Hippo: IoT-based paradigm shift from passive to active insurance companies

I’m a big advocate of incremental IoT strategies (check out my recent webinar with Mendix on this approach), for existing companies that want to test the waters first. However, I’m enough of a rabble-rouser to also applaud those who jump right in with paradigm-busting IoT (and big data) startups.

Enter, stage left, a nimble (LOL) new home insurance company: Hippo!

IMHO, Hippo’s important both in its own right and also as a harbinger of other startups that will exploit the IoT and big data to break with years of tradition in the insurance industry as a whole, no longer sitting passively to pay out claims when something bad happens, but seizing the initiative to reduce risk, which is what insurance started out to do.

After all, when a Mr. B. Franklin (I’ll tell you: plunk that guy down in 2017 and he’d create a start-up addressing an unmet need within a week!) and his fellow firefighters launched the Philadelphia Contributionship in 1752, one of the first things they did was to send out appraisers to determine the risk of a house burning and suggest ways to make it safer.

Left to right: Eyal Navon, CTO and cofounder; Assaf Wand, CEO cofounder of Hippo

In fact, there’s actually a term for this kind of web-based insurance, coined by McKinsey: insuretec” (practicing what he preached, one of Hippo’s founders had been at McKinsey, and what intrigued the founders about insurance as a target was that it’s a huge industry, hasn’t really innovate for years, and didn’t focus on the customer experience.).

I talked recently to two key staffers, Head of Product Aviad Pinkovezky and Head of Marketing, Growth and Product Innovation Jason White.  They outlined a radically new strategy “with focused attention on loss reduction”:

  • sell directly to consumers instead of using agents
  • cut out legacy coverage leftovers, such as fur coats, silverware & stock certificates in a home safe) and instead cover laptops, water leaks, etc.
  • Leverage data to inform customers about appliances they own that might be more likely to cause problems, and communicate with them on a continuous basis about steps such as cleaning gutters that could reduce problems.

According to Pinkovezky, the current companies “are reactive, responding to something that takes place. Consumer-to-company interaction is non-continuous, with almost nothing between paying premiums and filing a claim.  Hippo wants to build must more of a continuous relationship, providing value added,” such as an IoT-based water-leak detection device that new customers receive.

At the same time, White said that the company is still somewhat limited in what if can do to reduce risk because so much of it isn’t really from factors such as theft (data speaks: he said thefts actually constitute little of claims) but from one, measured by frequency and amount of damage (according to their analysis) that’s beyond their control: weather. As I pointed out, that’s probably going to constitute more of a risk in the foreseeable future due to global warming.

Hippo also plans a high-tech, high-touch strategy, that would couple technnology with a human aspect that’s needed in a stressful situation such as a house fire or flood. According to Forbes:

The company acknowledges that its customers rely on Hippo to protect their largest assets, and that insurance claims often derive from stressful experiences. In light of this, Hippo offers comprehensive, compassionate concierge services to help home owners find hotels when a home becomes unlivable, and to supervise repair contractors when damage occurs.”

While offering new services, the company has firm roots in the non-insuretech world, because its policies are owned and covered by Topa, which was founded more than 30 years ago.

Bottom line: if you’re casting about for an IoT-based startup opportunity, you’d do well to use the lens McKinsey applied to insurance: look for an industry that’s tradition-bound, and tends to react to change rather than initiate it (REMEMBER: a key element of the IoT paradigm shift is that, for the first time, we can piece “universal blindness” and really see inside things to gauge how they are working [or not] — the challenge is to capitalize on that new-found data). 

IoT Intangibles: Increased Customer Loyalty

There are so many direct, quantifiable benefits of the IoT, such as increased quality (that 99.9988% quality rate at Siemens’s Amberg plant!) and precision, that we may forget there are also potential intangible benefits.

Most important of those is customer loyalty, brought about by dramatic shifts both in product designs and how they are marketed.

Much of this results from the IoT lifting the veil of Collective Blindness to which I’ve referred before: in particular, our prior inability to document how products were actually used once they left the loading dock. As I’ve speculated, that probably meant that manufacturers got deceptive information about how customers actually used products and their degree of satisfaction. The difficulty of getting feedback logically meant that those who most liked and most hated a product were over-represented: those who kinda liked it weren’t sufficiently motivated to take the extra steps to be heard.

Now, by contrast, product designers, marketers, and maintenance staffs can share (that critical verb from my Circular Company vision!) real-time data about how a product is actually operating in the field, often from a “digital twin” they can access right at their desks.

Why’s that important?

It can give them easy insights (especially if those different departments do access and discuss the data at the same time, each offering its own unique perspectives, on issues that will build customer loyalty:

  • what new features can we add that will keep them happy?
  • can we offer upgrades such as new operating software (such as the Tesla software that was automatically installed in every single car and avoided a recall) that will provide better customer experiences and keep the product fresh?
  • what possible maintenance problems can we spot in their earliest stages, so we can put “predictive maintenance” services into play at minimal cost and bother to the customer?

I got interested in this issue of product design and customer loyalty while consulting for IBM in the 9o’s, when it introduced the IBM PS 2E (for Energy & Environmental), a CES best-of-show winner in part because of its snap-together modular design. While today’s thin-profile-at-all-costs PC and laptop designs have made user-friendly upgrades a distant memory, one of the things that appealed to me about this design was the realization that if you could keep users satisfied that they were on top of  new developments by incremental substitution of new modules, they’d be more loyal and less likely to explore other providers.

In the same vein, as GE has found, the rapid feedback can dramatically speed upgrades and new features. That’s important for loyalty: if you maintain a continuing interaction with the customer and anticipate their demands for new features, they’ll have less reason to go on the open market and evaluate all of your competitors’ products when they do want to move up.

 

Equally important for customer loyalty is the new marketing options that the continuous flow of real-time operating data offer you. For a growing number of companies, that means they’re no longer selling products, but leasing them, with the price based on actual customer usage: if it ain’t bein’ used, it ain’t costing them anything and it ain’t bringing you any revenue!

Examples include:

  • jet turbines which, because of the real-time data flow, can be marketed on the basis of thrust generated: if it’s sitting on the ground, the leasee doesn’t pay.  The same real-time data flow allows the manufacturer to schedule predictive maintenance at the earliest sign of a problem, reducing both its cost and the impact on the customer.
  • Siemens’s Mobility Services, which add in features such as 3-D manufactured spare parts that speed maintenance and reduced costs, keeping the trains running.
  • Philips’s lighting services, which are billed on the basis of use, not sold.
  • SAP’s prototype smart vending machine, which (if you opt in) may offer you a special discount based on your past purchasing habits.

At its most extreme is Caterpillar’s Reman process, where the company takes back and remanufactures old products, giving them a new life — and creating new revenues — when competitors’ products are in the landfill.

Loyalty can also be a benefit of IoT strategies for manufacturers’ own operations as well. Remember that the technological obstacles to instant sharing of real-time data have been eliminted for the supply chain as well. If you choose to share it, your resupply programs can also be automatically triggered on a M2M basis, giving an inherent advantage to the domestic supplier who can get the needed part there in a few hours, versua the low-cost supplier abroad who may take weeks to reach your loading dock.

It may be harder to quantify than quality improvements or streamlined production through the IoT, but that doesn’t mean that dependable revenue streams from loyal customers aren’t an important potential benefit as well.

I’ll be on live Thursday morning talking the IoT and Smart Cities

Cities are the future of global civilization and the economy, and smart cities are the only way they’ll survive and prosper!

Join me and two SAP experts on the subject, Dina Dayal (global vice president for Digital Enterprise Platform Group) and Saj Kumar (vice president of Digital Transformation and Internet of Things) as we guest on Bonnie D. Graham’s always-enjoyable Coffee Break With Game Changers, 11 AM EDT, 8 AM PDT (it will be archived at the site if you can’t listen live.

Bonnie likes us to start with a provocative (and relevant) quote, and mine will be from Jane Jacobs’ great Death and Life of American Cities:

Cities have the capability of providing something for everybody, only because,
and only when, they are created by everybody.”

… with the emphasis on everybody: I’ll explain that there really is an important role in smart cities for city government, the private sector, and — often ignored — grassroots innovators.

A critical key is the global Things Network, created by Wienke Gieseman and his Gang of Ten in Amsterdam,  who created a free LoRaWAN city-wide data network for $12,000 and in less than a month, and then went on to create a global network and a crowdsourced campaign to bring the cost of LoRaWAN hubs down to $200.

I like to think I was there at the beginning, working with Vivek Kundra, then the DC’s CTO (before his accomplishments there led Obama to name him the first US CIO). Vivek and Mayor Fenty took the bold move of releasing more than 40 major city data bases on a real-time basis, then held a contest to get smart developers to create new-fangled “apps” (remember, this was 2008!) to capitalize on them. Because the apps were open-source, they’ve been constantly copied and improved in the years since then.

And that’s only the beginning:

  • creative startups such as Alicia Asin’s Libelium, working with an enlightened city government, have made Barcelona a massive testlab for the Iot, and arguably THE smart city of the day
  • Columbus OH won the Obama Administration’s Smart City competition for its all-inclusive transportation scheme (and I do mean all-inclusive: who ever thought a better transportation network could be used to cut infant mortality???)
  • Smart Cities organizations have been formed in cities worldwide to share ideas — we’re all in this together!

And, of course, I’m going to bring the discussion down to earth by really getting down and dirty — yessiree, we’re gonna talk trash cans.

Be there or be square!

 

Brexit and the IoT: Let’s Capitalize on the Opportunity, Not Wallow in Despair

Wow: as the old Dinah Washington ditty went, “What a Difference a Day Makes.” Since last Thursday, I doubt even the most diehard IoT zealots have thought about anything but Brexit and its implications.  Now that we’ve had a little time to reflect and digest exactly how dire the possible problems are, I’d like to suggest we look at the bright side, and think the IoT could play a major role in improving everyone’s life in the future — not just the economic elites.

Wei ji: crisis combines danger and opportunity

Wei ji: crisis combines danger and opportunity

I used to be a corporate crisis manager, called in when major corporations had done amazingly stupid things and their reputations and sometimes even their survival was in question. For those occasions, I kept a battered greeting card in my briefcase with the calligraphy for wei ji, the Chinese ideogram for crisis. I’d point out that it c0mbined danger — that was obvious! — with the less-obvious one for opportunity. I still believe that, even in the global confusion and concern resulting from Brexit, and I think there’s a role for the IoT in the new world order.

Above all, this should be a wake-up call for the global economic and political elites that, going forth, change must benefit everyone, not just them.

When it comes to the IoT, that means that it can’t be yet another excuse for automating jobs out of existence, but must instead be a way of empowering workers and creating new opportunities:

  • One that occurred to me is near & dear to my heart, because I thought of a primitive version 25 years ago: creating 30″ high 4′ x 8′ garden “boxes” planted using Mel Bartholomew’s “Square Foot Gardening” methods, that would allow people worldwide to grow their own veggies in very small spaces.  Add in IoT water sensors so that the beds could be watered precisely when and in the amount needed, and people everywhere could become self-sufficient (e-mail me if you’re interested in commercializing the approach)!  It would be the cheapie’s variation on the neat, but costly, Grove Labs home ag solution.
  • smart asthma inhaler

    smart asthma inhaler

    Increasingly, global populations will be centered in cities, so the whole smart cities approach will improve everyone’s quality of living by cutting down traffic, reducing municipal operating costs, and improving public health. Even fat cats get upset when their limos are stuck in traffic, so this is a win-win.
    One of my favorite examples of the smart city approach is the asthma inhaler cum GPS that automatically alerts public health authorities when a user — most frequently, sadly, a low-come minority person — uses the inhaler, allowing them to identify dirty air “hot spots” where cleanup efforts need to be focused.

  • I’ve always been impressed about the outside-the-box mobile device apps coming out of Africa that make their lack of conventional infrastructure into an advantage. One of the coolest examples of that when it comes to the IoT is the example INEX’s Chris Rezendes told me about: how Grundfos, the world’s leading pump company, releases the data from senors on its pumps for village water supplies in Africa and some smart guys have come up with an app that allows the village women to check in advance whether the village well is working before they trudge miles to get the watch (which, BTW, I hope they’re carrying back in these way-cool appropriate technology rolling water carriers, the “Hippo”).

  • Also, the IoT could empower assembly-line workers and others if smart managers realize that they too should be among those sharing real-time IoT data: yes, a lot of IoT data can be used on a M2M basis so one machine’s status will regulate another’s, but there’s also a potential role for workers, with their years of experience and horse-sense, using that data to fine-tune processes themselves to optimize efficiency. Artificial Intelligence is great, but I still think there’s a role for enlightened humans, even if they don’t have a lot of education and prestige within the corporation.

Those are just a few ideas on how the IoT might be used to improve everyone’s lot in the coming years and undermine the current status quo that benefits only a few.  Let me know if you have ideas on how to foster this revolution and make Brexit the catalyst for positive change.

 

 

Eureka! MYLE TAP: Nice Example of IoT Letting You Do Something You Couldn’t

I like to occasionally feature products that aren’t earth-shaking in their own right (such as the cameleon shoes that can change their appearance with the swipe of an app) , but nicely illustrate one of my IoT acid tests: what can you do that you couldn’t do before?

I love those, because they can get our creative juices boiling to think of other unprecedented IoT devices.

The MYLE TAP Thought Recorder

Here’s a nice example that I suspect may itself facilitate a lot of “Archimedes Moments” (just coined that one, LOL), where IoT users will leap from their baths and run nude through the streets, shrieking “Eureka,” because of their sudden insights into some great new IoT device (actually not sure of that image.  Are IoT enthusiasts slim and attractive?),

One little factoid really makes this one come alive: “the average person generates over 70,000 thoughts a day.” Now that’s a staggering unstructured data challenge!

Might be of particular interest, Dear Readers, to those of us on the far side of 50 who have a ton of great ideas but, how shall we say this delicately, don’t always remember them 15 minutes later).

At any rate, the crowd-funded ($83,707 raised so far, by 755 people in 15 days, compared to a $50,000 goal. As of this writing the campaign goes for 16 more days, so you can still get in on the ground-floor.) MYLE TAP will allow users to effortlessly record their thoughts in real-time (which, BTW, is a crucial element in how the IoT really transforms everything: instead of limited data, obtained retroactively, we can get limitless data now, when we can still act on it).

To activate the attractive device you simply tap it.  It understands 42 languages right out of the box!

There are some really neat components of the device that could really make your life a lot simpler because you can speak what you want to record (I don’t know about you, but the more I learn about the powers of Siri and her friends, the more I think voice-interface is really the way to go in the future, especially for tech-averse seniors, the targets of my Smart Aging concept). As the site says, “your saved notes are analyzed by context to generate you meaningful results via smartphone applications.” Here are the first uses:

  • Calorie Counter: “’I had one Caesar salad and one big apple.’ MYLE calculates how many calories you have consumed.”
  • Budget & Spending: “’Spent $7 on coffee and $40 on gas’, and MYLE enters it into your personal and business expense tracker.”  IMHO, this could be a REAL value!
  • Grocery List: “Tell MYLE ‘buy eggs, milk, flour,’ Your shopping list is built automatically.”
  • Calendar: “Tell MYLE ‘Pick Sophia up from school at four,’ and a new item is added to your calendar.”
  • Social Media: “Share your memorable event or experience. One tap can post can post it on your Facebook or Twitter account.”
  • Exercise: “Excercise with your MYLE TAP. Build and keep records of your progress.”

I can already do a lot of these things with my iPhone and Apple Watch, and perhaps the Watch will eventually do all these things once developers have created new apps, but I like the idea of a single, snazzy-looking device that can do all of them. And, smart people that they are, the MYLE developers have developed an open SDK and API. Once the IFTTT community gets hold of it, they’ll come up with ideas to extend the device’s utility that the MYLE folks never would have conceived of!

The MYLE TAP — doing something that we couldn’t do before!


 

Here are the technical details, courtesy of Atmel:

“Based on an Atmel | SMART SAM4S MCU, the super compact and lightweight gadget is equipped with an accelerometer, a Bluetooth Low Energy module, a few LEDs and a built-in battery capable of running up to a week on a single charge. MYLE TAP boasts some impressive memory as well, with a storage capacity of up to 2,000 voice notes.”

 

Incredible example of rethinking “things” with Internet of Things

Ladies and gentlemen, I give you the epitome of the IoT-enabled product: the trash can!

My reader statistics do not indicate this blog has a heavy readership among trash cans, but let me apologize in advance to them for what I’m about to write: it’s not personal, just factual.

I’m sorry, but you municipal trash cans are pathetic!

Dented. Chipping paint. Trash overflowing. Smelly. Pests (ever seen any of those prize city rats? Big!!!) Sometime even knocked over. And, worst of all, you are so…. DUMB. You just sit there and don’t do anything.

BigBelly trash compactor and recycling center

But that was then, and this is now.

I have seen the future of trash cans, and, equally important, perhaps the best example I’ve seen of how smart designers and company strategists can –and must — totally rethink products’ design and how they are used because of the Internet of Things! 

At last week’s Re-Work Internet of Things Summit there were many exciting new IoT examples (I’ll blog others in coming weeks) but perhaps the one that got more people talking was the BigBelly trash compactor & recycling system, high-tech successor to the lowly trash can.

The company’s motto is that they are “transforming waste management practices and contributing to the Smart Cities of tomorrow.” Indeed!

I was first attracted to the BigBelly systems because of my alternative energy and environmental passions: they featured PV-powered trash compactors, which can quintuple the amount a trash container can hold, eliminating overflowing containers and the need to send trucks to empty them as frequently. Because the containers are closed, there’s no more ugly banana peels and McDonald’s wrappers assaulting your delicate eyes — or noses! Equally important, each is paired with a recycling container, which are almost never seen on city streets, dramatically reducing the amount of recyclables that go into regular trash simply because no recycling containers are accessible downtown.  These features alone would be a noteworthy advance compared to conventional trash cans.

But BigBelly wasn’t content to just improve the efficiency of trash and recyclable collection: they decided to make the containers smart.

The company worked with Digi to add wireless communications to the bins. This is a critical part of BigBelly’s broader significance: when the IoT first started to creep into corporate consciousness, of course designers thought about smart versions of high-value products such as cars, but lowly trash cans? That deserves real praise, because they fundamentally re-examined not only the product as it existed, but also realized that an IoT-based version that could also communicate real-time data would become much more versatile and much more valuable.

Here’s what has resulted so far (and I suspect that as the BigBellys are more widely deployed and both city administrators and others become aware of their increased functionality, other features will be added: I see them as “Smart City Hubs!”):

  • heatmap of trash generation in Lower Manhattan using real-time data from BigBellys and CLEAN dashboard

    instead of traditional pickup routes and schedules that were probably based on sheer proximity (or, as BigBelly puts it a little more colorfully, “muscle memory and gut instincts”), they now offer a real-time way to monitor actual waste generation, through the “CLEAN Management Console,” which allows DPW personnel to monitor and evaluate bins’ fullness, trends and historical analysis, for perspective. Collections can now be dynamic and driven by current needs, not historical patterns.

  • For those cities that opt for it, the company offers a Managed Services option where it does the analysis and management of the devices — not unlike the way jet turbine manufacturers now offer their customers value-added data that allows them to optimize performance — and generates new revenue streams for the manufacturers.
  • You may remember that I blogged a while ago about the “Collective Blindness” analogy: that, until the IoT, we humans simply couldn’t visualize much about the inner workings of the material world, so we were forced to do klugy work-arounds.  That’s not, strictly speaking, the case here, since trash in a conventional can is obviously visible, but the actual volume of trash was certainly invisible to those at headquarters. Now they can see — and really manage it.
  •  They can dramatically increase recycling programs’ participation rate and efficiency. As BigBelly says, the system provides “intelligent infrastructure to support ongoing operations and free up staffing and resources to support new and expanded recycling programs. Monitoring each separate stream volumes, days to fullness, and other activities in CLEAN enables you to make changes where needed to create a more effective public recycling program. Leverage the stations’ valuable sidewalk real estate to add messaging of encouraging words to change your users’ recycling behaviors.”Philadelphia is perhaps the best example of how effective the system can be. The city bought 210 of the recycling containers in 2009. On average, each collected 225 pounds of recyclables monthly, resulting in 23.5 tons of material diverted from landfills. Philly gets $50 per ton from the recycling — and avoiding $63 in landfill tipping fees, with a total benefit to the city of $113 per ton, or $2599 per month.

Here’s where it really gets neat, in my estimation.

Because the BigBellys are connected in real time, the devices can serve a number of real-time communication functions as well (enabled by an open API and an emphasis by BigBelly on finding collaborative uses). That includes making them hubs for a “mesh network” municipal wi-fi system (which, by the way, means that your local trash container/communications hub could actually save your life in a disaster or terror attack, when stationary networks may be disrupted, as I explained years ago in this YouTube video).

The list of benefits goes on (BigBelly lists all of them, right down to “Happy Cities,” on its web site). Trust me: if my premise is right that we can’t predict all of the benefits of the IoT at this point because we simply aren’t accustomed to thinking expansively about all the ways connected devices can be used, there will be more!

So here’s my take-away from the BigBelly:

If something as humble and ubiquitous as a municipal trashcan can  be transformed into a waste-reduction, recycling collection, municipal communication hub, then to fully exploit the Internet of Things’ full potential, we need to take a new, creative look at every material thing we interact with, no longer making assumptions about its limited role, and instead looking at it creatively as part of an interconnected network whose utility grows the more things (and people!) it’s connected with!

Let me know your ideas on how to capitalize on this new world of possibilities!

Why It’s So Hard to Predict Internet of Things’ Full Impact: “Collective Blindness”

I’ve been trying to come up with a layman’s analogy to use in explaining to skeptical executives about how dramatic the Internet of Things’ impact will be on every aspect of business and our lives, and why, if anything, it will be even more dramatic than experts’ predictions so far (see Postscapes‘ roundup of the projections).

See whether you thing “Collective Blindness” does justice to the potential for change?

 

What if there was a universal malady known as Collective Blindness, whose symptoms were that we humans simply could not see much of what was in the world?

Even worse, because everyone suffered from the condition, we wouldn’t even be aware of it as a problem, so no one would research how to end it. Instead, for millennia we’d just come up with coping mechanisms to work around the problem.

Collective Blindness would be a stupendous obstacle to full realization of a whole range of human activities (but, of course, we couldn’t quantify the problem’s impact because we weren’t even aware that it existed).

Collective Blindness has been a reality, because vast areas of our daily reality have been unknowable in the past, to the extent that we have just accepted it as a condition of reality.

Consider how Collective Blindness has limited our business horizons.

We couldn’t tell when a key piece of machinery was going to fail because of metal fatigue.

We couldn’t tell how efficiently an entire assembly line was operating, or how to fully optimize its performance.

We couldn’t tell whether a delivery truck would be stuck in traffic.

We couldn’t tell exactly when we’d need a parts shipment from a supplier, nor would the supplier know exactly when to do a new production run to be read.

We couldn’t tell how customers actually used our products.

That’s all changing now. Collective Blindness is ending, …. and will be eradified by the Internet of Things.

What do you think? Useful analogy?

Why the Internet of Things Will Bring Fundamental Change “What Can You Do Now That You Couldn’t Do Before?”

The great Eric Bonabeau has chiseled it into my consciousness that the test of whether a new technology really brings about fundamental change is to always ask “What can you do now that you couldn’t do before?

Tesla Roadster

That’s certainly the case for the Tesla alternative last winter to a costly, time-consuming, and reputation-staining recall  (dunno: I must have been hiding under a rock at the time to have not heard about it).

In reporting the company’s action, Wired‘s story’s subtitle was “best example yet of the Internet of Things?”

I’d have to agree it was.

Coming at the same time as the godawful Chevy recall that’s still playing out and still dragging down the company, Tesla promptly and decisively response solved another potentially dangerous situation:

 

“‘Not to worry,’ said Tesla, and completed the fix for its 29,222 vehicle owners via software update. What’s more, this wasn’t the first time Tesla has used such updates to enhance the performance of its cars. Last year it changed the suspension settings to give the car more clearance at high speeds, due to issues that had surfaced in certain collisions.”

Think of it: because Tesla has basically converted cars into computers with four wheels, modifying key parts by building in sensors and two-way communications, it has also fundamentally changed its relationship with customers: it can remain in constant contact with them, rather than losing contact between the time the customer drives off the lot and when the customer remembers (hopefully..) to schedule a service appointment, and many modifications that used to require costly and hard-to-install replacement parts now are done with a few lines of code!

Not only can Tesla streamline recalls, but it can even enhance the customer experience after the car is bought: I remember reading somewhere that car companies may start offering customer choice on engine performance: it could offer various software configurations to maximize performance or to maximize fuel savings — and continue to tweak those settings in the future, just as computers get updated operating systems. That’s much like the transformation of many other IoT-enhanced products into services, where the customer may willingly pay more over a long term for a not just a hunk of metal, but also a continuing data stream that will help optimize efficiency and reduce operating costs.

Wired went on to talk about how the engineering/management paradigm shift represented a real change:

  • “In nearly all instances, the main job of the IoT — the reason it ever came to be — is to facilitate removal of non-value add activity from the course of daily life, whether at work or in private. In the case of Tesla, this role is clear. Rather than having the tiresome task of an unplanned trip to the dealer put upon them, Tesla owners can go about their day while the car ‘fixes itself.’
  • Sustainable value – The real challenge for the ‘consumer-facing’ Internet of Things is that applications will always be fighting for a tightly squeezed share of disposable consumer income. The value proposition must provide tangible worth over time. For Tesla, the prospect of getting one’s vehicle fixed without ‘taking it to the shop’ is instantly meaningful for the would-be buyer – and the differentiator only becomes stronger over time as proud new Tesla owners laugh while their friends must continue heading to the dealer to iron out typical bug fixes for a new car. In other words, there is immediate monetary value and technology expands brand differentiation. As for Tesla dealers, they must be delighted to avoid having to make such needling repairs to irritated customers – they can merely enjoy the positive PR halo effect that a paradigm changing event like this creates for the brand – and therefore their businesses.
  • Setting new precedents – Two factors really helped push Tesla’s capability into the news cycle: involvement by NHTSA and the word ‘recall.’ At its issuance, CEO Elon Musk argued that the fix should not technically be a ‘recall’ because the necessary changes did not require customers find time to have the work performed. And, despite Musk’s feather-ruffling remarks over word choice, the stage appears to have been set for bifurcation in the future by the governing bodies. Former NHTSA administrator David Strickland admitted that Musk was ‘partially right’ and that the event could be ‘precedent-setting’ for regulators.”

That’s why I’m convinced that Internet of Things technologies such as sensors and tiny radios may be the easy part of the revolution: the hard part is going to be fundamental management changes that require new thinking and new questions.

What can you do now that you couldn’t do before??

BTW: Musk’s argument that its software upgrade shouldn’t be considered a traditional “recall” meshes nicely with my call for IoT-based “real-time regulation.”  As I wrote, it’s a win-win, because the same data that could be used for enforcement can also be used to enhance the product and its performance:

  • by installing the sensors and monitoring them all the time (typically, only the exceptions to the norm would be reported, to reduce data processing and required attention to the data) the company would be able to optimize production and distribution all the time (see my piece on ‘precision manufacturing’).
  • repair costs would be lower: “predictive maintenance” based on real-time information on equipment’s status is cheaper than emergency repairs. the public interest would be protected, because many situations that have resulted in disasters in the past would instead be avoided, or at least minimized.
  • the cost of regulation would be reduced while its effectiveness would be increased: at present, we must rely on insufficient numbers of inspectors who make infrequent visits: catching a violation is largely a matter of luck. Instead, the inspectors could monitor the real-time data and intervene instantly– hopefully in time to avoid an incident. “

Capgemini Report: dramatic proof most big companies lag on IoT strategy!

In writing the SAP “Managing the Internet of Things Revolution” i-guide to IoT strategy for C-level executives, my research led me to believe that most big companies were still clueless about the IoT and how it would revolutionize every aspect of their operations.  Now a great report by Capgemini, “The Internet of Things: Are Organizations Ready for a Multi-Trillion Dollar Prize?” seems to answer its own question with a resounding “No!” It’s a must read, whether you’re late to the game, or if you’re looking for entrepreneurial opportunities. Let’s start with the conclusion:

The IoT represents the next evolution of the digital universe. The speed at which nimble startups and Internet players are capturing IoT opportunities should serve as a wake-up call to larger, traditional organizations. Analyst estimates point to a world where startups will dominate the IoT market. Fifty percent of IoT solutions are expected to originate in startups less than 3 years old, by 201732. They may be less nimble, but bigger organizations need to step up to the plate. As with all digital disruptions, being an organization that is in catch-up mode will be a deeply uncomfortable place to be. ” (my emphasis)

Earlier, it emphasizes that success will require both a paradigm shift and mastering new technologies such as big data analysis:

The IoT prize will be won by those who achieve a change in mindset, from a product world to a service world. However, that fundamental mind-shift is not the only requirement. Organizations need to get the right IT infrastructure in place, quickly acquire capabilities in analytics, and strengthen a whole host of functional capabilities. “

Got your attention yet?

The report was most emphatic about an aspect of the IoT that I don’t think I’ve emphasized enough in the past, the shift from products to services. Once again, I look to GE as one big company that “gets it” about the IoT transition, building sensors into its products that rotate, then monetizing the investment by offering real-time data about the products’ operations to customers so that they can optimize their operations — and charging for that data.  The study said that within a year after GE began offering its “Predictivity” line of IoT services in 2012, it generated $290 million in revenues.

One of the reasons why I really like the analysis is that it zeros in on a range of management issues that executives must address to capitalize on the IoT.

The study of more than 100 US and European companies reported that most don’t have the in-house expertise to make the switch from selling products to offering services:

“They now need to be able to envision new services, develop commercial models and design service contracts that result in continuous revenue streams. Our discussions with senior executives revealed that these are not areas of strength for many product- centric organizations.”

In particular, it targeted salespeople as a problem area: “For IoT solutions, a sales force needs to be comfortable in articulating the value proposition and potential benefits, which is critical to convincing often-reluctant customers to pay for a new class of services.” Customer support will also need to be beefed up — and delivered faster to customers who come to expect real-time data.

 The research showed that most companies were only in the early stages of IoT implementation — if at all. Fewer than 30% support remote operation of devices, and fewer than 40% use sensor data to offer customers the kind of performance improvement insights that GE gives.

One major gap that jumped out to me is that most of the big companies just don’t get my “Essential Truth” that you have to begin asking “who else can use this data”?,” and begin opening up proprietary systems so that third parties will enrich your offerings by creating new combinations and complementary offerings. Fewer “than 15% of organizations offer IoT solutions that integrate with third-party products and services.” (my emphasis) If mighty GE can team with Quirky and Electric Imp, what’s your excuse? On the more positive side, the research revealed that nearly 60% use partnerships to develop IoT solutions, so there’s hope.

The gaps are technological as well as human. 67% of the respondents said they don’t have the technology (shout-out to SAP’s HANA) to handle the massive amounts of big data the IoT will generate.

Another obstacle that the report identified was one I’d not come across before: resistance from within. “An executive at a medical technology company outlined how resistance can come less from the customer – and more from within the organization, explaining, ‘We only have 20% resistance from the customer and 80% from our own organization. Consequently, it is a significant challenge to align our existing business processes with new IoT-based service offerings.’”

The final section is an action agenda to get companies up to speed on the IoT:

  1. Put the Right IT Infrastructure in Place and Acquire Data Analytics Capabilities.
  2. Strengthen Functional Capabilities across Product Management, Sales and Marketing and Customer Support
  3. Use Trainings and Incentives to Prepare the Sales Force to Sell IoT Solutions. Augment Product Management Capabilities with Services Expertise and Emphasize Ease-of-Use in Product Design
  4. Develop Customer Support Capabilities to Drive Real-Time Issue Resolution.

Bottom line, Capgemini concluded that a shocking 42% of all companies don’t provide any IoT services. That, in my mind, is a clarion call to action!

You simply must read this report — then act on it.