One of the unanswered questions about the Internet of Things is what a successful business model will look like.
Companies are busy trying to work this out. They are at an advanced stage of research across North America, Europe and Asia-Pacific, according to our recent report on the business uptake of the IoT. Equally, many remain cautious about taking the next step towards development, since this will inevitably involve much greater investment.
Honbo Zhou, a director of China’s Haier—the world’s largest manufacturer of white goods—encourages businesses to experiment because the technology is already cheap enough.
Meanwhile, doing nothing could also prove costly: the majority of senior executives we surveyed believe companies failing to adopt the IoT will fall behind the competition. Bill Ruh of GE suggests it could be a decade before we know which business models actually work, by which time it may be too late for laggards to catch up.
Fortunately some early indicators may not be far away. Stride is a UK state-funded IoT project, focussed on the transport sector. It involves a consortium of businesses, universities and local government exploring the commercial opportunities arising out of the information generated by IoT applications—particularly how sharing and using this data can be facilitated.
At the heart of Stride is an information hub overseen by BT. The hub collects and controls access to the consortium’s pooled data. It also acts as a central assembly line for information – turning disparate data sets from multiple sources into useful information, while discarding the 99% of useless junk created by big data.
Stride has just released an interim report detailing the lessons they have learned so far, ahead of publication of a full report in March 2014. At this midway stage it has identified nine so-called "priority challenges" for its project to address. These are split between the commercial, such as understanding the value of data, and the technical or legal, such as ensuring data accuracy, quality and completeness.
When we interviewed two of the members of the consortium for our report—BT and Ctrl-Shift—the focus fell on the last in this list of challenges: privacy and the use of personal data. Here is some of what they had to say:
So, do either of you think that the Internet of Things is a fad?
John Davies, BT: No. I don't think it's a fad at all. We’re seeing a lot of initiatives here in the UK so I don't think it's something that's going to go away.
Liz Brandt, Ctrl-Shift: When I talk to senior executives about the information economy and I mention that we’re working on an Internet of Things project they always perk up and say I'm really interested, can we have another meeting?
What level of knowledge do they have?
LB: My experience is they know a little about it—they know what parts of their business it could impact. Some have already worked out that there is massive opportunity, while some know that they might need to make strategic decisions at some point in the not too distant future. What exactly they do, how do they structure their business, what they take to market, and what skills they need are just some of the big questions they are struggling with right now.
Why is the IoT going big now and not a decade ago (aside from the costs of the underlying technology)?
LB: The ‘why’ reason normally boils down to: ‘show me the money’. Where's the business model? Where’s the business case for doing this? We’ve already got an information economy that's trading from this data but the value is not necessarily reaching the people that create or own that data. We’re finding the businesses that control and own the data have IT suppliers which are reluctant to share data because they are already making money out of that data in different ways. So we’ve got a slightly lop sided ecosystem as it currently stands.
What level of investment are companies allocating to this?
JD: BT is clearly taking the Internet of Things and the opportunity it may offer quite seriously, as evidenced by our participation in Stride and other initiatives. No doubt other businesses are doing the same. If we think about the Technology Strategy Board’s programme around the IoT, of which the Stride project is one part, there was a lot of interest here in the UK; a lot of people put in project proposals for that programme. So much so that the TSB were originally intending to fund three projects and in the end they increased it to eight.
LB: The sense is that businesses are actually investing quite a bit but they're playing their cards very close to their chest. Across the whole data ecosystem and information economy businesses are still trying to work out where they fit in the value chain and where their unique position is and how they can defend their value.
Until they work that out they won't be revealing how much they're really spending on it and how much of an effort they're focusing on it. But if I look at my other projects outside of Stride I would probably say something like 70% of the projects take account of the IoT.
It's also very healthy that the TSB have been asking to include universities in this project. There is a skills gap across the market and being able to involve universities at this stage helps them understand what skills the student population will need to develop.
Where do you think the consumer fits into the IoT?
JD: To be frank, consumer awareness is fairly minimal, but I don't think consumers will be particularly bothered about the Internet of Things. They’ll be very interested in some of the apps and the benefits that those apps develop. The IoT itself is not a consumer play.
LB: Trust is the other side of that. Trust is an essential part of this future market and there is a potential fault line in the landscape. If the data starts to flow but the trust is then broken people will lose confidence in the market. No economy can afford for that to happen. So understanding whether that fault line exists and where that fault line might be will be a very useful output from IoT demonstrators like Stride.
Do you have any lingering doubts about the IoT?
LB: Yeah, for me the lingering doubt is the trust doubt. It's like the GM [genetically modified food] market. How quickly were we able to knock the GM market off its feet in the UK because the consumer trust was undermined?
What is your vision of the IoT three years from now?
JD: There’ll be even more devices connected to the IoT so it will become more and more ubiquitous. Cisco is predicting that global IP traffic will triple by 2017 and they are attributing a significant amount of that growth to IoT-related traffic. Costs will continue to fall, which again will drive up more and more of this data being out there and I think we’ll see a wider range of sectors starting to apply this kind of technology.
Does every business have a use for the IoT in some shape or form?
LB: I'm trying to think about a business that couldn’t…the one that comes to mind is groceries, vegetable shops, but now I'm thinking that pallets tagged with sensors will make a huge difference in distribution, and it’ll make a huge difference to the freshness of products.
JD: I came across an interesting start-up in Cambridge on Monday where they're seeking to use IoT technology with home delivered groceries. They've got temperature-controlled, DPS linked, boxes so that supermarkets can deliver your groceries at any time of the day. You don't have to be at home and the groceries will still be fresh, which obviously makes it much more efficient as you don't have to worry about delivery slot times and so forth.
I wouldn’t like to say every business on the planet will benefit, but I think the majority probably could, either through internal efficiencies or through new products and services.