-time, context-specific data to assist or repairs. Such guidance helps companies avoid project
workers tackle equipment repair—can increase first- delays and higher costs.
time fix rates and decrease errors, both of which will
reduce the cost of materials and eliminate repeat visits • Long Wait Times for Repairs. Field service engineers
by technicians. usually must visit equipment sites to make repairs,
extending downtime. However, remote support through
• Boosting Revenue. Companies can deploy IoT-AR solu- AR, along with access to IoT dashboard data, can help
tions to increase the speed of operations, and, thereby, less experienced engineers who are on site tackle some
business output. Companies can also use these technolo- issues that they otherwise would not have been able to
gies to develop new products and services that they may handle.
be able to monetize. For instance, creating a premium
maintenance service built on IoT and AR could help a • More Training Time. Experienced employees are leav-
company retain customers, reduce churn, and increase the ing the workforce. As a result, companies must allocate
number of customers that sign up for after-sales services. more time to train staff and new hires on complex tasks.
AR devices that give clear step-by-step instructions su-
• Creating Strategic Value. The added value from an perimposed on physical objects can provide employees
IoT-AR solution can accrue in many ways, including high- with the necessary guidance and on-the-job training.
er brand equity, increased customer satisfaction, and
mitigated risk. For instance, using AR to guide workers • Poor Service Quality. IoT and AR technologies can con-
through a warehouse can boost safety, which improves firm whether equipment has been repaired or serviced
the work environment. properly, which, along with AR-guided work instructions,
will improve service quality.
An IoT-AR Application
Several companies—such as Global Foundries, Howden
To highlight how IoT-AR solutions can generate significant Group, Sysmex, and Volvo Group—have deployed IoT-AR
financial returns, we investigated two use cases and devel- solutions to tackle maintenance issues, provide customers
oped an IoT-AR app to bring them to life. The app demon- with self-service options, and improve quality. For these
strates how these technologies can help reduce equipment OEMs, IoT-AR solutions are transforming the speed and
maintenance and warehouse costs. quality of service delivery, increasing customer satisfaction,
and reducing consumer churn.
Reducing Costs and Increasing Revenue from Equip-
ment Maintenance Using IoT and AR. After-sales ser- By implementing IoT-AR solutions, companies have real-
vices are a lucrative source of revenue for industrial manu- ized sizable economic benefits:
facturers because most customers sign service contracts
for the maintenance and management of their assets. • Increase in Labor Productivity. Providing AR-guided
However, manufacturers are facing increasing pressure instructions reduces the time it takes to make repairs,
from customers to provide not only better service at a increasing labor productivity. Because remote support

BOSTON CONSULTING GROUP X PTC 7

FIVE PAIN POINTS IN
SERVICE REPAIR
TYPICAL SCENARIO WITHOUT
IoT AND AR

2
Unplanned downtime delays
the project and increases costs.
Additional time is lost waiting
1 for repair parts to arrive.
The company is unaware that
the excavator needs service
until it breaks down, which
causes unexpected downtime.

5
During a repair, errors are
made deciphering complex
manuals and the quality of the
repair is not confirmed or
documented.
3
Time is wasted when an
incorrect diagnosis requires
experts to travel to the site to
accurately troubleshoot the
problem.
4
Experienced workers are
leaving the workforce. As a
result, significant time is lost
training new hires on complex
tasks.
 reduces the need for experts to travel, each specialist • New Offerings. Developing novel, value-added IoT-AR
can respond to more service calls. services and capabilities increases the opportunities for
manufacturers to generate revenue from existing cus-
• Decrease in Material Waste and Rework. AR-based tomers. Such services and capabilities also help build
instructions, together with IoT verification, can ensure companies’ brand equity.
that repairs are completed the first time, eliminating the
need for rework and the reordering of parts. To show how a solution that pairs IoT with AR can lower
costs and boost revenues, we developed a case study using
• Lower Costs. IoT-AR training solutions reduce labor real-world data. In our study, a manufacturer with annual
costs by enabling less capable engineers to conduct after-sales service revenue of $1 billion, or 30% of its annu-
repairs. These applications also lower training costs by al revenue, employs 1,000 service engineers.
providing on-the-job training on demand.
By deploying an IoT-AR solution with 20% to 30% of its
• Lower Churn. IoT-AR solutions can increase how quickly service engineers, we found that the manufacturer has the
companies respond to customers and improve service potential to generate $13 million to $30 million of net
quality. In turn, companies can increase their renewal benefit for every $1 billion of revenue. We have often seen
rate of lucrative after-sales service contracts and win companies achieve results toward the higher end of this
new opportunities. range. (See Exhibit 2.)

Exhibit 2 - Companies Can Boost Returns by Implementing an IoT-AR

Maintenance Solution
Incremental benefits

Business area impacted Improvement in Benefit (per $1 billion Benefit

Economic impact x =
(% of revenue) business (%) of revenue) (% of revenue)

Increase in labor Addressable labor cost: Decrease in labor costs $7 million–$11 million 0.7–1.1
productivity 1.5–2.0 from faster operations:
45–55
Costs
Decrease in the cost Training costs: Decline in training costs: $1 million–$2 million 0.1–0.2
of workforce training 0.5–0.6 20–30

Drop in rework costs Cost of repeat visits: Improvement in the $2 million–$4 million 0.2–0.4
0.6–0.8 first-time fix rate: 30–50

Revenue
Increase in revenue
Addressable service Increase in service
from less churn $6 million–$18 million 0.6–1.8
revenue: 6.0–9.0 revenue: 10–20
and new services

Average impact as a percentage of company revenue

2.5
0.4
Incremental Cost of
1.3 benefit implementation Net benefit

2.1 (%) 1.6–3.5 0.3–0.5 1.3–3.0

1.2
Per $1 billion $16 million– $3 million– $13 million–
of revenue $35 million $5 million $30 million
Incremental Cost of Net
benefit implementation benefit

Source: BCG analysis.

Note: Our case study evaluated a manufacturer with annual revenue of about $3.3 billion and annual after-sales service revenue of about $1 billion. The
company employed 1,000 service engineers, only 20% to 30% of whom could use an IoT-AR solution. Because of rounding, not all numbers add up to the
totals shown.

BOSTON CONSULTING GROUP X PTC 9

 LOR
AN IoT-AR SOLUTION TRANSFORMS
EM
THE SPEED AND QUALITY
IPS OF
SERVICE UM
DOL
O

1 Predictive
monitoring

IoT analytics proactively

monitors equipment and
provides early warnings on
equipment health.

2 Scheduled service
and parts delivery

IoT analytics determines

when downtime for
maintenance would be
least disruptive and which
repair parts are needed.

3 Data-driven
diagnosis

1 3 Remote support via AR

and access to IoT data
reduce travel time for
4 5 experts and help less
experienced engineers
diagnose an issue.

4 Guided repair and

training

An IoT-AR solution
superimposes
step-by-step instructions
on the equipment,
enabling guided repair
and immersive,
on-the-job training.

Download the IoT+AR app by BCG 5 Improved first-time

and PTC from the App Store or
Google Play. Then point your fix rate
device’s camera at the image on
this page to launch an AR service An IoT-AR solution
determines if services
experience.
2 and repairs are done
correctly and tracks
workers' performance.

10 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY
AR IOT
According to our calculations, the upside potential could be time and reduce the number of employees that are
even larger if the company rolls out the solution to all its needed to perform order-picking activities.
service engineers. The benefits would also extend beyond
the manufacturer, providing significant cost savings for its • Reduced Waste. AR-guided instructions reduce the
customers in terms of lower asset downtimes and higher chance of goods getting damaged, saving insurance
asset performance. costs and material waste.

To be sure, companies could use other options instead of • Faster Throughput. Improved operating speeds en-
an IoT-AR solution. An alternative would be to match engi- abled by IoT-AR solutions ease traditional bottlenecks.
neers’ skills to the right tasks, thereby reducing errors and
increasing the first-time fix rate. A pure human solution is • Lower Risk. AR-guided navigation improves safety and
likely to cost less, but it won’t provide all the benefits that reduces accidents, making working conditions in ware-
an IoT-AR solution can deliver. For instance, the former houses better.
won’t reduce the travel that experts undertake, provide
training benefits, or help new technicians get up to speed • Burnished Brands. IoT location tracking enables
faster. companies to track the location of products, especially
high-value products, at all times. Providing higher-touch
To bring the case study to life, BCG and PTC developed services that are supported by faster processing speeds
IoT+AR, an app that enables users to experience an equip- can unlock new business opportunities and enhance cor-
ment maintenance solution in 3D. The app can be down- porate reputations.
loaded for iOS and Android devices. The app puts users in
the shoes of a technician to experience how IoT and AR This case study focuses on a logistics company that man-
can guide them at every step of an excavator repair. ages the transportation of large volumes of products. It
works on tight timelines and has several warehouses all
Shrinking Warehouse Costs Using IoT and AR. The over the world. Most product picking is done manually by
second case study we developed focused on order picking. the company’s workforce of about 90,000 employees.
In mammoth warehouses, selecting products for shipment
or delivery is a slow process because workers need to According to our estimates, a company of this kind with
navigate vast spaces. In most cases, a product’s location is $20 billion in revenue would spend about $3 billion in
noted only at the entrance and exit, so it’s difficult for order-picking labor costs a year. With an initial IoT-AR
workers in the warehouse to know exactly where products deployment covering one-third of the workforce, the com-
are. Employees spend a lot of time searching for products, pany could generate a net benefit of $3.5 million to $7 mil-
taking suboptimal routes to find what they’re looking for. lion a year per $1 billion of revenue. Those benefits would
Moreover, lifting bulky products while holding a clipboard only rise over time as the solution rolls out across the rest
or a checklist often leads to accidents and damaged goods, of the workforce. (See Exhibit 3.)
as does performing a job without clear instructions.
An IoT-AR solution is not the only way to tackle order-
An IoT-AR solution can increase the speed of order-picking picking and package-sorting issues in warehouses, of
operations and boost productivity. Several companies course. Another option may be to use robots. Although
(such as DHL, Intel, and Boeing) have deployed IoT sensors generally more expensive, robots can work well in indus-
throughout their warehouses, and head-mounted AR devic- tries with large warehouses, small homogenous products,
es guide workers to products’ locations by superimposing and higher margins. Companies should experiment with
instructions on users’ fields of vision. These solutions help different solutions to identify the technologies that will
employees take the shortest routes to the exact locations work best for them.
of products. When workers find the products, their headset
camera scans them and checks them off the list, freeing BCG and PTC’s IoT+AR app brings this to life. It enables
the employees to handle the products. users to experience product picking using IoT and AR. The
app can be downloaded for iOS and Android devices. The
Companies can benefit from IoT-AR warehouse solutions in app puts users in the shoes of a warehouse employee to see
several ways: how IoT and AR can help employees find products quickly
and safely.
• Higher Labor Productivity. IoT-AR applications that
provide the optimum route through the warehouse save

BOSTON CONSULTING GROUP X PTC 11

FIVE PAIN POINTS IN
WAREHOUSING
TYPICAL SCENARIO WITHOUT
IoT AND AR

3
Products are sorted and
scanned manually.

4
1 Workers perform their jobs with
The location and status of a unclear instructions, increasing
product is available only at scan the risk of accidents.
points.

2
Workers navigate the warehouse
using their judgment and paper
pick lists, slowing the order-
fulfillment process.

5
Employees use their judgment
to load trucks, resulting in an
inefficient use of space.
Exhibit 3 - Using an IoT-AR Order-Picking Solution to Increase Productivity
Can Benefit the Bottom Line
Incremental benefits

Business area impacted Improvement in Benefit (per $1 billion Benefit

Economic impact x =
(% of revenue) business (%) of revenue) (% of revenue)

Increase in labor Picking labor costs: Decrease in labor costs: $3 million–$6 million 0.3–0.6
Costs productivity ~20.0 1.5–3.0

Decrease in material Material waste: Drop in damaged goods: $500,000–$1 million 0.05–0.1
waste 0.5–1.0 10.0

Revenue
Rise in core Improvement in revenue: $1 million–$3 million 0.1–0.3
business output 0.1–0.3

Average impact as a percentage of company revenue

0.7

0.2 Incremental Cost of

benefit implementation Net benefit
0.5

(%) 0.45–1.0 0.1–0.3 0.35–0.7

0.5

0.2 Per $1 billion $4.5 million– $1 million– $3.5 million–

of revenue $10 million $3 million $7 million
Incremental Cost of Net
benefit implementation benefit

Source: BCG analysis.

Note: Our case study evaluated a logistics company that had an annual revenue of about $20 billion and spent about $3 billion in order-picking labor
costs per year. The initial IoT-AR deployment covered one-third of the workforce.

Using IoT and AR in Health Care ally switch their focus among several sources of informa-
tion, including video screens, biosignal monitors, the at-
IoT-AR solutions aren’t only about increasing revenue or tending surgical team, and, of course, the patient.
reducing costs; they can deliver societal benefits as well. For
example, using the two technologies together may prove to By contrast, an IoT-AR solution would enable a surgeon
be a game-changer in health care applications. Specifically, wearing an AR headset to see a 3D model from diagnostic
minimally invasive surgeries account for about 35% of all imaging that is superimposed on the patient; the model
medical procedures. During such a surgery, a doctor makes would be aligned with the patient’s anatomy with the help
a small incision in the patient’s body and inserts tiny cam- of high-precision positional trackers placed on and inside
eras and miniature instruments so as to navigate the pa- the patient. The surgeon could rotate, zoom in and out,
tient’s body without having to make large cuts and incisions. and interact with the 3D model using simple hand ges-
tures. The patient’s vitals and other biosignals, as well as
Although the techniques of keyhole surgery, as it is often instructions (such as the best angle and depth for a cut),
called, have been honed over the past 20 years, surgeons could be overlaid in the surgeon’s view, eliminating the
still face several challenges. They cannot get all the in- need to switch among the various factors that require
sights needed solely from the 2D video streams provided attention. And the surgeon would be able to control the
by the inserted cameras. Moreover, surgeons must continu- entire procedure through hand gestures, voice controls,

BOSTON CONSULTING GROUP X PTC 13

 AN IoT-AR SOLUTION INCREASES
ORDER-PICKING EFFICIENCY AND
IMPROVES SAFETY
A
1 3

MOVING MACHINERY
4
WARNING

C
2

D
5

Download the IoT+AR app by BCG

and PTC from the App Store or
Google Play. Then point your
device’s camera at the image on
this page to launch an AR
warehouse experience.

LOADING
ZONE

1 2 3 4 5
Accessible Optimized Hands-free Improved Efficient
product data warehouse navigation inventory scanning safety and accuracy use of space
The location and status of An IoT-AR solution Workers' AR headsets An IoT-AR solution An IoT-AR solution
products with sensors are instructs workers how scan the product, ensuring superimposes relevant delivers optimized loading
available to workers using to efficiently navigate a that the correct items are data on products, instructions via the
an IoT-AR solution and warehouse to locate the picked and that the increasing safety and workers' AR headsets.
across the value chain. products on their pick inventory is updated. speed.
lists.
14 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY
and eye movements—without pressing buttons or looking Organization Structure and Partnerships. Cross-
away from the patient for even a second. functional collaboration across traditional business units is
critical for success. Companies must get stakeholders from
For surgeons and patients, there would be enormous all relevant groups—not only the core business units but
benefits. Doctors would be able to perform surgeries with also IT and R&D—to back the IoT-AR experiments. As we
fewer errors and achieve higher first-time success rates. mentioned earlier, of the companies we surveyed, 85%
Patients would thus enjoy faster recovery times and a already manage the development and deployment of IoT
lower risk of complications. Several clinical trials are under and AR together.
way globally, and if they receive approval, IoT-AR surgical
solutions could deliver enormous benefits to society. Because the development of an IoT-AR solution must be a
business-level initiative, obtaining executive sponsorship is
important. Having that backing from the start can ensure
Getting IoT and AR Right that these projects gain momentum quickly. Companies
must be careful about choosing technology vendors, part-
IoT-AR solutions are at an inflection point, but they are likely ners, and systems integrators for the IoT-AR ecosystem;
to become table stakes soon in several industries. Compa- they must have the ability to support the redesign of oper-
nies must choose the right starting points—the largest cost ational processes as well as the implementation of techno-
centers and revenue opportunities—and identify where logical solutions.
IoT-AR applications will have the highest value. It’s critical to
scale such applications as quickly as possible across the Development and Launch. Companies must optimize
enterprise not only to reap the financial benefits but also to the user experience and ensure that IoT-AR devices are
ensure that the cultural change that is necessary for the comfortable and intuitive in the physical environments in
new approach to succeed has time to take root. Although which they will be used. Getting that right can drive adop-
companies will face challenges, it’s possible to successfully tion faster and ensure that employees routinely use the
harness these complex technologies. (See the sidebar technologies. The best way to optimize the user experience
“Managing the Risks of Deploying IoT-AR Solutions.”) is to encourage IoT-AR teams to develop minimum viable
products, run pilots, conduct end-user tests, and iterate
Scope and Value. Companies should rank projects by the solutions quickly.
largest value opportunities, choosing to develop and deploy
one or two IoT-AR applications that will deliver value—fast.
Companies must develop business cases and articulate the
value proposition of using the two technologies together.
C ombining IoT and AR technologies enhances the ways
that people can interact with the world around them.
But to harness that power, companies must choose where
to deploy the technologies, build an ecosystem that sup-
The use of IoT technology is increasingly prevalent, so it’s ports IoT and AR, and develop the talent that can use both
important to ensure that AR has a value-adding role; AR technologies. Companies that do so will be able to not only
shouldn’t be an afterthought or a gimmick. Our survey reduce costs, boost revenues, improve the customer experi-
suggests that employees are five times more likely to ence, and strengthen brands but also use contextual data
regard AR as a core technology if their company develops in ways never before imagined.
an IoT-AR application from the start, rather than adding AR
later.

BOSTON CONSULTING GROUP X PTC 15

Managing the Risks of Deploying IoT-AR Solutions

Several challenges could derail an IoT-AR initiative after it partner with external technology providers even as they
gets underway. It’s therefore important to keep them in internally develop the skill set that is required.
mind from the outset. The major risks fall into the follow-
ing categories: • Data. IoT-AR solutions are only as good as the quality
of the data that companies use. Getting access to the
• Cost. Both IoT and AR systems can be relatively expen- data, and combining it in a meaningful way, can be
sive to develop and deploy depending upon the choices challenging. Companies would do well to build a digital
made during those stages. Companies should carefully thread—a communications framework that enables the
assess the choices in order to meet their return-on- flow of data—so as to link interrelated data across all
investment target. Using smartphones and tablets as processes, products, and applications.
AR devices can be cost-effective; our survey shows that
standard smartphones are the most popular endpoint • Devices. Each AR solution should be designed with a
device. device type in mind to ensure a good user experience.
AR head-mounted devices can be bulky, have limited
• Talent. Developing IoT-AR solutions is usually beyond fields of vision, and be uncomfortable to use for long
the expertise of most IT departments. Moreover, it periods. Although the technology is improving quickly,
requires people who understand both physical machines companies should learn to work with today’s limitations
and digital technologies. Globally, the pool of talent with and develop an AR strategy that is compatible with
the right expertise is small. Most companies will have to many devices.

16 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY
• Connectivity and Security. Creating a smooth AR • Speed. IoT and AR are emerging technologies, so rolling
experience with live IoT data requires high connection out solutions can take longer than expected. Some appli-
speeds and low latency. That can be challenging in cations, such as those that guide machine or medical in-
remote areas and underground locations, so companies teractions, will require certifications, regulatory approvals,
must factor in those conditions when developing applica- and even the creation of standards. These steps can add
tions. Over time, 5G networks may resolve those issues. to the time needed to deploy IoT and AR technologies.
Even so, managing AR devices, in addition to IoT devices,
raises the number of assets connected to the IoT-AR sys- • Flexibility. Companies should develop IoT-AR solutions
tem, increasing the potential for security vulnerabilities. that can be deployed with a variety of partners to avoid
Companies should involve security experts in the design getting locked into specific technology providers. It must
and development of IoT-AR solutions to minimize cyber be possible to have the IoT solution hosted by any exter-
risks. nal cloud service provider or a cloud server on site.

BOSTON CONSULTING GROUP X PTC 17

IoT-AR solutions help companies
improve performance by reducing
costs, boosting revenue, and
creating strategic value.

18 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY
About the Authors

Zia Yusuf is a managing director and senior partner in the Vladimir Lukic is a managing director and partner in
Silicon Valley office of Boston Consulting Group. He leads BCG’s Boston office. You may contact him by email at
the firm’s work in the Internet of Things. You may contact [email protected].
him by email at [email protected].

James Heppelmann is the president and CEO of PTC. Craig Melrose is PTC’s executive vice president of digital
You may contact him by email at [email protected]. transformation solutions. You may contact him by email at
[email protected].

Neeru Ravi is a consultant in BCG’s San Francisco office. Usama Gill is a principal in BCG’s San Francisco office.
You may contact her by email at [email protected]. You may contact him by email at [email protected].

Andres Rosello is the vice president of corporate marketing

at PTC. You may contact him by email at [email protected].

BOSTON CONSULTING GROUP X PTC 19

Acknowledgments For Further Contact

The authors thank PTC’s Grace Fong for the analysis she If you would like to discuss this report, please contact one
provided, as well as Charles Lamour, Randy Goux, Taryl of the authors.
Hafer, and Brian Siu for developing the IoT-AR app that
accompanies this report. The authors also express their
appreciation to Ashley Drewery and Jason Kwok, BCG
colleagues, and Dmitry Shchepochkin, formerly a BCG
consultant, for helping to conduct the research for this
report. Finally, the authors thank Anand P. Raman for his
writing assistance as well as Katherine Andrews, Kim
Friedman, Abby Garland, Frank Müller-Pierstorff, Shannon
Nardi, and Trudy Neuhaus for their editing, design, and
production contributions.

20 UNLEASHING THE POWER OF DATA WITH IoT AND AUGMENTED REALITY
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