IOT; Introducing a Market Disruption A strategy for Market Leaders based on IoT Platform Collaboration
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…...
Read more
When faced with a new competitive situation the phrase ‘Build, Partner or Acquire’ is often used to sum up the possible responses. But are the three options enough when faced with the challenges of a global interconnected, interactive Smart Services business? In a market place potentially powered by hundreds of thousands IoT players individual Smart services can such simple contained options work for Market Leaders? Or is there a new more appropriate option for this new business and technology model?
Very few enterprises are systematically researching the IoT start-up activity within their sectors as they consider the new entrants too small, and scattered, to be a threat. This also creates an attitude that removes consideration of their potential as Partners, or Acquisitions in creating a market disruptive move.
IoT startups have received incredible cumulative investment since 2010. There are two obvious conclusions: first, the technology and business-savvy VC funds see IoT has the disruptive business force that will build significant new value for new businesses; second - and for this exercise of more concern - is that in many sectors, IoT startups have more investment to spend on disrupting the market than the existing market leaders have to spend on defending, or renewing their positions.
The relative ease of gaining Investment has created very large numbers of IoT start-ups in most, if not all, business sectors and markets. The low profile period of incubation to turn investments into products is ending and in 2016 the impact will become real. Invariably, these new players have set their sights on some aspect of the market leader’s existing business. As an example, analyzing Honeywell’s product range in the Building Controls industry, 31 startups are specifically targeting one or more Honeywell products for a market disruption by IoT smart services.
How many Market Leaders can name their new IoT startup competitors, let along know which parts of their current revenue models are under threat? By the time erosion of profitable parts of the business have started it’s very late to respond. Current strategic initiatives may be in place, but are they going to be quick enough, or agile enough?
Many market leaders have, with other market leaders, formed consortiums to try to shape the emerging IoT market their advantage using standards. Unfortunately, progress for any consortium built around ‘coopetiton’ members is slow. The competition is well-financed, single-minded startups that do not need consensus to move first, seizing connections, data, and market share for a defacto standard.
The following statements define their activities, impact, and possible abilities to drive new competitive rules into the existing market place;
- A wholly new set of “values” overturns traditional grounds of choice.
- The ‘noise’ of startup players will create new interest within the sector.
- Using App Shops gets access to the market bypassing usual routes
- Venture capital investments encourage and enable disruptive moves.
Recent experience has shown that, within a few quarters, a new innovative smart service from an unknown startup can be catapulted into a scale of market awareness beyond conventional marketing means. The democracy of the Internet allows the meritocracy of the new Digital Service product to be recognized, and promoted, globally very quickly!
The numbers of “black swans” or “unicorns,” defined, as companies that rise above a $1 billion valuation in a few years, has never been higher as digital business allows speed and access to markets at hitherto unknown rates.
Market leaders find it difficult to think about their hard won market in terms of the factors that will result in its destruction. But the reality is that their Corporate Products and passive Services are facing competitive Disaggregation. Replace by buyers switching to customise Re-Aggregation using selected Smart Services that match their precise requirements.
Digital Business Disruption and Transformation occurs as the customers choose to select and bundle Smart Services to match their perceived value, rather than be forced to take the current product bundle. The key to success is that as the customer finds new higher value then payment can be higher. Those who move first to lead this transformation expect higher margins from the higher customer value.
Todays IoT startups have the benefit of a connected Cloud and App shop Digital Economy to move quickly with relatively low investment costs to access profitable cash rich opportunities. A current market leader is denied many of these opportunistic advantages and looks to find new ways to create and add innovative products to their current position. A handful of additional Smart Services may actually add to numbers and rate oif the market dis-aggregation rather than improve the competitiveness of the traditional market.
The form and nature of IoT and Smart Services make the options of Build, Partner or Acquire difficult to use beneficially against such fragmented markets and competition. Instead a new option of Collaborate, or more particularly the form of market leadership collaboration practiced by players such as Amazon
The strategic use of current market leadership assets to build an Industry Ecosystem Smart Services Platform with an App shop to induce IoT startups to empower your leadership. Think of Apple, or Google Android, as examples.
Market Leaders forget that they own a powerful mix of data, connections and customers that correctly combined can create a new Industry Ecosystem. Designing and deploying a platform using these advantages offers the new startup competitors a tempting and well targeted choice as a route to market, turning attackers into Collaborators. The resulting industry ecosystem reaffirms brand leadership and control whilst enabling new innovative forces to be harnessed and empower the enterprise.
IoT based Smart Services are both made possible, and directly increase in value, in proportion to the number of connections, services and data available for complex event processing into insightful outcomes. Market leaders consistently don’t recognize how much value they have built since 2000 in Internet based technologies that can form the basis for an ecosystem platform strategy.
More than a decade of adding Internet, Web, Mobility and, more recently, Social Marketing initiatives have provided most companies with a surprisingly rich collection of capabilities to underpin their new competitive Internet (IoT) market strategy.
The Internet of Things shares the common foundation of the Internet. IoT adds different functionality that enables a new generation of disruptive business capabilities. However there are many synergistic alignments allowing the benefits of earlier Internet based waves to be re-used. More importantly these assets are not available to the new wave of competitors.
An excellent example of this approach is John Deere, a global leader in Agricultural Machinery who have successfully consolidated and built on earlier moves in Internet, Web, Mobility, and Social tools to establish a market-disruptive IoT platform. The first-mover advantage, together with the customer access, data, and connections, encouraged potential attacking start-ups (combined with significant existing Agri-Businesses) to join and multiply the customer advantages delivered.
The reuse of customer relationships and accumulated data in an open collaborative Ecosystem Platform has allowed John Deere to collaborate with innovative startups and their services and strengthened their own industry leadership and brand.
John Deere Example:
The MyJohnDeere.com industry Ecosystem platform delivers a complete value package to farm more efficiently in both increased yields and reduced costs. This in turn relates to the increasing use of the term “Precision Farming” in the Agri-Business sector. The strategy has transformed individual market corporate products, from tractors to seed supply, into a comprehensive set of Smart Services optimized around individual farmers. Importantly the platform makes available in a cohesive manner dozens of new innovative Smart Services from Startups that add a range of new innovative farm operational values.
John Deere developed its experience to launch its market-disrupting IoT Platform over a period of five years due to its business focus moving year by year – from a Web presence through mobility to smart app to IoT platform progression. Today, John Deere has a first-mover advantage by acting before the market leadership was threatened by IoT startups, and the company has enlisted many of the IoT startups to become market partners in their Agri-Business IoT ecosystems.
The John Deere’s timeline of adding Initiatives that built value for its market disruptive IoT based strategic move:
2011: The era of mobility and telematics introduced ‘JDLink telematics’, a first move into connecting John Deere tractors with simple sensing functionality based on GPS to remote data collection. The initial data collection might have been limited, but the value in creating a new type of relationship with the end customer around data created the first ongoing value for reuse.
2012: The era of smartphones, tablets and smart apps added John Deere Mobile Farm Manager. Farmers quickly proved to be very willing to use smartphones and tablets to run a new generation of apps. John Deere moved to closer interaction with its customers by using the low cost ease of apps and downloads to offer a broader range of services, all of which strengthened the bond around shared data and value generation. More sensors and sensing capabilities continue to be added to John Deere products to support apps focused on precision farming.
2013: A further era of progress sees John Deere Farm Sight realizing the power of connecting the ecosystem of John Deere dealerships into a range of smart services for reliable operational maintenance. A move that not only added new value to John Deere customers but also added new business value for dealerships themselves and encouraged dealerships to add additional services. Further additions to the range of sensing values were added, concentrating on operational and cost management.
2014: John Deere was ready to go ahead with opening its myjohndeere platform to the agri-business industry as a whole, creating a data and connection-rich IoT ecosystem platform that would attract start-ups and encourage agri-businesses to make use of its unique positioning and capabilities. By now, John Deere’s agricultural products are a well-integrated IoT fog computing cluster centered on the tractors reporting on many kinds of field and farming conditions.
New C-Suite
not only prior to the moment of truth, at the point of making a purchase, but also expect it post sales.
