From the outside, we tend to idealize the way big organizations work. We imagine they are highly efficient, all the time making the right decisions and making the most of the resources available to them. The best organizations are supposed to be lean and mean machines. Reality is however a bit messier than this idealization suggests. One CEO put managing a corporation as, “The Corporation is a boat that is leaking everywhere and I have to steer it”.
One of these major leaks in an organization is asset utilization. Deployment of assets is a mystery in many instances. Managers use rule of thumb principles which they have learned from experience to plan and organize. The result is enormous amount of capital being tied up in underutilized assets. This effects the Return on Capital of these companies.
Return on Capital is one of the most important measures of a company’s performance. It gives investors an idea about how a company utilizes its investments into profits. The value of the company depends on optimal utilization of the capital investments. In spite of the pressure to boost capital deployment, many organizations are struggling with it. Lack of information is the real problem, the larger the organization the bigger the challenges with stuck capital.
New In-door tracking technologies (Micro-Location in technical jargon) are well positioned to solve these problems. Micro-location takes tracking of assets to a whole new level. Organizations can track any movable asset / equipment / field workers / staff of high importance and get an accurate view of what is happening at the ground level. Micro-location sheds light on utilization of assets and allows managers to observe, track and plug the leaks as necessary.
The Internet of Things is perfectly placed to give management the ability to make their organizations leaner and less capital intensive. Real-time tracking and intervention will improve utilization. This will trim the tied up capital for organizations and improve the Return on Capital. It is going to be a big windfall for the investors. Larger the organization, the more it can benefit from these solutions. These organizations have the ability to use scale to minimize the investment required for these tracking solutions. While SMEs will benefit from better coordination amongst different enterprises, larger ones will benefit from better coordination within.
Real-time tracking is the next big thing, changing the way organizations and industries are managed. Many of the great leaps forward for civilization have happened due to the increased ability to communicate. The first industrial revolution went hand in hand with the telegraph, the second one with radio communication and the internet revolution with the world wide web. The Industrial Revolution 4.0 is promising to be the most transformative so far. Everyday objects will start communicating with each other, leading to a more efficient economy. Investors can look forward to increased returns. The world as a whole will benefit from more effective use of natural resources.