Where Will Value Be Created In The Internet of Things & People?
Value and profitability are playing a new game of hide-and-seek. They're still there, but not where they used to be. If you keep looking in the old places ... well, you know what's going to happen.
In recent research and modelling of the Internet of Things and People opportunity for clients, it has been found that with only a few mission critical exceptions, “hard” technologies tend to be declining profit activities — even though literal growth can be enormous. Sustainable profits, on the other hand, can be achieved in smart services like data management, analytics and intelligence activities that flow from the data themselves.
Cheap, self-organizing wireless sensors and smart devices have nearly infinite potential applications. Their widespread adoption is inevitable. But that doesn't mean that every participant will automatically be shaking a money tree (just look at the number of wireless sensing start-ups that are littered along the highway).
In the short term, connectivity components, networking hardware, gateways and the like will continue to be profitable if suppliers play their cards right. They may also be able to differentiate themselves and make money with toolsets for deployment and development, analogous to the offerings of companies in the open source space. After that, physical enablement technologies will become mature and decreasingly profitable.
So where’s the long-term money?
Well, the galaxies of “dust”-borne data generated by networked devices will be worthless unless they can be translated into actionable business intelligence. The higher margins we see today in connectivity and network hardware will diminish and, in the future, will not be in products at all, but in data management and related services. The products will continue to exist, of course, but only as "portals" into the valuable services offerings, not as ends in themselves.
So, what can be the conclusion? If you’re a vendor of connectivity products with no long-term data services strategy, you’re in the Internet of Things booster rocket. You may well have a great short-term lift-off. But when the booster runs out of fuel (product-centric profits), you’ll fall back to Earth. And that’s going to hurt.
Given the scale of the data and managed services opportunity one cannot help but wonder what exactly are the defining characteristics and marketplace dynamics that will drive success ….. or failure?
Fostering Market Defining Business & Technology Platforms:
Smart System solutions will not work if they are just a disparate collection of hardware, software, and network products from different vendors. Business practices, as well as standards and protocols for interoperability, security, and performance will be required and will come in time. But for now, vendors that can provide technology and business platforms for integration, and can do so as a product that can be sold to diverse customers, will have an early advantage.
Managing The Contention Between “Vertical and Horizontal” Opportunities:
Vertical expertise will become increasingly critical differentiator. Will large IT vendors and carriers with dominant shares and scale economies in horizontal technologies add new “vertical” solution elements to their infrastructure offerings? How will smaller vendors focused on vertical niches perform in a world increasingly dominated by behemoths? Everyone will need to carefully pick the horizontal technologies that they want to master and/or the verticals that they want to dominate, but trying to manage the contention will be a tricky balancing act.
Complex Systems Will Drive Need For Open Ecosystems & Alliances:
The dynamics surrounding emerging Smart Systems are incredibly complex. Basic enablement, network connectivity, systems integration, value-added services, and other management functions are all needs that generally must be addressed when customers seek to connect intelligent smart devices. Given all of the elements that must be addressed from the customer standpoint, open alliances between suppliers are the best available means to address these complexities.
User Centered Experience Moves To The Forefront of Customer Value:
Combining technologies from multiple domains and packaging them into a cohesive user driven experience will help ensure all of the data and value that is being captured is being recognized. Without understanding how the data is being used, it’s very difficult to design for effectiveness and can create a bottleneck of value. With the deluge of solutions vying for attention, customers often have too many opportunities to waste their time with one that feels awkward or burdensome.
The above appears to be a lot to ask for, but it is believed that we are beginning to see that the real Smart Systems “action” will be in data and information services, not in technology per se. It’s going to be all about data-driven relationships and partnerships that shape entire ecosystems to meet the emerging needs of new types of smart customer and system interactions.
Republished with kind permission from Harbor Research's smart business newsletter
The original article: www.harborresearch.com/whereswillvaluebecreated/