Business Value of the Internet of Things - A Project Portfolio Selection Approach

The Internet of Things (IoT) counts among the most disruptive digital technologies on the market. Despite the IoTs emerging nature, there is an increasing body of knowledge related to technological and business topics. Nevertheless, there is a lack of prescriptive knowledge that provides organizations with guidance on the economic valuation of investments in the IoT perspective. Such knowledge, however, is crucial for pursuing the organizational goal of long-term value maximization. Against this backdrop, we develop an economic decision model that helps organizations determine an optimal IoT project portfolio from a manufacturers perspective and complies with the principles of project portfolio selection and value-based management. For our purposes, IoT project portfolios are compilations of projects that aim to implement IoT technology in an organizations production process, products, or infrastructure. Our decision model schedules IoT projects for multiple planning periods and considers monetary as well as monetized project effects. On this foundation, it determines the project sequence with the highest value contribution. To evaluate our decision model, we discussed its real-world fidelity and understandability with an industry expert renowned for its proficiency in IoT technology, implemented a software prototype, and demonstrated its applicability based on real-world data.