Digital companies like Amazon and Netflix have used data to reinvent products and services in ways no-one imagined possible. Shopping and films were not new concepts, but these companies and many others built hugely successful businesses by disrupting existing industries through connected, personalised, data-driven services, writes Nick Earle, CEO of the IoT hardware firm Eseye.
We are on the brink of a similarly disruptive revolution, as the Internet of Things (IoT) starts doing the same for โphysicalโ businesses โ from tennis rackets to coffee machines and industrial machinery – allowing them to offer connected, data-driven, differentiated experiences. This is sometimes referred to as the โnext Internetโ and IDC predicts that in total there will be 41.6 billion connected IoT devices or “things” by 2025.
Access to this incredibly detailed data on every aspect of how the physical world works will create endless disruptive innovations โ from both new and existing companies. This presents limitless opportunities, but also severe threats to companies that wait too long.
A decade ago, many predicted this revolution, but it has taken longer than expected. Despite pockets of innovation, many have struggled to deliver successful IoT projects. We have yet to see the IoT equivalent of Netflix.
There are some obvious reasons for this. Many companies with a long heritage in the physical world find digitisation hard to navigate. Moving from selling units via a capex model to managing a continuously connected, data-driven relationship via an opex model is a big shift โ involving new technologies, business processes, skills and management metrics. Concerns about how to do this can cause management paralysis where the outcome is often โdo nothing and waitโ. Arguably a worse approach than trying and failing.
Itโs also a culture issue. We donโt like change, itโs difficult and we only do it when we have to. The problem is that when you are the market leader your existing financial metrics often disguise the change that your competitors are implementing in the market. A large installed base of customers will keep generating revenue for a long time and itโs often hard, if not impossible, to recognise the new disruptive business models that are winning the next generation of customers. But as the old saying goes, you overtake on the corners not the straights, and the COVID-19 pandemic has accelerated many digital initiatives not slowed them down. Your business model is being disrupted whether you can see it or not and itโs almost certainly accelerated during 2020.
Another reason is much more basic. Due to the fragmented nature of the Mobile Network industry, where multiple players compete with each other with their proprietary SIMs, the holy grail of ubiquitous global cellular connectivity for each and every device via a single embedded eSIM has not been possible. The reality is no network SIM, even from the largest Tier 1 operators, can deliver more than 90% global coverage, even with extensive roaming arrangements. You donโt want a connected lawn mower which is invisible in 10% of cases, or a connected health monitoring device that misses 10% of emergencies. And to fill that connectivity gap you donโt want to have to use a different operatorโs SIM – that just adds complexity, cost and kills the business case. If this connectivity barrier can be removed, then the savings in manufacturing and supply chain costs that can be delivered from moving to single global product SKUs will more than justify the investment in IoT pilots and new product rollouts. This is the problem that Eseye solves and we are currently doing it for more than 2,000 customers worldwide.
Iโve spoken to IoT industry leaders from Microsoft Azure, EY, Thales, Relayr, and The Chasm Group, to understand the opportunities that IoT offers for companies to create disruptive products and services, and the lessons theyโve learnt delivering digital transformation and disruption through connected devices.
Dr Miroslaw Ryba, Global IoT Leader at EY, explained that: โDisruptive IoT is about taking the sum of thousands of IoT sensors โ say in a factory – and combining data to deliver transformational insights. And that the next, exciting phase, will be a new data economy.
โThere is [already] an agreement that the user gives up their data in return for a service. Imagine what will happen once that data expands to real-world activities. It will allow the development of whole new classes of products and services aligned to customer needs.โ
Tony Shakib, Global IoT Business Acceleration Leader, at Microsoft Azure believes that weโre at an inflection point where some companies are taking investment in IoT infrastructure seriously, allowing them to capture meaningful data, and integrate it into their workflow management systems. Here they can start delivering, and acting on, real-time insights.
He said: โGradually weโre crossing from the experimental phase to mass adoptionโ he explains. โOnce we get there, weโll see real change. Once you start connecting devices and using data intelligently, the amount of innovation you can do becomes exponential.โ
When moving from incremental advances to big disruptive IoT-driven transformation, Shakib believes the key is cultural change.
He explained: โTech is not the bottleneck โ devices, security, connectivity, and cloud platforms are all there if you know where to look. The problem is people struggling to understand the art of the possible.โ
VP of IoT at Thales, Andreas Haegele, unpacks the points of consideration including, security, connectivity and process when trying to maximise the benefits of IoT.
โMost business models of the past โ and many today โ are โsell and forgetโ. IoT connects your products, which changes what you offer. It creates an ongoing connection between you and the customer allowing you to deliver ongoing services and collect data which provides valuable insights.
โHowever, there are other factors to consider, namely around process and security. Eseye, for example, offers out-of-the-box connectivity which you can embed in an IoT device and it just works, there is no need for setting up new networks, security protocols, certification with mobile network operators (MNOs), etc. IoT needs security to be embedded from the start as security is very hard to retrofit. There must be a unique identity for every device so they can be managed during their lifetime. And you need to make sure software updates can only be accepted by trusted sources.
โAlso, built-in connectivity is central to IoT. Each device needs to consider the right type for them, but I expect most will use cellular eventually, since it removes many roadblocks to uptake. If devices over-complicated connectivity, thatโs a major turn off for customers who expect seamless, convenient experiences.โ
While Peter Van der Fluit, Principal at Chasm Group, said: โAny company that currently makes or operates a physical product needs to be thinking about IoT. If you donโt connect your product to create a differentiated offer, someone else will.
โTo be successful in embracing IoT, or any disruptive technology, companies should divide their business into four โZonesโ โ an approach established by Geoffrey Moore in his book Zone to Win. Two of these Zones focus on innovation, and two on the core business. Each needs a different leadership style, culture, financing and governance.โ
With so much disruption and change thrust upon companies, business models are inevitably going to evolve. Josef Brunner, CEO at Relayr, explained to me how IoT is disrupting business models, forever.
Josef said: โIoT is creating whole new ways of thinking for those who manufacture products, enabling them to change how they sell in a way that works better for them and their customers. This is often talked about as moving from selling products to selling services. Weโd go further and say that at its best, IoT is about selling outcomes. Rather than charging an hourly or monthly subscription, the manufacturer can sell the value that is delivered.โ
But there are pitfalls to be avoided when switching to a model that sells outcomes. Josef explains: โThe main mistake companies make is to think of IoT as a technology project, looking at what tech is available and working out where to deploy it. Instead, they should start with the business problem.
Start by looking at what assets you have, and how they could be used to deliver a better experience for customers. Put the customer need at the centre of that offer. Then look at how tech can enable it.โ
The inventors of the internet could never have predicted Uber and Netflix. Likewise, we can only guess at what IoT entrepreneurs will come up with once they have access to data from trillions of devices capturing rich data on every aspect of our lives and businesses. But itโs likely to be an even bigger wave of innovation than the first version of the internet unleashed. There really are no limits.
