Review of Digitalization Using IoT Maturity Models: The Case of American SMEs

Abstract

This chapter plans to review studies related to IoT maturity models in manufacturing systematically. Digitalization is critical for small and medium enterprises (SMEs) to have a competitive edge in the highly competitive market. Digitalization provides value-producing opportunities and new revenues for the organization. SMEs are better able to compete with larger firms and have improved customer experiences to meet market demands. American SMEs need to have a far-sighted vision and invest in digitalization efforts as benefits like reduced operational expenses and data-based insights are beneficial and invaluable to customers. This chapter evaluates the state of IoT applications in American SMEs using the assessment provided by the IoT maturity model.

1. Introduction

Internet development demonstrates the continuous improvement in the quality of human interaction without a common geographical location, as well as providing better benefits along with better information systems [1]. The Internet revolution was sparked by inventions like the telegraph, radio, telephone, and computer [2]. The innovation of greater communications capabilities has transformed society so drastically [1]. Traditionally, Internet communication has been human-to-human, which requires human interaction from both sides [1]. The human-things connection has developed as further advances have occurred, in which humans instruct devices to accomplish tasks, and devices perform the tasks based on instructions from humans [3].

Technologies that are innovative are the building blocks of the Internet of Things [4]. Sensors built into devices on the Internet of Things ecosystem are connected to IoT platforms that store data from all the connected devices, using the data to perform tasks as needed [5]. An IoT device does not necessarily need to be online and can be connected directly to a network. Due to the rapid growth in IoT devices, interconnecting dissimilar IoT devices will become one of the most critical issues for IoT’s success [6]. The development of IoT is increasingly being viewed as a priority in national strategies for information and communication technology (ICT) [7].

The number of IoT devices in use around the world could reach 64 billion by 2025 [8]. This paper discusses digitalization as a result of IoT-driven transformation. Consumers are better connected, better informed, and more opinionated than ever before as a result of the technology-driven information revolution surrounding the IoT [9]. According to the end user, IoT can be divided into three main categories [10]. Commercial IoT, Consumer IoT, and Industrial IoT are these three categories. IoT devices and systems used in businesses and enterprises are referred to as commercial IoT. Examples are entertainment values and supermarkets. The term consumer IoT refers to products or services that are sold directly to consumers. An example is a personal fitness device. In the context of industrial IoT, we are referring to devices and systems used in manufacturing operations. Examples are smart irrigation and supply chain robotics [10]. IoT focuses on consumers, while IIoT focuses more on supply chains, manufacturing, and management [11]. The Internet of Things allows manufacturers to monitor, manage, and command all details of the facilities remotely by enabling predictive maintenance, optimizing quality control, and managing warehouses etc.

The Internet of Things raises a variety of issues, including privacy, intellectual property, competition and consumer law, and human capital [7]. Since IoT devices collect data about individual users, there are privacy and security concerns. Licensing and spectrum management, addressing and numbering, switching and roaming, security and privacy are among the ICT-oriented legal issues relevant to the Internet of Things [7]. Data protection is a challenge for users, and providers need to ensure their customers’ data is protected. There are more cyber or Internet attacks now than ever before because of the increasing smartness of the Internet of Things, and we are facing more privacy concerns as a result [1]. Security attacks are primarily caused by “things” (devices) having a minimal capacity, the openness of the system, including wireless communication between the majority of devices, and sensor accessibility [4].

The term “small and midsize enterprises (SMEs)” is used to describe the types of businesses that maintain revenues, assets, or a number of employees under a certain threshold. Generally, they are entrepreneurial in nature and outnumber large firms with hundreds of employees. Even though SMEs are small, they play a significant role in economic growth. Small businesses in the United States are classified by the Small Business Administration (SBA) based on their ownership structure, number of employees, earnings, and industry. SMEs are firms with fewer than 500 employees in manufacturing.

In the U.S., SMEs contribute to a variety of ways to the nation’s economy [12].

• U.S. small businesses constitute more than 99% of all businesses.

• It is estimated that small businesses contribute 43.5% of the nation’s GDP.

• The private payroll in the U.S. is dominated by small businesses, accounting for 39.7% of it.

• From 1995 to 2020, there were 4.8 million more jobs created by small businesses than by large businesses in the U.S [12].

Small and medium-sized enterprises (SMEs) play an important role in the economies of most countries, so they are regularly offered incentives including better tax treatment and access to loans to assist in maintaining their growth [12]. With a limited number of employees, an SME must limit the scope of its services. The focus of SMEs may be narrower and more direct than those of larger corporations. Successful SMEs often focus on a smaller target market instead of trying to have a wide market presence [12]. Canada, Mexico, China, Japan, and the U.K. are the top export destinations for U.S. small businesses [13]. As the backbone of the U.S. economy, exporting small businesses create more jobs, grow faster, and pay higher wages [13].

Due to the COVID-19 disease caused by the new coronavirus known as SARS-CoV-2 and other incidents, SMEs are facing great challenges and struggling to adapt [14]. Technology provides SMEs with opportunities to strengthen their business models and achieve exponential changes through creative destruction, leading to higher levels of innovation in today’s highly competitive market [14]. In addition to enhancing competitive advantage, digital technology can facilitate open innovation processes, which are known as internal and external knowledge flows, which accelerate internal innovation to expand markets [15].

There is no doubt that the digital revolution will have a profound effect on society and create many new opportunities for businesses in the near- and long-term [16]. Digitalization has proven to be a key advantage for SMEs before and after the COVID-19 crisis [17]. Small and medium-sized businesses can reduce costs, standardize and automate their business processes through digitalization. With digitization, both processes and products become more automated, increasing both the demand and quality [18]. As a result of going digital, SMEs will be more competitive and better understand consumer behavior [18]. There are limited resources, knowledge, and implementation skills for small- and medium-sized enterprises (SMEs) when it comes to digitalization [19].

The purpose of this study is to answer the following questions using existing maturity models.

RQ1: How can IoT maturity models be used to assess the level of digitalization readiness in the manufacturing domain?

RQ2: What levels are seen in different maturity models in the literature review?

RQ3: How can organizations achieve the next maturity level in the manufacturing domain?

In order to gain an overview of the dimensions for assessing IoT maturity models, a systematic literature review is conducted. The IoT Maturity Assessment provides organizations with a tool to evaluate their current IoT capabilities, detect gaps and improvements, and develop guidelines to improve IoT programs. Using the above-mentioned dimensions, this study will explore the research gap and direct future research and studies.

2. SWOT for American SMEs

Table 1 shows the SWOT analysis for American SMEs. Performing a SWOT analysis helps businesses determine how to strategically approach their business objectives. It can be extremely helpful to a small business to conduct a SWOT analysis and identify areas for improvement.

Strengths	Weaknesses
Flexible organizational structure Process of faster decision-making	Lack of skilled workers R&D infrastructure is lacking Investment costs are high Work hours that are longer Possible lack of guidance
Opportunities	Threats
Government support Embracing Digital Transformation Fostering Innovation and Collaboration Sustainability and ESG. Seizing global market opportunities	Intense competition in the market Manufacturing hub shifting Material shortage Market demand dries up Key person losses Increasing employee benefit costs

Table 1.

SWOT analysis.

2.1 Strengths

SMEs are more adaptable because their organizational structures are simpler, and they are less cluttered with rules, procedures, and systems that large businesses have. Being small is not bad, it has its advantages, such as quick response times for product innovation or decision making. While having fewer employees may allow organizations to innovate faster, there are benefits to this as well.

2.2 Weaknesses

Small business owners may work long hours and are likely to work a long day every day, sometimes even on weekends. There may not be a mentor to assist a small business owner in their financial endeavors and business planning. It can be challenging and lead to uncertainty when making business decisions.

2.3 Opportunities

Businesses of all sizes, including SMEs, must embrace digital transformation to enhance customer experiences, streamline operations, and remain competitive. A unique characteristic of SMEs is their ability to adapt quickly to changing market conditions, which makes them ideal for fostering innovation. Innovation opportunities can be capitalized on by SMEs by creating a culture of creativity and experimentation. Investing in R&D can help meet emerging customer needs or address societal challenges by developing new products, services, or business models. SMEs can embrace sustainability as a business strategy as environmental, social, and governance concerns gain prominence.

2.4 Threats

Small businesses are often built around a few individuals’ talents and expertise. Day-to-day operations can be adversely affected if a crucial employee leaves unexpectedly due to death or injury. Businesses worry about employee benefits.

3. Digital strategy

For IoT development to succeed, a strategic viewpoint must be taken, followed by a roadmap and action plan [7]. During the defined time period, the roadmap details what will be done. Organizations develop digitalization strategies to identify their target audience, competitive landscape, goals, key performance indicators, and existing user journeys. To map the company’s present and future, businesses should move toward a digital model. The goal of a digitalization strategy is to make business processes or products more efficient using technology. It is the first step toward a digital transformation for enterprises undergoing it. Secondly, understand the benefits of a digitally enabled transformation and how digital innovation can be implemented across an organization. Achieving digital transformation allows organizations to maximize performance, boost customer retention and engagement, and accelerate growth. Digital transformation allows enterprises to collect data in real-time and convert those metrics into valuable insights. Consolidating resources, assets, and tech tools is a key benefit of digital transformation. Additionally, Digitalization requires training sessions to create digitally literate employees.

An organization’s strategic plan outlines how it plans to use technology to create new competitive advantages. As new technology makes it possible for innovative companies to provide services that were previously impossible, businesses are usually forced to change their business models. Technology is now more than just hardware and software; it is something that is integrated into the fabric of business. With the proliferation of digital technology and companies moving forward on the journey of digital transformation, the terms “digital strategy” and “business strategy” will become synonymous. Defining the types and extent of desired business outcomes is crucial for the executive team when setting digital strategy. Digital transformation is a buzzword these days, but it is rare for traditional enterprises to fully adopt it. Transforming and optimizing at the same time is a more successful digitalization strategy. Business owners need to invest in digital business transformation initiatives in a small number of high-potential product/service lines, business units or functions, and in digital business optimization initiatives in complementary areas to achieve nearer-term results. A bolder digital transformation path is frequently selected by more aggressive companies seeking to be early adopters. In addition to investment policies, financial policies were identified as strategic factors for IoT development [7].

A digitalization process needs to be implemented in steps:

• It is important to identify the capabilities that contribute to your business’ success-such as your technology stack, talent, and operational workflows.

• Determine the gaps in your current technology stack and customer experience, then harness digital capabilities to fill those gaps.

• Prepare your strategy for execution by allocating sufficient resources to ensure you have the right people and tools.

Cost leadership, differentiation, and focus are the three generic strategies proposed by Michael Porter. Businesses of any size or form can benefit from these strategies. To differentiate through digitalization strategy, an organization needs the right culture, infrastructure, and capabilities. Companies can, however, struggle to grow at a fast enough pace and scale. Step-by-step transformation processes and tailored transformation measures are needed for this.

3.1 SWOT for digital transformation

Technology-related SWOT analyzes examine a company’s internal strengths, weaknesses, opportunities, and threats. A digital transformation strategy helps businesses determine their strengths, weaknesses, and what external influences could affect them. Table 2 above details SWOT analysis for digital transformation. Factors contributing to digitalization strategies are shown below.

• Pick a leader

Strengths	Weakness
Recent updates have been made to organization workplace technology The IT team at the organization is highly skilled and innovative Leaders understand the organizational culture and structure	A lack of change management strategies The budget is limited The needs of customers are constantly evolving
Opportunities	Threats
Competitive advantage through digitalization An era of digital disruption is an opportunity for legacy companies	Confusion and uncertainty surrounding digital transformation A lack of clarity in transformation strategies

Table 2.

SWOT analysis for digital transformation.

Being an effective leader in the digital economy requires a leadership mindset. It is the leader’s responsibility to confront challenges and change, and to identify and address weaknesses and gaps for transformation.

• Embracing a digital-first mindset

First and foremost, digital organization requires a “digital-first” mindset to be successful. Organizations need to embrace digital possibilities instinctively, positively, and pro-actively. Digital solutions must be explored before manual solutions, technology should be viewed for its advantages, and data should be analyzed systematically.

• Cultural transformation to become digitally literate

Investing in employee skills and providing digital literacy training can foster a culture of digital literacy among employees. Organizations that support digital literacy can help their employees increase their technical knowledge and skills.

• Conflict between attack and defense

New initiatives should be guided by either a proactive or defensive stance by top management from the beginning.

• In order to fully transform digitally, Organization need to shift away from traditional thinking and focus on a collaborative, experimental approach.

Leaders are responsible for bridging the past and the future. Digital transformation involves more than just digitalization efforts and affects the entire organization.

4. Maturity models

The implementation of IoT is still in its infancy in most organizations. Organizations can benefit from IoT technology by increasing value, decreasing costs, improving operational efficiency, streamlining operations, and eventually moving toward profitability. A streamlined operation aided by IoT reduces downtime and optimizes workflows. The cost-effectiveness of deploying IoT systems at scale has been made possible by affordable technology that is available for most use cases. Staff can be alerted about changes in processes or productivity with the use of IoT devices, which helps them make smarter decisions. The use of IoT in an organization reduces the time it takes to bring new products and services to market and increases revenue.

Using a maturity model can help organizations assess the current state of effectiveness and determine the next steps to reach objectives. It is necessary for stakeholders to know the current digitalization efforts and to plan for the future. The aim of this study is to discuss available maturity models to assess industrial capabilities related to Industry 4.0 concepts and technologies [20]. For the maturity model, a literature review is conducted. Various maturity models exist in different fields. A majority of the maturity models assessed in this paper relate to manufacturing, where IoT implementations are also carried out. Each maturity model has a unique basis and is planned with specific requirements that are different from each other. SME markets need an IoT maturity model that is specifically designed for them. Table 3 shows maturity model comparisons.

Author	[21]	[22]	[23]	[24]
Dimensions of maturity models	5 levels	3 levels	8 levels	3 levels, 2 dimensions
Goals of the strategic plan	Manufacturing industry	Manufacturing industry	Application of IoT in manufacturing.	Assessing the IoT maturity of an organization
Description	Manufacturing capability maturity model	Digital servitization maturity model	IoT technological maturity model	Gartner’s IoT maturity assessment

Table 3.

Maturity model comparisons.

Different models have different dimensions as shown by the analysis. A fourth industrial revolution, or Industry 4.0, has been shaped by the use of innovative and disruptive technologies in manufacturing environments [20]. New requirements require updating these Industry 4.0 maturity models.

5. IoT maturity model for small and medium businesses

The maturity model identifies the weaknesses and checks the readiness of the organizations. As an organization moves up the assessment level, these weaknesses must be corrected, and improvement actions must be taken. SME digitalization must maximize productivity while addressing global problems like sustainability, resource conservation, and energy conservation [18]. In order to build a more human-centric, resilient, and sustainable industry, the IoT maturity model needs to be assessed based on Industry 5.0, which represents the future of the industry and how it will evolve in the future. Humans and advanced technologies work together in Industry 5.0. In Industry 4.0, technology is emphasized, while in Industry 5.0, value is emphasized [25].

A human-centered organization is needed. There is more to the maturity model than just technology assessment. It is important to focus on the people. It is important to have a progressive digital strategy and to combine people with it. For the SMEs of the future to thrive, they need to be resilient and capable of assisting critical infrastructure during times of crisis. Sustainability measures can improve SME recovery, accelerate growth, and provide lasting commercial success [26].

Scale and complexity of all devices communicating with each other will require drastic mobile technologies. As more and more devices connect simultaneously, 4G LTE networks boasting connection speeds of 5–12 Mbps will be outdone [27]. In the midst of the global 5G rollout, 6G hype is already building about the next generation of wireless technology. Communication is expected to be transformed by 6G over the next decade. In remote regions, the Internet of Things can be used to monitor assets and devices with low latency by 6G. The future launch of 6G networks makes it possible to handle even the most demanding IoT use cases.

6. Future

The future we envision is currently hampered by challenges [1]. It is anticipated that the coming tide of IoT-generated data will dwarf current volumes, and that existing strategies and technologies will be overwhelmed. AI technologies are expected to boost production by 40% by 2035. Different industries will benefit from an average increase of 1.7% in economic development [28]. The destruction of human dignity and the replacement of jobs by machines have, indeed, been constant themes in this coverage, alongside speculation about whether machines are able to think. Over 75 billion IoT-connected devices are expected to be in use by 2025, almost threefold more than in 2019. Linking all of these devices with intellectual abilities will be a substantial challenge [29].

7. Conclusions

It is imperative that both established SMEs and start-up organizations adjust their current practices to take advantage of the IoT’s full potential [9]. An assessment of the current MMs is presented here, along with recommendations for expanding the current MMs to accommodate Industry 5.0 and 6G technology. Based on the SLR evaluation, existing MMs were assessed as applicable to SMEs. Research gaps can be addressed by using 6G technology and focusing on a human-centered approach.

SMEs industry should collaborate and push for a higher level of digitalization. By assessing the level and addressing shortcomings, MMs will be able to provide effective management. SME MMs need to be reviewed and future MMs developed. SME industries, employees, and society can benefit from future technologies like 6G combined with an Industry 5.0 human-centered approach.

IoT Glossary

Big Data:Patterns and trends can be drawn from a very large set of data.
Connected Devices:An Internet of Things is made up of several components. There are many devices that have embedded sensors and/or actuators and collect data to help users and other devices make informed decisions or monitor outside events.
Gateway:In the network, a device that receives data from many other sources, transmits it to another source.
Home Automation:The control and management of electronics, appliances, and devices within a home through a combination of hardware and software.
Industrial IoT (IIoT):The IIoT enables machinery and equipment to transmit real-time information to an application. This allows operators to better understand equipment efficiency and identify preventative maintenance needs.
Internet of Everything (IoE):IoT is not just about things, but also about data, processes, and people, according to a term coined by Cisco and still used today.
Internet of Things (IoT):A network of objects (such as sensors and actuators) that can capture data autonomously and self-configure intelligently based on physical world events, allowing these systems to become active participants in various public, commercial, scientific, and personal processes.
IoT Cloud Platform:A cloud platform that provides a set of services that simplify the integration process between the services provided by cloud platforms and IoT devices. Some platforms include development tools and data analytics capabilities.
Machine-to-Machine (M2M):This refers to a network setup that allows connected devices to communicate freely, usually between a large number of devices; M2M often refers to the use of distributed systems in industrial and manufacturing applications.
Microcontroller (MCU):A small computer on a single integrated circuit designed for embedded applications and used in automatically controlled embedded systems.
Messaging Protocols:The way information is transferred and communicated among devices, the cloud, and data storage. Different protocols are used for different results.
Operability:Operability is the measure of how well a software system works when operating in production, whether that is the public cloud, a co-located datacenter, an embedded system, or a remote sensor forming part of an IoT network.
Personal Area Network:A network created through the interconnection of information technology devices within the context of a single user.
Radio Frequency Identification (RFID):A technology that incorporates electromagnetic coupling and radio frequency to identify objects and persons. It consists of three components: an antenna, transceiver, and transponder.
Sensor:A device or component that perceives and responds to physical input from the environment.
Sensor Network:A group of sensors with a communications infrastructure intended to monitor and collect data from multiple locations.
Wearables:Connected devices that can be equipped with different types of sensors and are worn on a person’s body. They are meant to monitor, collect, and quantify data about a person’s life and environment, and allow them to interface with that data.
Wi-Fi:A wireless local area network (WLAN) that uses radio waves to provide wireless high-speed Internet and network connections.
Z-Wave:A wireless protocol for home automation that communicates using a low-power radio frequency technology specifically designed for remote control applications.

Organizations involved on the internet of things

GE Digital:GE Digital’s Predix industrial IoT platform supports multiple GE Digital applications’ workflows among its products and services.
Cisco:A range of IoT products and solutions are available from Cisco, including industrial sensors and connectivity management.
Verizon:With Verizon’s IoT solutions, customers can track vehicles, machines, kiosks, automate their retail experiences and take advantage of intelligent lighting to make street lighting more energy and cost-efficient.
IEEE the Institute of Electrical and Electronics Engineers:The goal of the organization is to promote standardization through international electronics development.
W3C World Wide Web Consortium:A major international standards organization for the World Wide Web (abbreviated WWW or W3) is the World Wide Web Consortium.