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.

Why collaboration must replace zero-sum game for IoT profitability

Posted on 3rd September 2013 in collaboration, Essential Truths, Internet of Things, strategy

I guest blogged today @ INEX Advisors today on one of my favorite Internet of Things principles: how thinking collaboratively has to replace I-win-you-lose-zero-sum-game thinking if companies want to really profit from the IoT.

As before, I cited GE as one of the few big companies that’s seizing a strategic advantage in the IoT world by practicing this approach.

Usage-based Insurance: Preview of Radical Industry Change Through IoT

Holy Clayton Christensen! Another wave of “disruptive innovation” is on its way, and this time the Internet of Things is responsible!

I’m confident that the IoT is going to bring about radical change throughout a wide range (if not all…) of vertical markets in the near future, through new realities such as giving everyone who needs it access to real-time information or by making preventive maintenance simple through real-time data from products such as jet turbines (General Electric is, again, a leader…).

However, for concrete evidence of how the IoT will change things, perhaps the best industry to look at is auto insurance, where the IoT is facilitating a fundamental shift in marketing, from the prior practice of basing premiums on proxy indicators such as a student’s grades or a person’s credit rating (leading to the heinous — and expensive — crime of “driving while poor,” LOL).

Progressive Snapshot

Progressive Snapshot

Instead, what is emerging worldwide (especially in Europe) is “usage-based insurance” (UBI), where the rates are based not on guestimates, but the driver’s actual behavior!

Insurance & Technology reports that the transition will only accelerate in the future.

“‘In five or ten years, all insurers will have dynamic driving data, so all will be able to offer discounts,’ says George Ayres, vice president of global sales for Verizon Telematics. ‘There will be no more asymmetry in terms of what they know about customers, so price alone won’t be as effective [for acquiring and retaining customers]. …The insurers who are out front on this idea are realizing [that soon] all will [have to] start to provide much wider breadth of services to keep those captured through price.’

“These services can be as simple as sending additional driving data to the driver’s smartphone, or as complex as auto insurance bundled with a customer relationship solution that sends alerts for scheduled maintenance.”

What a transformation!

Smart business leaders will start paying close attention to the features of the Internet of Things, and begin planning now on how to get ahead of the curve on making certain they are the beneficiaries of disruptive innovation — not the victims!

 

 

Hallelujah! The Internet of People launches

Most readers of this blog probably already know Rob van Kranenburg, arguably THE leading European Internet of Things theorist. What you may not  know is that, for the past year, he and a core group of IoT leaders have been planning creation of a UK-based global IoT consultancy, “The Internet of People.”

Unfortunately, one of the victims of that effort was a planned collaborationinternet_of_people_small
between Rob and me on an article about the IoT for the Harvard Business Review, but now I’ve got Dave Evans of Cisco as a writing partner, so I ain’t complainin’!

At any rate, there’s glorious news today: The Internet of People has officially launched, and there are more than 100 of us consultants who are already in the fold!

This is going to be an all-star team, so if you’re in need of IoT strategy and other consulting services, I hope you’ll contact us!

Essential #IoT Truths: who else could use this data?

Two weeks ago at the EntreTech seminar on the Internet of Things, good buddy Chris Rezendes told an anecdote that blew me away, both because it was such a powerful demonstration of the IoT’s potential to transform our world and because it reminded me of one of the IoT’s “Essential Truths.”

Chris mentioned that Grundfos, the world’s largest pump manufacturer, now includes sensors that report on the operating status of pumps at remote wells that dot Africa. They did it so that monitoring the wells would allow customers to improve maintenance of the wells and do it more economically, dispatching repair crews only when needed.

Nice, but not the cool, transformational part!

As you may know, Africans (primarily the women) often walk hours each day to-and-from their villages in order to get vital water — often carrying big jugs on their shoulders for many miles. Some dear soul at Grundfos realized that the same data that helped their customers improve management of the wells could also let the women know when there was adequate water flow at the well to make it worthwhile to make the trek (rather than having to walk to several wells before actually finding water — an all-too-frequent occurence).  So Grundfos made the data available to designers who were able to create an app that the women could read on their phones before leaving their village to determine where to go.  It cut the average amount of time the women spend per day hunting for water from 8 hours to 3 — a dramatic savings that allows them to spend their time on more productive and less tiring activities!  Isn’t that wonderful?

The second lesson I drew from the Grundfos data story was one that I first detailed two years ago in my book Data Dynamite: I argued that in the new era of “democratizing data,” that managers need to learn to routinely ask a new question when they examine a data set:

“WHO ELSE COULD USE THIS DATA?”

With the vast quantities of data that will be created by the IoT, the question is more relevant than ever!

This question doesn’t come easily to many managers. For so long, the secret to economic success was proprietary information that I had and you didn’t (for those with long memories, proprietary operating systems were the secret to the “Massachusetts Miracle” of the 1980s, when companies such as DEC and Prime created entire ecosystems around their proprietary systems).

Now, however, the future lies with open standards and shared data, that will actually create more wealth by sharing information because other people with a particular insight or critical need will realize that your data can be combined in mashups with other data sets to create whole new insights and valuable information.

Asking this question can also be a powerful tool to get rid of information silos within organizations, on the realization that many people in many departments can now potentially share the same near-real-time data at the same time, both improving coordination of activities such as supply-chain management and improving decision-making.

It’s time to wipe away the last vestiges of the old way of creating wealth and instead ask ourselves “who else could use this data?” The chances are that, whether inside your organization or — more daringly — outside it, you’ll be able to find other potential users who can cooperate to create new services and revenue streams as well as increasing operating efficiency.

So who else could use your Internet of Things data?

PS: I’ll be offering more of these “Essential #IoT Truths” on an occasional basis in the future, prodded by Chris Rezendes, who finally hammered it into my thick skull that all of my years in consulting on communications in a wide range of field meant that my unique contribution to the IoT can and should be to help  companies with the human communication aspects of the IoT that often tend to get obscured by our emphasis on machine-2-machine communication. Thanks, Chris (I plan to develop consulting services in this area to be offered in conjunction with INEX Advisors)! I’ll be speaking on this topic at a Meetup in Providence later this month — details to follow.