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Business Models and the Internet of Things

Two topics close to my heart - Business models and the Internet of Things

 

Surprising Stats Regarding the Internet of Things

CMO.com publishes a weekly column, "Mind Blowing Stats"  that collects disparate and sometimes arcane data points about a specific topic.  A recent edition of the column highlighted the great traction and movement forward that IoT is achieving though most people, and companies, don't recognize how fast the technology is being embraced.  From the column:

1. In 2008, there were already more "things" connected to the Internet than people. By 2020, the amount of Internet-connected things will reach 50 billion, with $19 trillion in profits and cost savings coming from IoT over the next decade.

2. Connected homes will be a huge part of the Internet of Things. By 2019, companies will ship 1.9 billion connected home devices, bringing in about $490 billion in revenue. Google and Samsung are already ahead of the pack. Google bought smart thermostat maker Nest Labs last year for $3.2 billion, and Samsung purchased connected home company SmartThings for $200 million.

3. Right now, most IoT smart devices aren't in your home or phone; they are in factories, businesses and health care. By 2025, the total global worth of IoT technology could be as much as $6.2 trillion--most of that value coming from devices in health care ($2.5 trillion) and manufacturing ($2.3 trillion).

4. Only 0.06% of things that could be connected to the Internet currently are, which means 10 billion things out of the 1.5 trillion that exist globally are currently connected.

5. By 2020, it’s estimated that 90% of cars will be connected to the Internet as compared to 10% in 2012.

6. The connected kitchen will contribute at least 15% savings in the food and beverage industry by 2020.

7. By equipping street lights with sensors and connecting them to the network, cities can dim lights to save energy, only bringing them to full capacity when the sensors detect motion. This can reduce energy costs by 70% to 80%.

8. GE estimates that convergence of machines, data, and analytics will become a $200 billion global industry over the next three years.

9. More than two-thirds of consumers plan to buy connected technology for their homes by 2019, and nearly half say the same for wearable technology. Smart thermostats are expected to have 43% adoption in the next five years.

10. In 2008, Proteus Digital Health created a pill with a tiny sensor inside of it. The sensor transmits data about when a patient takes his medication and pairs with a wearable device to inform family members if it's not taken at the right time.

11. A whopping 94% of all businesses have seen a return on their IoT investments.

12. Wearables will becomes a $6 billion market by 2016, with 171 million devices sold, up from $2 billion in 2011 and just 14 million devices sold.

13. Currently, 7% of consumers own a wearable IoT device, and 4% of consumers own an in-home IoT device. Nearly two-thirds of consumers plan to buy an in-home device in the next five years, and wearable technology ownership will double by 2015—increasing from 7% in 2014 to 14% by 2015. By 2016, wearable technology is expected to double again and reach a total of 28% adoption rate.

14. Among wearable technology devices, wearable fitness applications and technology stand to see the most growth in the short term, with 13% of consumers planning to purchase within the next year and a total of 33% looking to adopt in the next five years. Smartwatches are the second most popular wearable device, with 5% planning to purchase in the next year and a total of 23% planning to adopt in the next five years.

15. Although the mass adoption of connected technology is likely in the long term, the majority of consumers (87%) haven’t heard of the term “The Internet of Things.”

 

The Growth of the Internet of Things (IoT)

Cisco continues to be among the vanguard of enterprises that are embracing the emerging Internet of Things (IoT).  John Chambers, CEO of Cisco, recently delivered another speech on the concept and the bottom line, from Cisco’s viewpoint, is that the IoT is going to be a $19 trillion profit market in the next few years. That includes $2.9 trillion for manufacturing alone. Internet of Things is becoming the backbone (at least in rhetoric) of Cisco's overall business strategy, and Chambers pointed in that direction once again, stressing that Cisco's IoT game plan combines the company's cloud strategy with data analytics, mobile, collaboration, and most important of all, security.

M2M and the Internet of Things

A dozen years ago in a white paper on emerging technologies I included a section on machine-to-machine (M2M) technology, though at the time that nomenclature wasn’t generally accepted.  My simple example of the power of M2M featured communications among a population of Coke machines in a large downtown area sharing real-time inventory data to allow any individual machine to direct a customer to the next closest machine should they be out of the carbonated beverage that customer desired at that particular time.

That example was fanciful at the time, but M2M has now gained traction as one of the “next big things” as hundreds of companies are combining wireless, Wi-Fi, mobile, web, and context technologies to offer information and convenience in innovative new ways.  The escalating pace of adoption for smart devices – phones, tablets, home appliances, industrial equipment - is creating new demands on enterprises and consumers around the globe which requires new thinking about the connected environment.

M2M technologies allow wireless and wired systems to communicate with other devices possessing the same capability.  M2M uses sensors, meters or like devices to capture event data (electricity usage, temperature, inventory) and share it via network with an application that translates the data into information that can be used by other devices, networks, applications and enterprises.

M2M is a critical platform for the enablement and maturation of the concept of the “internet of things” which includes everything from smartphone apps that control a home's living environment remotely to real-time analytics that help ease traffic congestion and city parking challenges.

The notion of an “internet of things” has been around for a while now.  Kevin Ashton coined the term in 1999.  Of course, a concept is never truly viable until it has its own consortium hence, the Internet of Things Consortium

The Internet of Things (IoT) represents the connection of all machines, devices, sensors, automobiles, cameras, and other "things" to help customers improve operations and save valuable time, money and even lives. The IoT connects places such as manufacturing floors, energy grids, healthcare facilities, and transportation systems.

With cloud infrastructure becoming more prominent, M2M applications have expanded beyond a one-to-one connection to become a system of networks that transmits data to personal appliances. This has made it far easier to effect M2M communication and lessened the amount of power and time necessary for information to be communicated between machines.

The critical dynamic here, and one that has been growing for at least 15 years, is that smart devices connected to the internet would eventually far outnumber the people that would be connected to the internet.  Voila! We are there.  Per Cisco, over 12.5 billion devices were connected in 2010 and Cisco’s Internet Business Solutions Group (IBSG) predicts some 25 billion devices will be connected by 2015, and 50 billion by 2020.

ERP solution provider SAP has begun to explore M2M and recently conducted a survey among IT decision makers on the impact, current and forecasted, of M2M.  Some interesting data points that emerged from that survey included:

• 85 percent of IT decision makers (ITDMs) think that M2M is a natural technological evolution and will advance the "consumerization of IT" trend
• 82 percent think that M2M interaction enables businesses to respond to real-world events
• Sixty-five percent of ITDMs think increased workforce mobility is the biggest opportunity for M2M
• 65 percent think the major challenge in M2M is managing and analyzing the real-time data.
• By year's end:
  • Mobile devices will outnumber the human population
  • Data volume will reach 4 billion terabytes
  • 90 percent of consumer-connected devices will have access to some personal cloud.
  • SAP estimated that by the end of 2020, there will be 24 billion connected devices and by 2015, 35 percent of mid-to-large organizations will adopt in-memory computing

The possibilities for machine-to-machine in concert with other emerging technologies are extraordinary. Almost every machine or device has the potential to become connected, creating interactions with other technologies and services and bringing significant impacts to processes in and across all industries.

As the notion of an “Internet of things” becomes increasingly mainstream, businesses will incorporate machine-to-machine technology to gather and use information towards both strategic and tactical ends. The end result will be new products and services that will drive new revenue streams and reduce costs for businesses.

Addendum: Social Business Gains Traction

As an addendum to an earlier post on social business, this chart from the second annual MIT and Deloitte Social Business Global Executive Study and Research Project survey on how businesses use social media suggests that the concept of social business is being adopted aggressively across all industries.  How well and how strategically it is being adopted is still an open question.

 In all 12 of the major industry sectors covered by the survey, the percentage of respondents who said social software or social business was “important to their organization today” increased from the previous year’s survey. No industry sector declined and none remained flat.

Interestingly, the industry sector with the strongest year over year increase in the survey was energy and utilities, moving from 7% of respondents ranking social business as “important” in 2011 to 29.1% in 2012.  That exponential increase may be linked with the increasing adoption of smart grid technologies that allow utilities to more easily interact with their customers.  A 2012 research report by Navigant Research predicted that by the end of 2017, the number of utility customers using social media to engage with the utility companies would rise from 57 million in 2011 to 624 million.

Unsurprisingly, for the second year in a row, the technology/media/telecommunications sector respondents were most likely to rate social business as important to their organization with 87% saying that social business was important or somewhat important to their organizations in 2012.  A bit more surprising was that the education (82%) and professional services sectors (76%) followed closely behind.

Another finding from the survey was that while companies in most industries are generating social data from their initiatives, few businesses were analyzing the data or integrating it into their organization’s systems and processes.

The new study from MIT and Deloitte will be released in July.

Mobile-First Strategy and the Growth of Responsive Web Design

As more and more consumers hold their “computer” in their hand rather than on their lap or use a venerable desktop version, the pressure on enterprises to improve/refine/perfect their active connection to these increasingly mobile consumers becomes ever more important.  For many businesses, commerce happens in a much more real-time and immediate manner than ever before and the ability to access those mobile consumers and influence their purchase decisions require that their digital access points be built for mobile.  Sadly, too few companies at this point are designing and developing business applications with the mobile interface as the primary design driver.  Traditional PC-based application development still rules over a “mobile first” strategy. 

A "mobile first" approach is where new websites and applications are designed for mobile devices first, instead of initially designed for laptops and desktops. Estimates suggest that by 2015, more people will access the Web via mobile devices than desktop computers.  Opinions on the validity of a “mobile first” strategy vary, but there are some reasonably strong advocates running around.

“Google programmers are doing work on mobile applications first, because they are better apps and that's what top programmers want to develop.” – Eric Schmidt, Google Chairman

“We're just now starting to think about mobile first and desktop second for a lot of our products.” - Kate Aronowitz, Design Director Facebook

“We really need to shift now to start thinking about building mobile first. This is an even bigger shift than the PC revolution.”  - Kevin Lynch, CTO Adobe

Still, every organization needs to assess what is the better process for engaging their key constituencies. One general school of thought is that if you don't design your products and services for what is rapidly becoming the dominant UI, you will not maximize the success of your business in the long run.

Not surprisingly, most Web development teams have designed for the desktop first. Mobile, if it even happens, is simply ported off the desktop version.  Consideration of what the mobile experience requires, in terms of user interface and navigation, seems cursory at best. But that thinking is based on a smart phone 1.0 context – challenges in browsing, Web access that was problematical, and slow network speeds.

As iPhones and Androids have driven a tidal wave of technological ease and sophistication in smart phones and smart devices, the necessity of designing for mobile has become more acute.  That is causing companies to consider adopting a mobile-first strategy to ensure that they capture mobile markets before going after the more traditional desktop community.

Into the breach a new approach, responsive web design (RWD), has arrived aimed at crafting sites to provide an optimal viewing experience—easy reading and navigation with a minimum of resizing, panning, and scrolling—across a wide range of devices (from desktops to smart phones).  The “philosophy” underpinning RWD is that designing for mobile first can not only open up new opportunities for growth, it can lead to a better overall user experience for a Web site or application.

Whether this all makes sense for your organization is a function of multiple components of your business model – who your customers are, the way you make money, and the channels that facilitate the most profitable engagement.  If your key markets are increasingly seeking you out via the mobile platform, it may be time to alter your app development strategy.

On Becoming a Social Business

Call it the tipping point, the moment of truth, a watershed event or any other synonym for when things have arrived at a point of irreversible, no-going-back, change.  Is 2013 going to be the year when social media truly becomes social business and social business morphs into business as usual?

Probably not.  Reams of data suggest that most companies are using social media.  Most of those are still really just dabbling.  Truly embracing social media as a core element of business going forward requires a belief and commitment that is still difficult to find in companies with more traditional business models and a bias towards the tried-and-true.  But with proof points on the efficacy of the practice/process/technology/culture of social media becoming more and more plentiful, it would seem that the more programmatic embrace of social media is coming closer to a need-to-have more than a nice-to-have.

The concept of a “social business” is still probably nascent enough that there remain a number of definitions running around.  In a recent report from Altimeter Group, Charlene Li and Brian Solis outlined the difference between a social media strategy and a social business strategy:

A social media strategy lays out the channels, platforms, and tactics to support publishing, listening, and engagement. A social business strategy is the integration of social technologies and processes into business values, processes, and practices to build relationships and spark conversations inside and outside the organization, creating value and optimizing impact for customers and the business alike. The most important criteria for a successful social business strategy are twofold: clear alignment with the strategic business goals of an organization AND organizational alignment and support that enables execution of that strategy.

Social media broadly permeates society (perhaps too much!) and that means it permeates business operations on all levels.  Ad hoc social activity runs rampant across the enterprise so it stands to reason that sooner or later, every company will want to formalize and harmonize these activities into a coherent strategy and plan.  Social business technologies help people connect, communicate, and share information and, whether informal or formal, use of those technologies allow companies to respond more quickly, take advantage more easily, and create competitive advantage.

Companies have historically tended to demonize those things that impact their business but remain beyond their control.  Though it may be stating the obvious, social media is one big, fat dynamic that is altering the playbook for business and not just in the marketing discipline.  De facto, every business today is a social business; they may just not have internalized it yet.  Possessing a strategy is merely the first step in the formal embrace of social.  That way, all those “Likes”, “Friends”, “Links”, and “Follows” can mean something more than a distraction.

Along those lines, here is a video from GE on their progression towards becoming a social business.

 

 

 

Chaos, Boundaries and Innovation

As I am a visual thinker, I do love a good graphic.  Jeremy Gutsche, Chief Trend Hunter at TrendHunter.com, included some nice ones in his book, Exploiting Chaos last year.  At the core of his thesis, that in times of chaos, companies must learn not to create structure and stability, but rather, to adapt quickly, is this evocation of a process that is aligned with much of my thinking.  While I have nits to pick with some of his conclusions in the book, I appreciate the codification of the thinking around chaos and the opportunities that learning to manage chaos to the enterprises' (and individual's) benefit serves in creating elements of competitive advantage.

The key elements of what Gutsche refers to as the Exploiting Chaos Framework are outlined below:

Culture of Revolution

Culture is more important than strategy. Culture underlies your organization’s ability to adapt, and times of dramatic change magnify this importance. Most likely, your organization perceives the need to adapt, but uncertainty and resistance are paralyzing innovation. By creating an organizational culture of revolution, you can spark a new paradigm for creative change.

Trend Hunting

Innovation and strategic advantage hinge on your ability to anticipate trends and identify the next big thing. By using the cutting-edge framework in this book, you can filter through chaos and identify clusters of opportunity to focus your innovation.

Adaptive Innovation

Engineers, designers, and scientists have invested billions of dollars to perfect human creativity. By applying the best of their proven practices to your own field, you can think big while acting small. You can rapidly identify and evaluate new opportunities.

Infectious Messaging

The Internet has created a world cluttered with chaos, but it has also created the world’s first viral platform for ideas. Well-packaged stories travel faster than ever before. Unfortunately, most marketers are stuck in a world dominated by traditional advertising and cliché. By cultivating infection, your ideas will resonate, helping you to leapfrog ahead of the competition.

 

An expanded view of the Framework adds some color to the canvas.

The first chapter of the eBook is available for free download here and the book can also be purchased at the same location.

The Only Constant is Change: Addendum

When it rains, it pours, or so it seems.  On the heels of a recent Forrester report on the future of IT services which I wrote about here, management consultant A.T. Kearney weighs in with their own, very similar view on that future.  This recent op-ed in Businessweek by Arjun Sethi and Olivier Aries sees most of the same external drivers highlighted in the Forrester report  but offers a different and altogether more interesting futurescape for IT services.

“ In the next five years outsourcing as we know it will disappear.  The legion of Indian service providers will be sidelined or absorbed. U.S. and European companies that pioneered this corner of the high tech industry will suffer similar fates if they don't wake up.  Who will emerge as the new leaders?  Google and Amazon.com , brands that we associate with search and retail, will become better known for outsourcing."

Longtime readers of this blog will know that I have been harping on the threat that Amazon and Google, in particular, present to the old guard of IT service providers as I have written about it here, here and here. SaaS/cloud technologies, under any name, have been a game changing disruptive force for the past 10 years. When IBM acquired Corio five years ago, that should have, de facto, been some kind of canary in the coal mine.

In their commentary Sethi and Aries also conjure up a vision of what the new outsourcing model will look like.

“In the new model, outsourcers provide standard, off-the-shelf software on a "pay-per-drink" basis. For that, they will leverage so-called cloud technology, which lets users tap into computing power available via the Internet, rather than on a desktop or computer server housed locally. The appeal is scale, flexibility, and efficiency: Thousands of server computers can attack a task more quickly—and cheaply—or handle a patchwork quilt of different technologies that companies use to run their businesses. This approach will let businesses outsource entire tasks such as the tracking of inventory, paying only for the information accessed or used.”

The commentary also mentions who might be the losers in this new model (mid-tier Indian outsourcers), possible winners (SAP, Oracle, Microsoft, Salesforce), and a several major players that are not moving fast enough (Accenture, Xerox, Dell, HP).  

I am guessing that this commentary and the Forrester report will be far from the last discussions regarding the changing IT services landscape.  I would also imagine that we will see more and more discussion of the death of the internal IT department beyond the many books and reports already written.  Fasten your seatbelts.