IoT - Adopt, or Face Extinction! Series

IoT - Adopt, or Face Extinction! Series

Provocative as the topic is, it is also the reality of what is about to happen to many businesses, industries and business models due to IoT. It has the hidden latency, or potential power that will not be readily visible until it is too late for companies that do not keep tabs on this change, adopt and adapt to it.

This is a change that many businesses may tend to ignore, especially the ones that are still expanding in their markets assuming all is well. They may be thinking this is another hype that will fade away. Or, they are oblivious to the impending change, or are too busy surviving to notice the oncoming tsunami of IoT driven changes and its disruption of current business models!

This is one management lesson not to be missed by C-suite and business leaders. Beware! disruption is heading your way and you need to be as vigilant of disruptive technologies and what they can do to your business.The power of big data, real time analytics, ubiquitous and ever increasing bandwidth, ubiquitous cloud, high chip processing speeds, etc. are all enablers supporting IoT driven change.

This is a change that is prompting smart businesses to partner with intra and inter industry companies to create solutions that far exceed solutions specific to their company or industry. And, this kind of partnership is what will cause disruption to existing business models unless they respond with compelling offers of their own.

IoT (Internet of Things) is one of the hottest technology trends, and is listed at the top of the Gartner Hype Cycle 2015 ( IoT itself has been around a long time but had been restricted to a few industries and applications due to technology limitations. Technology enablers listed above have convergence to open doors to connected devices where IoT is no longer restricted to a few applications, industries and intra-company solutions. IoT has become pervasive, thus landing it one of the top spots on the Gartner Hype Cycle in 2015. Gartner also projects that 6.4 Billion connected Things will be in use in 2016, up 30% from 2015 [1].

Market opportunity for IoT is huge. Market research firm IDC projects IoT market to reach $1.7 Trillion by 2020 [2}. Gartner, Deloitte, and others have similar projections for the IoT market. Initial data on IoT market penetration and the expected adoption rate indicates that IoT projections are real, IoT is here to stay, and it is going to become ubiquitous in the coming years.

What is not easily apparent is that IoT is going to disrupt many industries, businesses and business models. New business leaders will emerge, new business models will fall in place and companies that don’t adapt to this change will find themselves on the way to extinction.

Initial rush for IoT solutions was dominated by applications within an industry vertical, e.g., Industrial Automation. Here IoT devices and applications provide meaningful information for smart decisions for improving productivity, typically within a company. For example, IoT sensors and its data analytics provided alerts to a manufacturer to take preventative actions before a machine broke down. This avoided costly repairs and diminished productivity.

Data transportation was limited to telemetry and connected-ness within a limited geographic boundary, or within a company supported by its data transport infrastructure (e.g. WAN, LAN, corporate WAN etc.). Technology challenges in broadband, Wi-Fi and other data transmission approaches prevented IoT from becoming ubiquitous. Nor did companies have the propensity to share their data with anyone else. All of this is changing.

Technological advancements have removed this limitation. It is now possible for IoT to produce cross industry solutions. It helps fuse partnering companies’ knowledge and expertise in their fields to create new products and solutions whose benefits far exceed legacy solutions. Legacy solutions have to be integrated to derive meaningful information. Besides we are all familiar with the interoperability challenges vis-à-vis proprietary or incompatible interfaces and costly integration to deliver meaningful results.  

Cross industry and cross-company within the same industry IoT solution benefits is not lost on progressive companies. They are partnering together to produce synergistic solutions. Let us consider two examples of these – one in Consumer and another in Business to Business sectors to drive home the point of disruption.

Consumer Industry

Samsung’s SmartThings uses different smart home devices like smart bulbs, smart sensors, and other devices (called end points) from various manufacturers. Samsung integrates them together through one application to produce a smart home and home automation solution.

The individual end points may have their own user interfaces to manage end point functionality. However, an integrated application can “stitch” together each end point’s functionality into one. In this case, a touch of a button can lead to a series of actions by end points to accomplish desired outcome (called a use case). Clearly, the integrated app provides much powerful solution and value than standalone functionality of each end point.

For example, a smart home solution at night may automatically switch on outside lights, set back thermostat settings to a lower temperature, switch on a hallway or kitchen lights to a dim condition, and arm the window/door sensors to trigger an alert should they open etc. This would be one use case, perhaps called the “Night” mode. Similarly, several such use cases exist (e.g. Day, At Home …) providing customers control over their environment. Contrast this with what a user who may have to go through if they had to use app of each end point to produce the same result as above!

Business to Business

Manufacturers use machines and machines break down requiring repairs, and regular maintenance! In a traditional model, a buyer purchases machines, annual maintenance contracts, and/or also maintains them using their own staff. Intelligent monitoring software correlates several inputs and data to determine a potential breakdown alerting maintenance. Proactive actions taken prevent machines from breaking down. This prevents revenue loss. Sounds good right? Consider the following.

With sophisticated IoT sensors and other enabler technologies listed earlier, machine manufacturers will be able to manage machine performance much better than before. These IoT sensors will provide detailed characteristics of machine behavior and usage by their customers. Proactive maintenance can be performed much earlier than the model above.

With such high degree of predictability, the machine manufacturers (suppliers) may no longer sell machines anymore! They may, instead choose to offer “Machine as a Services” (MaaS) to the end user. And, the end user may appreciated it as they no longer have to incur capital purchases, maintain ownership of the machines and dispose of them when the time arrives! And, they can shift capex to opex easily.

With such overheads gone, a supplier that effectively develops MaaS model is going to clearly disrupt traditional "purchase + annual maintenance" model as the former offers clear advantages to the buyer. And, the money saved in training their staff, or even hiring maintenance staff is gone, or reduced substantially. An unwary supplier, especially with increasing market share may miss out on disruption happening to them, until it is too late.

This is the potential threat, or the tsunami I referred to earlier regarding IoT. This is a latent threatening existing business models. It is not obvious, unless one is vigilant of disruptive powers of IoT and its enabler technologies.