Corporate Products are threated with Disaggregation by IoT enabled Smart Services offering custom Re-Aggregation.
Vice President and Principal Analyst, Constellation Research
Constellation Research
Andy Mulholland is Vice President and Principal Analyst focusing on cloud business models. Formerly the Global Chief Technology Officer for the Capgemini Group from 2001 to 2011, Mulholland successfully led the organization through a period of mass disruption. Mulholland brings this experience to Constellation’s clients seeking to understand how Digital Business models will be built and deployed in conjunction with existing IT systems.
Coverage Areas
Consumerization of IT & The New C-Suite: BYOD,
Internet of Things, IoT, technology and business use
Previous experience:
Mulholland co authored four major books that chronicled the change and its impact on Enterprises starting in 2006 with the well-recognised book ‘Mashup Corporations’ with Chris Thomas of Intel. This was followed in…...
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The Internet of Things has moved to the stage when hype is being replaced by visible market presence as in Smart Homes, or innovative Smart Services such as Uber. There are even examples of market disruption and transformation by global leaders such as John Deere, or General Electric. Yet significant numbers of business executives take comfort that there is no need to act using one of the following six statements that are demonstratively wrong;
1. The Internet of Things, IoT, is a just another title for Online or Digital Business, and is over hyped!
The last five years have left little doubt as to the value of Social CRM, SCM, in transforming relationships with customers, or potential customers. However by definition the relationship is with people, and their perceptions, as such it is an incomplete picture of the many factors that impact an Enterprise’s market. IoT adds to SCRM the ability to access and use huge amounts of data from sensors, devices, events and markets.
As an example, in travel, supply chain, or other similar activities, the environmental factors of weather, or traffic conditions, will all have a marked impact on outcomes. IoT supplied data aids efficient operations in a wide range of IoT sensed events that improve service levels and operational efficiency. In direct sales opportunities IoT can make the difference between knowing when and what to offer to make the right sales offer at the right time.
IoT is already adding competitive advantage to current business models and its dangerous to ignore this in favor of waiting for the signs of massive disruption. When this tipping point is reached it will be too late to gain the necessary experience and installed base to catch up.
2. Digital, or Smart, Services economy describes a shift to making more products available as Cloud based Services.
The term ‘Smart’ is used to describe a device that has intelligent multi functional capabilities beyond those original associated with previous generations of the device. As in the classification that a Smart Phone is functionally different to a Mobile Phone. The term is used in the same way when applied to Services to define interactive, intelligent capabilities to dynamically adapt and optimize automated responses.
This is a hugely important point that defines the competitive advantages that IOT technology brings to the Services market. The difference between a current passive Service based on content driven Web technology versus an IoT based Smart Service is easily explained by reference to the well known UBER taxi service. Many of the latest and most popular innovative Smart Phone Apps are actually IoT enabled Smart Services using a Smart Phone as an IoT sensor for position or other data.
A passive taxi booking Service entails completing a web content ‘form’ and sending it to the taxi company for manual matching with cab availabilities with a resulting time delay. In fact by the time the taxi arrives the customer may have been able to stop a passing cab as a quicker alternative to waiting resulting in loss business. UBER is a Smart Service because it provides real time matching and optimization using the IoT sensing of the various Smart Phones involved, (customer and cab drivers). Better responsiveness as well as easy of payment and other factors have transformed competitive factors in the Taxi market.
The arrival of IoT enabled Smart Services brings the lever of new competitive driven transformation of existing passive Services and Markets disrupting current business models. UBER is one example of a consumer Smart Service, but the same principle applies to Industrial Services such as maintenance of equipment. IoT enabled early detection of failure indications provides the opportunity for preventative maintenance by using a ‘Smart Service’ that can determine the likelihood of failure and automate orchestration of actions to fix.
3. IoT Data is yet more data and will add to the use of Big Data analytics.
It is tempting to visualize IoT sensors as adding new sources to Big Data to use analytic tools as part of historic Data Analytics capabilities. Indeed this is quite possible, even desirable for some purposes, if the data is only to be used for improving current business operations. The near real-time responsiveness of IoT Smart Services interaction relies on the near real-time collating and analyzing data ‘on the fly’. The change in technique is accomplished by a new generation of ‘Event Engines’ that provide Complex Event Processing in an entirely different manner to current analytic tools.
The example of preventative maintenance for a machine requires Complex Event Processing of the data flows from multiple sensors to reach insightful conclusions, and launch appropriate actions to complete the outcome. Sensing increasing vibration, rising heat, and increased energy consumption in a motor is indicative of wear in a bearing, an IoT trigger event would occur when the three conditions reached a certain level at the same time. If the data from each sensor was seen in isolation it would be difficult to detect this in advance, similarly if the data was analyzed historically it might be too late to be preventative.
A modern car contains over 150 sensors; more complex machines such as aircraft, trains, even farm tractors all contain hundreds, even thousands of sensors incorporated by their manufacturers. The flow of data from these IoT sensors are enabling their manufacturers to transform their products into high value Smart Services, and build new Digital Business leadership. The leaders are rapidly establishing their IoT sensors into critical places and literally gaining a ‘built in’ advantage.
4. Talk of Sector Disruption and Market Transformation is an exaggeration and can’t see it happening.
The question of visibility also occurs with Social CRM, where a lack of personal skills and cultural engagement has left many CXO level executives mystified as to its use and role. The transformation of some leading Industry sectors is a reality often led by leading manufacturers implanting IoT sensors in their products to support their shift from products selling to more profitable and competitive Smart Services. Much quoted examples include the GE transformation from selling, financing, or maintaining Railroad engines into the provision of ‘Smart Operations’. Integration of sensors on all aspects of the engines, trains, and track enable GE to use Complex Event Processing to provide a variety of Smart Services. Railroad operators can choose to combine these services to compliment their own skills, or even to take an entire ‘Railroad as a Service’ operational package.
Competition in the Railroad industry is being transformed from focusing on building, selling, financing and maintaining individual pieces of hardware, to Smart Services operations using IoT sensing to change increase the business value of what is sold. GE openly talks of becoming one of the ten largest global software businesses in their own transformation into a Digital Smart Services business.
In farming John Deere have led a similar revolution towards ‘Precision Farming’ where real time operational data is used to optimize the treatment and use of soil to maximize cropping profitability. John Deere farm machinery is equipped with sensors to flow real time data on cultivation conditions being experiences as the basis for farmers ability to determine when, how and with what to do with their soils and crops. In an industry transformation move Myjohndeere.com platform allows all Agri-Businesses, seed, sprays, fertilizer etc. suppliers, to add their individual Smart Services and use the data and individually improve effectiveness in the use of their products.
The John Deere strategy is insightful as it changes competitive start-ups into becoming collaborators building a transformed new market using the John Deere platform reinforcing the John Deere brand in a new way.
In other industry sectors such as Smart Homes, and soon Smart Cars, consumers are driving the transformation by making use of being able to choose Smart Services that match exactly their personal requirements, and reject corporate product bundles.
5. Only a handful of IoT Startups will become challengers and Industry Transformation will be achieved by current market leaders collaboration to develop new market standards.
The simple answer to this complacent point of view is to point to the transformation of the Mobile Phone market into the Smart Phone market, a transformation that destroyed the then market leaders such as Nokia, etc. Consumers have led the way in demonstrating how they would prefer to assemble (aggregate) their personal profile of Services rather than accept a standardized product. The App Shop model, the use of Smart Phones or Tablets, has already proven to be the model for the Smart Home, and the competition is rising for the Smart Automobile market as the next battle.
These are very visible market places, but the same fragmentation into ‘App Shop’ style mass markets for Smart Services based on the innovation and ideas of hundreds of startups is a feature of Digital Business models. As an example, analyzing Honeywell’s product range in the Building Controls industry identifies 31 startups specifically targeting one, or more, Honeywell products as part of the overall market disruption by IoT Smart Services. The new Digital Markets favor the new entrants as backed by massive capital investments, estimated to top $3 billion, their attack uses four prongs.
- A wholly new set of “values” overturns traditional grounds for choice of product.
- There are many startup players creating a wave of interest within the sector.
- Smart apps delivered through smartphones and tablets are the user interfaces.
- Considerable venture capital investments support these disruptive players.
Recent experiences show that within a few quarters, a new innovative Smart Service from an unknown startup has been catapulted into a scale of market awareness that conventional brand-based marketers could have only dreamt about. The democracy of the Internet allows the meritocracy of a product, (a digital service), to outperform previous alternatives, to be quickly recognized and promoted globally! Thanks to Digital Disruption the number of “black swans” (industry transformers), or “unicorns,” (achievers of a $1 billion valuation in a matter of a few years), has never been higher.
6. It’s Technology and the IT department will drive the Enterprise in respect of the role and use of IoT
It is an easy, but not necessarily correct, assumption that IoT will automatically be part of the role of IT department; more likely it will be part of the role transition of CIOs, and/or Chief Digital Officers. The role, and indeed term IT, was specifically defined around the development of Client-Server Enterprise Applications to automate the functions of an Enterprise back office. A role that was, and is, clearly defined as internal, secure and transactional process oriented. Accordingly the rise of the Internet itself, web, mobility and most recently Social CRM, SCRM, have all represented significant challenges to IT operational expertise due their very different externally nature in the Enterprise front office.
SCRM in particular has much in common with IoT, a point made earlier in this blog, but even after several years SCRM still sits uncomfortably, and often separately from IT departments. Its not just about the technology, it’s the business role that matters too, as SCRM has increasingly transformed customer interactions. IoT magnifies the SCRM impact driving Business disruption and shifts in the business model towards Smart Services. IoT and Smart Services are first and foremost a business management challenge to their competitive and market strategy and position.
IT departments are struggling for visibility and understanding of IoT as it has little in common with their current mandate. In time and maturity clearly the ‘one enterprise, one environment’ approach will develop but for now IoT and SCRM are the tools that Sales and Marketing, and Operational Management, are learning to master, resulting in IT departments lagging behind in IoT engagement.
The responses to these six common statements show the extent to which IoT is already disrupting and transforming Business and Markets
IoT is simple a reality as more and more devices of all types gain both processors and Internet connectivity and are shipped into every sector and market. A new set of capabilities has arrived, and is being put to use by those who understand the new capabilities. Taking the time to research competitive trends and players in any given market will identify the disruptive impacts already taking place. New Business values and competitive advantages from Smart Services have already made enough of an impact to ensure more than $3 billion of investment capital is supporting IoT based startups in their battle to take over existing markets.
Market leaders and their IT departments have mostly failed to monitor the startups and Smart Services activities closely enough to realize the threat they are on the brink of bringing to their business. The IT department, the traditional home of technology, is badly placed to lead the business transformation in the face of this new era of challenges and opportunities. There is still, just, time to get to grips with challenge!
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