According to the Gartner 2016 Hype Cycle the IoT is no longer “emerging.” I thought about this and I am okay with it because it means we have moved past the Trough of Disillusionment and on to creating real value. I have said before that the wave of IoT we’ve seen over the past few years, IoT 1.0, has been mostly a technology push. Early entrants demonstrated all kinds of interesting products showing what was possible: egg minders, step counters, doorbell cameras, self-filling refrigerators, and a wide array of smart home control centers. But overall IoT 1.0 delivered economic disappointment for shareholders — other than those of Arm Holdings, of course. Industrial stalwarts like GE and Honeywell have leveraged the ecosystem and lower cost technologies to extend previous M2M and automation solutions, but these successes have been more incremental than disruptive. The next phase is coming, however, and IoT 2.0 is all about getting back to user-focused design fundamentals driving recurring economic value.
The changes of IoT 2.0 are being led by this move to identify and solve real problems for paying customers – and doing it better than ever before. We see the changes in a number of recent events and those looking to keep up must adapt.
CHANGE: New focus on end users — Companies are shifting to design led processes focusing on end users who not only drive adoption of IoT solutions but also determine the application’s ongoing economic value through sustained use. Digital health provides the most visible examples of this shift as investors have shifted focus, post Theranos, from diagnosis and clinically derived therapies to patient engagement. This shift delivers value from two facts common to all IoT propositions: user engagement is necessary to create the application’s desired outcome and engagement increases both the volume and value of data generated from that use.
ADAPTATION: Augment your marketing and development teams with user focused, design thinkers who can make sure that the technology development that you undertake matters to end users and thus creates sustained impact and value.
CHANGE: Shifting value chain — Mature IoT players like GE are re-evaluating their position in the ecosystem and choosing where they focus. GE shifted its focus higher up in the technology stack, closer to its industrial customers, when it moved its Predix platform to Microsoft’s Azure cloud platform. Verizon leveraged its horizontal communication supplier position to a vertical solution in fleet management. The IoT value chain is shifting as manufacturers see where and how customers are willing to pay.
ADAPTATION: Evaluate your position in the technology stack and make sure that you are developing with your strength and buying from the ecosystem everywhere else. Clearly value is high closes to the user, but there is also great value at the other end of the value chain, sensing, and partial stack solutions with the right customers can be a solid business proposition, e.g. GE Predix.
CHANGE: New, high impact entrants to the IoT ecosystem — The technology ecosystem of the IoT is changing to address the hard problems identified by early entrants. Low Power Long Range (LPLR) radio and Low Power Wide Area Network (LPWAN) technologies like LoRa and NB-IoT make possible battery powered, wireless sensors that last 10 years while communicating at ranges of up to 10 miles. More important, these technologies come at cost-to-connect that is making the promise of billions of connected sensors an economic reality.
Blockchain, a new entrant on the 2016 Hype Cycle, comes out of the cryptocurrency world to address transaction security in the highly decentralized systems of the IoT. Blockchain appears to be perfect for IoT edge deployments where transactions between devices owned by different parties can be authenticated and securely recorded in a distributed ledger. Blockchains will allow automated commerce and asset transactions at a pace and level of trust not available today.
Cloud software is now a given for IoT applications, but the technology continues to evolve. One example is the growing use of containers that has extended development environments across the wide variety of computing environments enabling faster testing and deployment of the myriad IoT applications.
ADAPTATION: Know your technology stack and make sure that your team is either current with the new entrants or getting help from those within the ecosystem who are leading the way. Again, buy where you can and build only where strategic value results.
The IoT ecosystem is quickly moving to the next phase of maturing economic value with technology components that address the toughest application challenges. The fundamental behind the shift to IoT 2.0 is a focus on end users, away from the technology push that characterized the early days of the IoT. Late entrants, or fast followers if you prefer, can take advantage of the learnings of the first push but they must pay close attention to these changes or they will suffer similar consequences of low adoption and economic return.
As Darwin said, “It’s not the strongest or most intelligent who survive but those most responsive to change.” Heads up everyone.
By Scott A. Nelson
Scott A. Nelson is chief executive and chief technology officer of Reuleaux Technology, a Minnesota-based consulting firm that helps companies with strategy and new business development in the Internet of Things (IoT).