Market Development for the Economy of Things

At Mobile World Congress in February 2022, Vodafone launched a new Economy of Things (EoT) platform. It would allow businesses across multiple industry sectors to compete in disruptive, online markets by transforming physical goods into tradable digital assets. 

Just over a year later, Vodafone formed a blockchain based EoT joint venture (JV) with Sumitomo. This will operate as standalone business focusing on IoT devices, electric vehicles, and smart street furniture. Vodafone will contribute its blockchain-based Digital Asset Broker (DAB) IoT trading platform as part of its 80% stake in the JV. Sumitomo will invest in the business. It will also draw in additional investors, partners, and customers.

There is a lot to unpack in Vodafone’s announcement and the dependencies on which the EoT unit’s future successes rest.

Defining the Economy of Things

In a recently published Marketing Paper, STL Partners (STL) and Vodafone frame the opportunity in terms of EoT-enabled Things. These are intended to “interact and communicate with each other to trade and transact autonomously.”

Complementary to EoT-enabled Things is a platform that enables open participation and collaboration between a cross-industry, partner ecosystem. The platform functions as an interoperable infrastructure, providing the fundamental brokerage of data products, services and IoT data. Vodafone’s Digital Asset Broker (DAB) platform is, presumably, an example of this type of infrastructure. Vodafone’s platform uses blockchain technology and enables IoT devices to interact, authenticate and transact autonomously when using a Vodafone-enabled device.

The economy of things also depends on a marketplace concept where users and suppliers can transact. In comparison to the IoT, Vodafone/STL differentiate the EoT by reference to data monetization capabilities and the creation of “monetizable events.” They give the example of reporting spare capacity in a fleet of vehicles that EoT-enabled Things and their owners might respond to.

An additional capability of the platform allows its owner(s) to monetize platform usage by setting up subscription or revenue sharing models for platform users. There is also scope for third party involvement with payments handling offered as an example service.

Market-Making Challenges

The past decade has held considerable ambition for data marketplaces and IoT data monetization. There already exist closed or controlled markets for people-centric mobile network operator (MNO) data, for journey planning applications and for policing uses. For mixed-data (people and things) applications, however, data privacy concerns have dampened data monetization ambitions. Moreover, where providers want to build data-intensive services, MNOs find it difficult to embrace open or collaborative business models through which they are relegated from the gatekeeper or principal agent role.

Nevertheless, the carrot of data monetization continues to hold a strong allure. There is widespread acceptance that the process of sharing data adds value. Perhaps the most eye-catching example involves outside researchers identifying multi-billion-dollar gold reserves once they were granted access to privately held geological data. In general, however, data sharing is difficult. Vodafone’s JV will have to overcome several demand- and supply-side challenges in developing the EoT market and positioning itself to capture a significant share.

Characterizing and Aggregating Demand 

It is challenging to sell a business-process solution into a non-telecoms sector because of insufficient domain knowledge or unfamiliarity with the unwritten rules of the target sector. For example, it is one thing to propose a remote health monitoring device to a physician; it is a completely different matter to integrate that device, its procurement, and its data into healthcare sector workflows. One strategy is to present an offering in the language of the target sector; users prefer to measure heartbeats per minute rather than Mbytes/second. Alternative terminology might cover sector-specific operating procedures, compliance with regulatory obligations, key performance indicators and management incentives. That kind of framing makes it easier for operating staff and decision makers to understand and advocate for a solution.

As an example, here are some of the issues in Vodafone’s target use case for EoT applied to EV charging and smart street furniture. From a technology provider perspective, the theory behind consumer EV charging looks straightforward. It involves connecting multiple remote stations, sharing their data, allowing EV drivers to use those stations via an e-commerce portal and keeping records of energy consumption. The portal might contain information about plug-in requirements and station availability with processes to support reservations and payment functions. In practice, EV charging business models are more complicated. This user’s story illustrates some of the sector’s fragmentation challenges in terms of technology, business rules, and user-interface choices.

The challenge of scaling up an open and interoperable EV charging station system would require providers to agree to work together - business process and commercial contracts alignment. They would need common data models to enable interoperable information sharing and policies that support secure interactions with users who are likely to be using one of a range of Apps. This describes more of a market orchestration challenge than a technical one.

Thinking in terms of smart street furniture expands the addressable market opportunity. Now, EV charging becomes one of several sub-systems in the evolving utility grid or smart city infrastructure. This will mean more grid-connected things interacting with one another as the current, centralized, utility grid becomes distributed in nature. There will be a greater need for frequent and time-sensitive communications to smooth power quality across households, EVs and distributed forms of power generation and storage. The automation required for self-adaptive grid systems aligns with EoT concepts. This represents one of several pathways to growth for Vodafone’s JV.

Strategy and Technology Choices

Cellular devices, SIM-based identity, and blockchain are three pillars in Vodafone’s EoT proposition. 

Cellular connectivity and SIM-based devices are core businesses for Vodafone. However, they constrain the company’s business prospects. Taking an economy-wide view, Transforma Insights, the market research firm, characterizes cellular as a large but niche segment of the IoT market. That makes it challenging to support scenarios where connected things use non-cellular connectivity technologies or non-Vodafone SIMs. A system designed for SIM-based identity will involve additional mapping of system elements where a parent, cellular gateway oversees multiple child resources that use non-cellular connectivity.

To put these factors into perspective, here is an overview of a pre-commercial, intelligent-transport pilot project involving multiple participants in an IoT data market. To support a handful of use cases, it involved about 200 types of connected device and data representations. Not everything came via a SIM-enabled device. For congestion management, for example, some of the data could come from handwritten notes provided by road repair crews or, from event planning data maintained in spreadsheet form. The ability to incorporate different data sources has a direct impact on the scope and number of applications that a system can support. That suggests that Vodafone’s development roadmap will need to expand beyond cellular devices and eventually into the realms of interoperable data models if it is to avoid becoming a niche provider.

I have commented on the use of Blockchain technology in the telecoms sector, emphasizing the importance of defining use case requirements first and then selecting enabling technologies. Blockchain might be valid where participants in a joint application want information transparency and where they agree on the business rules around data sharing. It is possible that Blockchain’s distributed ledger and immutable record keeping properties satisfy their requirement priorities. However, Blockchain comes with a wider set of properties. One is data transparency. This might be advantageous for supply-chain governance. It can also be problematic if participants, or their legal departments, are concerned about how information disclosure might be used for competitive intelligence purposes. For example, does an EV charging provider want to disclose its system up-time or utilization rates? Would publicly listed companies be permitted to divulge investor sensitive operational metrics outside of management’s quarterly reporting cycle? These issues can be managed with private or permissioned Blockchain platforms. But that goes against the grain of an open economy of things.

It is also not a trivial task to get industry participants to agree on operational and data governance rules. Maersk, the shipping giant, and IBM made that point in shutting down their TradeLens initiative which set out to digitize global supply chains via an open and neutral industry platform.

 

Positive Intent for a Promising Journey

Until its rough edges are honed down, any due diligence on a new business concept will generate more than average levels of critical commentary. On the plus side, that is one mechanism to drive continuous improvement. While Vodafone’s EoT initiative sets a positive and innovative direction for the IoT, its journey to a well-rounded and commercially sustainable offering has just begun.

There are advantages to its independent status. Now, it can set its strategic priorities and commercial KPIs. While those point it in a different direction to its parent telco, commercial success will call for endurance. The JV’s starting point might involve demonstrating the value of the EoT under bounded conditions. It could work with one or more EV charging station providers, with an EV supplier or with a container shipping port seeking to promote sitewide EV transportation and asset tracking.

However, there will be many more steps if Vodafone is to realize its ambition to enable an open ecosystem for autonomous Things. It will need to persuade different equipment, solution, and service providers to agree and collaborate on technical and business standards. This need not be a far-fetched ambition. After years of competition, for example, rival smart home providers responded to the need for technical interoperability and a branding campaign that would de-risk consumers’ purchase decision. The large internet companies and retailers, such as IKEA, re-branded the ZigBee Alliance and consolidated individual technologies under the Matter connectivity protocol.

Of course, the ability for Things to trade and transact autonomously with one another will require more than standardized technical connectivity, even if this homogenizes cellular and other access technologies. Autonomous interactions will depend on an Esperanto for Things along with other supporting functions. There needs to be common forms of identity management, dynamic authorizations for security, discoverable data models, publish-subscribe schemes for data sharing and event notifications among others. If Vodafone intends to support open rather than curated ecosystems, these need to adhere to a standard, preferably one that is open.

Vodafone’s timing might be fortuitous. The impetus for interoperability in policy and regulatory circles will eventually turn into mainstream business practice. There is a precedent in measures to improve data privacy and the enactment of GDPR. If the push for interoperability translates into momentum for open and interoperable EoT platforms, Vodafone will enhance its reputation as a market maker and a platform provider with an implementation track record. It will also be ahead of the competition to capitalize on a business with significant scaling, cross-silo and digital transformation potential.

IMAGE CREDIT: Vodafone DAB website (visited 8 June 2023)