First Analysis

As an analyst and venture capitalist focusing on the IoT industry, I see creative, young, innovative IoT companies struggling to get their offerings broadly adopted. To be fair, I attribute some of this to poorly articulated value propositions and feeble sales and marketing efforts. The industry’s propensity to field engineering-centric senior management teams doesn’t help either and may be the root cause of some of these woes. However, this is not the case across the board, as more than a few high-quality offerings with clearly articulated value propositions have gone wanting– more so than I have seen in other industries at similar stages in their evolution. This raises the question of why?

From my perspective, the cause is often paralysis on the part of the buyer as they consider all the difficulties in implementing a solution “correctly.” Even after a buyer has chosen a compelling IoT application for deployment, the number of decisions to be made is mind numbing and involves trade-offs at each step:

• Should the edge hardware (e.g., sensors, gateways) have high processing power such that much information need not be transmitted back to the central application or should the devices be dumb and transmit everything? How does the response to this question impact battery requirements, cost, and data transport needs?

• Will any part of the solution require wireless connectivity to monitor/control remote assets? If so, is cellular, satellite, public RF, or another alternative best?

These questions generally lead to many more. Take the example of an application requiring cellular connectivity: Which carrier has appropriate coverage? Is one carrier sufficient or would an MVNO make more sense? Should I use 2G, 3G, or 4G technology? Do I need satellite backup? These are just some of the low-level technical questions that need to be addressed – many applications have much thornier high-level questions. What are the rights and restrictions on the data being collected and what are the legal and ethical limits around access and sharing? Given the state of the industry, for many applications, the answers are murky at best.

“Organizations should embrace IoT sooner rather than later, despite likely facing integration, optimization, and legal issues, because the hands-on experience gained overwhelms such transitory chaos, moving companies up the learning curve to competitive advantage.”

So I often see a committee formed with legal, technical, and operational representatives to “figure it out and get it right.” However, with the technology, industry, and even legal framework evolving, seeking the optimum solution can be a long, drawn-out, and perhaps impossible task. Perhaps this could be why we see so much hype and interest around many solutions but not an adoption rate to match.

The same does not seem to be true in the consumer market. Many individuals have been able to make a decision and adopt IoT technology without worrying about – at least not in a paralyzing fashion – the underlying technology, legal, and integration questions. I don’t think most consumers have contemplated how their Nest thermostat might interact or work with their Fitbit over time. And perhaps consumers are not exactly sure of the privacy and sharing rules for devices gathering information about them, their car, and home. Nevertheless, Fitbit sold 10.9M units in 2014 and had $745M in revenue, up 175 percent from the prior year. I am not aware of a publicly traded IoT company at similar scale serving the corporate market growing anywhere near that rate. 

Of course the comparison is not entirely fair with the risks and complexities of consumer-oriented IoT solutions much lower than their corporate counterparts. However, the point is illustrative: Consumers are becoming more sophisticated buyers and users of IoT via their hands-on experience. Is the same true of you and your organization?

I think companies embracing IoT now with all its challenges will end up being glad they did, despite the likelihood of making many mistakes along the way, as they will learn and gain a leg up on peers. This is not entirely different from the Internet revolution. Those building initial websites today (there are still many, particularly smaller, businesses that have no website at all) are behind the times. While they certainly gain from using later-generation technology, they lack understanding of how to best use the Web to interact with their customers, an understanding their competition has often gained through years of experience. I expect IoT to follow a similar curve as the Internet. Not only will companies benefit from their early experiences, I believe the individuals with experience developing and implementing IoT solutions during its early days will be in high demand for years to come.

Some adoption caveats

While recommending a “jump in with both feet” approach for corporate adoption of IoT solutions, I have some caveats. First, solutions that are straightforward and easy to adopt and implement are probably the best starting points. Second, several small discreet projects make more sense in my mind than multi-departmental integrated strategies. Will these projects need to be replaced wholesale when larger integrative IoT strategies are ultimately implemented? Most likely such a thing will happen. Is the cost and risk of this approach lower than taking on a mega-project initially? Almost certainly.

A special caveat for security

One area I think should give an organization pause because of the need to get it “done right” the first time is security. IoT implementations run the risk of opening holes to other corporate assets and information, and this can have ramifications well beyond the failure of any discreet project. I have seen a greater focus on IoT security lately, but still not anywhere near the attention given other topics such as sensor selection or data architecture. This is a mistake in my view. Having worked closely with payment card and, to a lesser extent, healthcare industry security over the years, I think the types of protections and safeguards for data in these industries, including ongoing processes to insure these safeguards are maintained, are the type of vigilance to be patterned for IoT. The exposure and risks are too great for anything less.

Embrace the chaos!

Given the state of the industry, IoT implementations will generally be challenging and solutions may not initially reach ROI projections. This fumbling through the deployment process and making adjustments post-production should not only be expected, but embraced. The key is to accumulate valuable IoT experience and find ways to use IoT to gain competitive advantage. From what I’ve seen, once the chaos is embraced, it is surprising how quickly this can happen.