IDEAthons – connecting IoT ideas, execution and funding

As new technologies become commonplace, there is a case for exploring new value creation opportunities in the realm of application ideas. Put differently, should the ever-popular hackathon give way to a new type of event – the ideathon? This notion cropped up when I attended my first ever ideathon to explore innovative service and business model opportunities in the IoT and intelligent

transport solutions markets.

The intent of an ideathon is to bring together individuals from different organizations to form small teams that work through new ideas. Teams don’t just focus on technology; they consider factors such as drivers of demand, the value proposition, the service delivery business model and its economics.

The event I attended included a mix of entrepreneurs, public-sector representatives and technologists who were exploring new ideas, building on the oneTRANSPORT regional intelligent transport system trial [1] and the Transport Data Initiative [2].

IoT Complications for MNO Business Units

Mobile operators, it would appear, remain captivated by connectivity solutions. Most recently, low-power technologies (e.g. LoRA, NB-IoT, SigFox etc.) have dominated the industry agenda. This outlook is slowly starting to change. Ian Huh, SVP of SK Telecom’s (SKT) IoT business described fees on its LoRA network as amounting to just 10 per cent of those on 3G/4G networks [1]. He pointed out that this would need at least a tenfold increase in the number of connected devices in highlighting the potentially destructive impact on revenues.

SKT’s comments are timely and show that the debate is shifting from shiny new technology to earning commercial returns. MNOs need to do something, over and above the sale of SIMs and connectivity, to capitalize on the wider IoT business opportunity.

IoT and Smart-building opportunities

What are the important industry dynamics in the smart buildings sector and is there a role for the IoT? Last week, I attended the 6th Building Energy Summit [1] to hear from building owners, building operators, real-estate portfolio managers and corporate-sector tenants.

As in all other industrial sectors, much of the discussion highlighted the established processes and the conservative nature of this sector. Most notably, procurement and architectural design processes make it difficult to introduce truly innovative construction ideas into the sector. In existing buildings, the challenge is to introduce new technologies and working practices in a highly cost conscious environment. The sector is however becoming more technology-friendly and data driven in its decision making.

There is growing acceptance of the idea that IoT is the way to improve decision making and deliver innovative services. Among the IoT use cases discussed, successful projects typically received approval, after considerable financial scrutiny, and realized a return on investment within a period of 1-2 years.

Making an Impact with IoT and Digital Transformation

A few weeks ago [1], I wrote about the potential for telcos to take advantage of digital transformation opportunities to boost industry growth. At present, much of what passes as digital transformation in the telco sector focuses on new technology (NFV, SDN, 5G etc.). This is understandable given the desire for innovators and vendors to sell new technologies that help service providers adopt more agile and flexible operational models.

However, these ideas do not correspond to transformation in the sense of entering new markets or, of driving revenue growth in new service categories. NFV, SDN and 5G are more likely to lead to juggling between CapEx and OpEx budgets which will have an impact on profitability and depreciation financial metrics rather than driving top-line revenue growth. The Internet of Things (IoT) does have the potential to open up new growth markets and is starting to be recognized as an enabler for digital transformation.

So, is there much evidence that will encourage telcos to enter completely new markets and drive meaningful revenue growth? What characterizes such opportunities and how should telcos approach them?

Will digital transformation save the telco industry?

Over the past few weeks, McKinsey [1] and the World Economic Forum (WEF) [2] have weighed in on the debate about long term growth prospects in the telecommunications sector. They have valid concerns which arise from projections for low revenue growth and shrinking margins for telecommunications service providers. The near term prospects for many telcos involves the sale ever increasing volumes of data and cloud services to consumer and business customers on the assumption that price elasticity effects will work in their favor and not undermine top-line, revenue growth.

The McKinsey and WEF ideas rely on optimizing the core business and building at the periphery to support digital services and enhanced customer experiences. These approaches take a narrow view of the market for telcos and one and define competition in terms of other telco service providers. Is that really the right way to address the strategic challenge that faces the industry?

2016 in Review: Shift in Industry Dynamics as the IoT Enters the Mainstream

According to my records, the strength of IoT corporate initiatives witnessed over previous years weakened in 2016, somewhat in contrast to the much greater visibility of the IoT at industry events and in the marketing literature.

While the number of merger, acquisition and investment (MA&I) fell compared to 2015, as a proportion of all corporate events it increased over the prior years.

About 70% of these relate to acquisitions; the remainder correspond to fundraising or investment activities.

Now that the IoT market has become a mainstream idea across the wider economy, the MA&I dynamic reveals a stronger tendency for companies to accelerate their IoT strategies by acquiring capabilities from third parties.

Industrial IoT Strategy

The combined activities of the Industrial Internet Consortium and Industrie4.0 alliance, culminating in the much expanded IoT Solutions World Congress in October seem to have given significant impetus to IoT adoption in the industrial sector. In several of my discussions over Q4-2016, I witnessed growing evidence that corporate executives have tasked their business development and strategy teams to formulate plans to integrate IoT more closely into their core operations.

The IoT takes most industrial organizations into a new operating domain and requires a process of self-education to begin with. Most of the questions I encountered began around the two topics of connectivity technology choices and approaches to justify the IoT business case.