Our central finding is that the hype may actually understate the full potential—but that capturing it will require an understanding of where real value can be created and a successful effort to address a set of systems issues, including interoperability. ... To get a broader view of the IoT’s potential benefits and challenges across the global economy, we analyzed more than 150 use cases, ranging from people whose devices monitor health and wellness to manufacturers that utilize sensors to optimize the maintenance of equipment and protect the safety of workers. Our bottom-up analysis for the applications we size estimates that the IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value—including the consumer surplus—would be equivalent to about 11 percent of the world economy ... Achieving this kind of impact would require certain conditions to be in place, notably overcoming the technical, organizational, and regulatory hurdles. In particular, companies that use IoT technology will play a critical role in developing the right systems and processes to maximize its value. ... The digitization of machines, vehicles, and other elements of the physical world is a powerful idea. Even at this early stage, the IoT is starting to have a real impact by changing how goods are made and distributed, how products are serviced and refined, and how doctors and patients manage health and wellness. But capturing the full potential of IoT applications will require innovation in technologies and business models, as well as investment in new capabilities and talent. With policy actions to encourage interoperability, ensure security, and protect privacy and property rights, the Internet of Things can begin to reach its full potential—especially if leaders truly embrace data-driven decision making.