The automated vote-counting machine was designed by Thomas Edison in 1869 to replace roll call voting in the U.S. Congress and was never used. The motor scooter was designed in post-war Italy to be a motorcycle for women and became a revolutionary transport mechanism for a larger population. The Java programing language was originally designed in the 1990s for use by set-top boxes. And eBay was created to sell Pez dispensers. History has many examples of how original use case definitions became irrelevant in the face of market economics. Like any other new technology, the Internet of Things (IoT) will create an ecosystem with its share of winners, losers, survivors — and needle movers.
Today, use cases abound on how the IoT’s connected devices can create economic value. Some analysts talk about white spaces of solutions that span industrial, commercial and consumer applications. Others talk about fundamental challenges in delivering on the promise of IoT. While white space use cases will have hits and misses, IOT-enabling technologies represent a much larger opportunity for innovative value creation.
We believe that “needle-mover” startups in the IoT ecosystem will be those that do not search for use cases in the white spaces but rather those that search for barriers to adoption and innovate on eliminating them. These companies will be the suppliers of pickaxes and blue jeans for the IOT gold rush.
Needle-mover companies will be driven by platform business models rather than by products and solutions. The success of the iPhone and the promise of Nest are examples of business platforms on which “killer” use cases can be built. Marshall Van Alstyne from Boston University describes platform business models as “3-D chess” compared to product business models.
Creating solutions within the IoT ecosystem requires addressing several challenges related to technology and operations governance. Let’s look at some of these challenges that create needle-mover opportunities.
Privacy and security exposure
Billions of devices translate into billions of points of vulnerability in the network. In the current environment this is a $445 billion unsolved problem. In the IoT environment this problem has not even been defined. The exposure from hacking a pacemaker can be much higher than an unsecured application. Scoping out these vulnerabilities and mitigating security risk is on the critical path of IoT. The privacy-aware consumer base opens up technology innovation in areas such as personalized privacy settings among others.
The power barrier
Several innovative solutions in the last few decades have assumed unlimited power or availability of abundant battery power. Power is typically a top-line item in running today’s data center. Success of the future IoT environment means that power will have to be a consideration for the deployment of 26 billion devices and their infrastructure, especially if they have a $1.9 trillion impact by 2020 (Gartner estimates). The IoT presents a new economic imperative for technologies such as power scavenging.
Data analytics and management
Low-cost instrumentation from the IoT ecosystem provides a quantum increase in the data available for analytics. Solutions in this area that provide “line of sight” to ROI will evolve faster than those where benefits take a long time to be realized.
Big Data analytics use cases are widely under development and already have a head start in evaluating economically viable applications. The IoT opens up a new set of opportunities for platform businesses to optimize resources in industries such as manufacturing, transportation and healthcare.
Interoperability and integration
The sharing of data between a large number of devices poses a huge challenge in using this data. The lack of universally accepted standards for the interchange can make or break the deployment of effective IoT solutions.
Solution designers that create business platforms may have to make hard choices in choosing between unproven interoperability standards. Winning business platforms will provide solutions to assimilate data from multiple vendors and support open API interfaces across platforms.
Governance
The IoT will change the game and the new game will need a new set of rules, processes, decision-making procedures and even regulation. The EU defined five principles of good governance: openness, participation, accountability, effectiveness and coherence.
As much as industry abhors regulatory constraints, they will become important considerations in building the IoT environment of the future. Specific areas of innovation can come in areas such as business platforms that enable self-governance.
A few decades ago, these challenges were not essential design parameters in building the Internet economy. But in the age of the Internet of Things, these challenges will be center stage. The stakes are high enough to sponsor the growth of needle-moving new business platforms for the IoT. Let the innovation begin!
Click here for a list of Sand Hill’s 50 IoT Needle Movers.
Shirish Netke is president and CEO of Amberoon Inc., a provider of data-driven business perspective solutions. He has led companies in the area of software, services and electronic entertainment. He was one of the first evangelists for Java when it was launched by Sun Microsystems and has been quoted as an industry thought leader in the New York Times, Investors Business Daily, Chief Executive Magazine and Asia Times. Follow him on Twitter.
M.R. Rangaswami is co-founder and CEO of Sand Hill Group and publisher of SandHill.com.