Tuesday, March 3, 2015

Four Big Changes from the Internet of Things

As companies seek to integrate connectivity into devices that previously lacked connectivity, my clients want to understand the differences between profitable innovations and costly distractions.

We’re seeing some clever new possibilities. Connected health monitors, home automation, thermostats, and monitoring applications are already getting traction.
There are four implications to this trend that really excite me, and each of these are hairy topics for companies looking to capitalize on the Internet of Things (IoT) opportunity.

1. Upside-down Computing Architectures. Prevailing wisdom dictates that the most efficient way to operate an information-based service is to assemble the computing and data assets into the smallest possible number of locations; centralization drives efficiency. Indeed, one of the more common strategies of large companies today is to collapse their data center footprint into a smaller number of physical facilities. Smaller companies are inclined to tap into public-cloud services (such as Amazon Web Services or Microsoft Azure) that similarly operate massive computing facilities.

But IoT connects devices, not just people, leading to a greater fragmentation of software and hardware amidst an explosion of data.  All of that connected stuff is, by definition, dispersed and even mobile. We will need new ways to process information and make efficient use of communications as networks of devices proliferate.  Companies seeking to internet-enable their business shouldn’t assume that the processing paradigm of today will apply.

2.) Data Storage and Analysis. My favorite current use case is the deployment of body cameras for law enforcement. Just imagine the massive amount of data that those cameras will generate. In the vernacular of the industry, it will be unstructured data – meaning that its relevance is subject to interpretation and indexing. You can’t (yet) search a stream of video to find an item of interest in the same way that you can search a text document. We need new capabilities to efficiently store all of this digital content in ways that enable search and retrieval.  The storage requirements will be massive, and potentially expensive.  We need new storage paradigms, too, with embedded analytics for all of that digital content. 

3.) Multi-platform Collaboration. The deployment of connected devices is merely the next step in our evolution towards an information-based society. It’s not the end state. Every new device brings with it the potential for collaboration with other devices and platforms. There will be great value created by being able to find and combine data from different source platforms. But, before this can be accomplished, we will need common software and interoperability standards that others can work with and build upon. Connecting personal health monitors with the healthcare system (hospitals) and insurance carriers is still a significant challenge. The most powerful applications will be those that unify platforms.

4.) Services Over Products. The most profound implication, in my view, is the shift of product-oriented companies to become services companies. Once you internet-enable a refrigerator, oil field monitor, or baggage locator … you are setting expectations with your customers that their product is now part of an ecosystem of connected devices. Most product companies aren’t geared around the services business. Fulfilling the ambition of being a player in the world of IoT will require new muscles and, likely, new partners.
The best partners to enable these service models will not just take orders and fulfill requirements. Rather, they will have vested interests in the solutions. They will see the potential to become ingrained in the fabric of industry services. They will bring investments and intellectual horsepower.

Most of my clients recognize that IoT is bringing new opportunities, along with risks of obsolescence.  But they don’t all fully appreciate that many of today’s accepted operating principles - such as centralized processing, ordered storage of information, islands of platform autonomy, and product-oriented expectations - are fading as the innovation ramps upward.
Business models are quickly moving to the edge - into cars and homes, and onto the wrists of consumers. These are not trivial changes. Innovation is not just a technological endeavor; it’s a business model shift.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

Image: horstjens/Flickr

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