IoT – what’s the fuzz?
Business models and challenges for the old tech industry
IoT or Internet of Things is not new at all. It’s been around since vending machines got connected to the internet back in the late nineties. In those days, you stuck an Ethernet connector into the wall socket, and the vending machine reported, over the internet, to a host server at the selling company, how much the device had sold and when a refill was needed. Over the years this has been called many names such as M2M (Machine to Machine), Telematics, connected devices and thin clients among others. So no, it’s not new.
So, what is the fuzz with IoT?
Well, it’s two things. First of all, the computing power of smaller devices such as phones or Raspberry Pi-like solutions is drastically up since the nineties. You can do a lot more data handling close to the data source.
Secondly, the broadband capacity of 3G, 4G and soon 5G networks makes it possible to send this data far away. Today you can quickly set up a sensor that is reporting data using cloud services such as AWS and in minutes and start sending millions of sensor data bytes up into the cloud. AWS released a “1-click” service at their re:Invent conference in Las Vegas in November 2017.
The challenge today is not the technology
The technology has been around for almost 20 years. The challenges are found in your business model. I meet many customers to Purple Scout when I do top-level management sessions that have brilliant ideas on what to do with the technology, but they seldom see the big picture.
What happens in companies is usually this:
Revenues are decreasing or stable, and top management understands that something must be done to increase the value of the company to stay alive merely. They probably have a pretty good setup where their product is doing okay on the market, but the profit increase is linear or low. They hire someone or gets a recommendation to connect their product via the internet to retrieve data from their device.
Often their reason is that “we need to do this because our competitors do this” or “we have a lot of data and what should we do with it.” More seldom, or almost never, management takes this IoT-tour with the belief that they can do a significant market offprint with a new disruptive business model and ways of thinking. Which of course should be the real reason. Instead, they often get stuck with an enormous amount of data and very quickly start talking data warehouse, big data, automation and other technology incentives. Which of course is a good idea, if you need to handle significant amounts of data, but it’s not meant to solve a problem of hamstring data.
Where to start
I urge that the only way to start is to find out what the end users are asking for and what they are willing to pay for. Conducting user summits or user questionnaires is very important to set your agenda. Ask your customers what they want. Never forget that money must come from somewhere. Either you think that you should enhance your brand, thus increasing sales or you find some service that customers are willing to pay for.
The IoT enablers:
- Increasing data power in handheld devices (phones, tablets).
- Very accessible hardware, also in low volumes (Raspberry Pi, Arduino, Beagle board).
- A cheap and scalable solution in the cloud.
- Excellent and stable wireless internet connections.
The IoT challenges:
- The business approach and business model.
- Where is the real end-user value? Find out what the end users are willing to pay for.
- Find the “good enough” solution, to verify that you are on the right track. Don’t build nuclear power plants on day one. Do it in small steps and do it agile.
- Think hard, do you really need a custom client hardware or does standard hardware do the trick?
In my home, I have a Water2Water heat pump. When I renovated my house, I wanted to put the heat pump in the garage instead of in the house, mainly because of logistical issues and also it meant a smaller project. After some time I realized that I needed a second main panel in the house since I didn’t want to go those meters outside when it was cold and windy to change parameters in the heating system.
A secondary panel was 1500 USD excluding installation which is probably another 500 USD. Now it seems that this supplier has a ”connected device” service. That’s a brilliant solution for me! I would save the money for the additional panel, but the company would miss out on the hardware deal.
By chance, I met the manufacturer in a customer session a few months later and asked them about their service since they had not updated their app for almost a year. Their reply was a surprise to me. They told me that they simply put the service up since their competitors have it and customer “wants an app” but nobody is really using it, and they asked me why I would pay for it. The annual fee for the connection and app is 25 USD.
They didn’t see the link, but it was clear to me. If I go for the app connected solution, I can use it for 80 years before I reach break even on the additional panel installation. Something was wrong here. If you cannot find a real use for the solution you are offering to your customers, then why bother at all. I think this example pinpoints why you really need to do your homework on the business case proper before you invent something.
With this said, what would the end customer really be asking for in the above example with the heat pump? What is the next phase that he/she will benefit from to the extent that they will want to pay extra for it? I would state that for any property owner there is always one thing that you want to stay focused on and that is running costs, in this case, heating or cooling. So what if you could buy an analysis report based on all your data and that with that you get a report on all the vital parameters like efficiency, seasonal adjustments, surges and maybe something more that I cannot think of right now. Also with recommendations on how to improve your system. In an extended case, this could also generate more installations of add-ons to the pumps since customers get aware of that they can save money by investing in their unit (like adding wind sensors, which I would need).
Recommendations give the client the opportunity to get to know their customers better, and guess what? That should open up more business opportunities, for yourself and your partners.