Image source: IBM. 

Internet of Things -- IoT -- is set to be one of the most exciting trends in technology over the coming years. Billions of devices across the world are increasingly becoming interconnected via Wi-Fi and similar technologies, and this is producing massive amounts of information with tremendous economic and strategic value.

IBM (NYSE:IBM) is leveraging the power of its supercomputer, Watson, to better capitalize on the huge opportunities provided by IoT, and it could be a real game-changer in the industry.

Watson joins the IoT revolution
In March of 2015, IBM made a commitment to invest $3 billion over three years to bring cognitive computing into IoT, and the company has not wasted much time since then. In October, IBM announced the acquisition of the B2B, mobile, and cloud-based web properties of The Weather Channel. Real-time weather data is enormously valuable in industries such as air transportation and insurance, and IBM has IoT partnerships with leading industry players like Airbus and Allianz.

In addition, IBM has recently announced that it will be opening a new Watson IoT global headquarters in Munich, Germany. This will be IBM's biggest investment in Europe in the last two decades, and the company is also opening eight new Watson IoT centers across the world, including locations in Beijing, China; Boeblingen, Germany; Sao Paulo, Brazil; Seoul, Korea; Tokyo, Japan; and Massachusetts, North Carolina, and Texas in the U.S.

The Watson IoT headquarters will bring together 1,000 developers, consultants, researchers, and designers, and it will also work as an innovation lab for data scientists, engineers, and programmers building all kinds of solutions in the area of cognitive computing applications in IoT. 

The power of cognitive computing
In traditional computing, data is guided through a series of predetermined possibilities: "If this, then that." These systems work with prescribed scenarios and predictable data, and this makes them inherently rigid and limited in their capabilities.

Cognitive computing systems, on the other hand, are not explicitly programmed. They can reason from their interactions with humans and the environment. These systems don't only provide intelligence, they also learn from experience. 

Cognitive systems go way beyond solving mathematical and logical problems; they can understand a company's goals and values, processing the relevant information to provide different possible solutions. These systems are designed to adapt and make sense of the complexity and unpredictability of information, interpreting such information, and offering different possible explanations for what the data mean.

As opposed to being deterministic, cognitive systems are probabilistic. They do not provide a unique and definitive answer to a specific problem. Instead, cognitive systems like Watson weight the information and offer different alternatives for consideration, assigning confidence levels to these different answers.

In a nutshell, cognitive systems are much better suited to deal with the scale, complexity, and unpredictability of IoT data.

Bringing IoT to a new level
There are more than 9 billion connected devices in the world today, and they are producing around 2.5 quintillion bytes of new data daily. However, most of this information is not being used or acted upon. 

According to McKinsey, an oil rig typically has 30,000 sensors, but only 1% of the data produced from those sensors is examined. Information is mostly used to detect and control anomalies, not for optimization and prediction. IBM estimates than 90% of the information produced by sensors is being wasted due to factors like bandwidth capabilities and privacy concerns.

IoT is not just about effectively gathering all kinds of information to increase operational efficiencies. The true game-changing applications are related to creating interactions among communities of devices that share this information. Cognitive systems like Watson offer the possibility to collect and integrate data from many types of sensors, to reason over that data, and to learn from their interactions.

IBM calculates that IoT is creating a gargantuan market opportunity that could reach $1.7 trillion in value by 2020, and the company is in a strong position to profit from this potential by applying its Watson cognitive systems to the IoT revolution.

Andres Cardenal owns shares of International Business Machines. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.