Oct 11, 2018

New IoT opportunities: where's the big deal?

In a recent McKinsey article [1] entitled “What it takes to get an edge in the Internet of Things”, the management consultancy advised firms to focus on three habits:

  • Habit 1: Begin with what you already do, make, or sell
  • Habit 2: Climb the learning curve with multiple use cases
  • Habit 3: Embrace opportunities for business-process changes

Through an analysis of several financial indicators, McKinsey concluded that organizations stand to benefit by implementing a greater number of IoT use cases. The effect levels off at around 30 applications.

While McKinsey’s advice is tactically safe, there are prudent reasons for IoT adopters to take a wider and strategic approach. That involves looking beyond the core of what a business already does. It will involve multiple learning curves and a pro-active discipline for cultivating new business opportunities.

The need for a strategic perspective is a consequence of the IoT's extensive reach across broad swathes of the economy. In many respects, it’s no different to the internet phenomenon. We can safely predict that all businesses will be affected, either from direct competition or indirect business-model innovation.

The issue of balancing tactical and long-term imperatives is not new news [2]. The situation is not dissimilar from the industry dynamics that saw Blockbuster, Kodak and Nokia lose their industry-leading positions. In the case of Blockbuster and Kodak, managers in both organizations had a decade of notice regarding the industry changes bearing down upon them.

A simple way for organizations to test the scope and robustness of their IoT strategies uses the following matrix.
Beginning with McKinsey’s first IoT habit, organizations start in their primary industry sector doing what they do well in their core business activities. Asset owners typically begin with a ‘connected business’ strategy. This involves the application of remote management technologies, such as upgradeable software and wireless connectivity, to turn standalone devices into a ‘smart’, connected devices.

The second strategy extends to complementary services, in the form of value-added services on top of ‘smart devices. A typical example is to use data from one or more connected devices to improve asset efficiency, as in the case of route planning for a fleet of vehicles or inventory management in vending machines.

A third strategy comes about when a firm faces competitive economics from businesses in an adjacent industry. This may involve a firm extending its reach into an adjacent industry sector. Or, it may involve a competitive threat as outside business encroach on a given firm’s primary market. There are numerous examples of internet businesses encroaching into the telecommunications sector with universal communications application alternatives.

The fourth strategy takes the form of breakout innovation when ideas from an adjacent industry sector build on capabilities from a primary industry sector to spawn completely new products and services. An example of this is the application of e-commerce marketplace ideas that are being used to match low price-point buyers and sellers for accommodation (Airbnb) and transportation (Lyft, Uber). What’s to stop these ideas from being applied to use spare capacity on large scale machinery or industrial production facilities?

Firms seeking an edge from the IoT will have to assess potential opportunities and threats in each of the four strategy categories of the matrix above.

There follows a set of investment and management actions. Budgeting, for example, should focus on core activities with a modest amount staked on new application areas and relationship building with potential partners.

The same is true for IoT expertise. It won’t be enough to grow expertise from an internal base because organizations will need to bring in new types of knowledge (technical, product/service management and go-to-market) in addition to making a few partnering types of commitment [3].

The idea of embracing opportunities as they arise won’t be enough. Such an approach leaves too many new and transformative prospects unaddressed. Businesses must tackle the IoT market pro-actively.

[1] What it takes to get an edge in the IoT - https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/what-it-takes-to-get-an-edge-in-the-internet-of-things 

[2] Why big companies squander good ideas (Financial Times, paywall) - https://www.ft.com/content/3c1ab748-b09b-11e8-8d14-6f049d06439c 

[3] Industrial Internet Consortium - Business Strategy & Innovation Framework (IIC BSIF) - https://www.iiconsortium.org/pdf/Business_Strategy_and_Innovation_Framework_Nov_2016.pdf

Jul 31, 2018

A change in perspective reveals new IoT strategies

My last post examined the direction that several MNOs are taking with their IoT strategies [1]. Applying these trends at an industry level, I questioned whether MNOs are approaching the commercial opportunity with a broad enough strategic perspective. Think about it from the perspective that traditional mobile connections will supposedly account for roughly 10% of all IoT connections. That proportion should rise now that low power cellular technologies (NB-IoT family) are firmly on the deployment roadmap. Since this raises the credibility of a vibrant supplier eco-system, more adopters should gravitate to mobile connectivity to take advantage of more compelling economies of scale.

Nevertheless, it’s clear that mobile connectivity will coexist as one of several IoT access technologies. However, unless MNOs find ways to stake an economic role in activities higher up the value chain they will lose out on promising commercial prospects. They will also find themselves dis-intermediated from end customers and their needs. How might this play out?

Jun 1, 2018

A fresh look at MNOs' IoT strategy

Over the past few weeks, there have been several commentaries about IoT strategies for mobile network operators (MNOs), several of these expressed at Mobile Europe’s 2018 IoT in Telecoms conference.

Vodafone’s Director of IoT, Stefano Gastaut [1], expressed visible frustration about the ‘dumb pipe’ label attached to MNOs and the implied commoditization of connectivity. Enrico Bagnasco, Head of Innovation at TIM articulated [2] a ‘horizontal services’ view.

And, finally, Ericsson published a study [3] drawing on interviews with 20 mobile operators about the status of their IoT priorities and the strategic opportunities for growth. One highlight in Ericsson’s findings is that 70% lack a well-defined strategy. While many are testing different roles in the IoT value chain, 80% plan to move up to higher layers.

On the whole, it therefore looks as if the industry has got second wind, aiming to build on a first phase of growth, triggered by the GSMA’s ‘M2M and Beyond’ industry strategy.

So, are operators on the right track to capitalize on the opportunity or has the market passed them by?

May 6, 2018

Who is setting the IoT agenda?

Several weeks ago, I was in a briefing call with a panelist who was preparing for an event on privacy and security challenges in the IoT market. This was in the context of possible guidelines emanating from the US government.

There was the usual discussion about the pros and cons of light-touch and self-regulatory approaches, in keeping with the conditions that fostered innovation and investment in the Internet.

However, the world has moved on since the late-90s; it is worth spending time to reflect on today's conditions and what new approaches are warranted. And, to what extent will US agencies set the future direction?

Apr 6, 2018

The investment case for Smart City data

I recently attended the Smart Cities Connect conference in Kansas, MO. There, I moderated a panel on data marketplaces and collaborative approaches to smart city solutions.

The event demonstrated that there is a growing body of interest in smart city solutions. It also highlighted several themes that should dominate the agenda in coming years. The more interesting topics included collaboration, interoperability and principles of data monetization.

Mar 19, 2018

Blockchain and the Mobile Industry

With almost no industry untouched by blockchain-mania, what opportunities does the technology hold for the mobile industry? Recognizing the issue, the GSMA has begun to explore the applicability of its Mobile Connect, identity management proposition. And, at this year's Mobile World Congress, several mobile network operators (MNOs) bandied together to launch a collaborative approach [1].

Feb 16, 2018

Innovating and Investing Strategically in New Service Categories

A few weeks ago, the UK mobile operator O2 decided to shut down it smart home business [1]. O2 stated that it had not seen "category-leading take up" of the service to justify continued investment.

This episode encapsulates a recurring challenge for businesses in the mobile eco-system, laboring under the opportunities to exploit mobile technology in adjacent industries and new application categories. Just think back to the promise of mobile money and mHealth (another category that Telefonica entered and subsequently exited a few years ago [2]). The new waves of opportunity today are in the industrial IoT and smart city markets, to name a couple of examples.