In the early days of building and selling tech products, life was relatively simple. You came up with a cool idea for something you believed people or companies wanted to buy, you determined how much it would cost to build, you added in a profit margin, and you sold it. Easy.
Over time, however, those simple business models have fallen by the wayside as companies have grown more sophisticated, routes to market have become more complicated, and larger sums of money have been at stake. Now you have things like carrier subsidies, retailer spiffs, market development funds (MDF), license and patent royalty fees, software bundling kickbacks, and a host of other elements that make it nearly impossible to decipher exactly where, by whom, and how much money is being made when a tech product is sold.
As a result of these complications, it’s now common to find as much experimentation with business models in the tech world as there are experiments with new technologies. Nowhere do I expect to see more of this experimentation than in the burgeoning world of IoT, or the Internet of Things.
One of the reasons business models have become more complicated in the tech business is it’s often increasingly hard to determine who brings the most value to the table. A fundamental tenet of business is people will purchase something they believe offers some kind of “value” to their life, whether as simple as sustenance or something as sophisticated as an always-connected information and entertainment device. In the case of IoT, it’s not always clear where and to whom the potential “value” belongs. Heck, even the name Internet of Things—who just buys “things”?—strongly suggests a lack of clearly defined value.
The challenge for IoT makers, as well as the broadly defined IoT ecosystem, is to create strong value statements that will compel either individuals or businesses to buy them. For individuals, if people perceive something as somehow “improving” their life, that may suffice. For businesses, it often boils down to basic dollars and cents—the classic ROI (return on investment) question. Will this device somehow save my company money, either directly, by lowering costs, or indirectly, by improving efficiency of existing resources, etc?
Part of the challenge with IoT is the devices themselves—which cover an enormous range of potential applications, but are essentially classified together by virtue of having some kind of sensors built into them—are often really only a means to an end. In most situations, they provide data that only has value if it’s been collected, organized, analyzed and made actionable. Now, in the era of the information economy, it’s easy to say information inherently has value, but as many large organizations are starting to learn from big data projects—sometimes it really doesn’t have much (if any) value.[pullquote]It seems clear to me the kind of complicated business models necessary for many IoT devices are going to limit their near term impact.”[/pullquote]
Even if the data generated by these connected IOT devices has value, however, it’s not always the person or company who deploys the device that directly benefits. One of the more interesting applications of IoT (and one of the few true early success stories involving consumers), is the use of devices built into cars that track how safely (or not) an individual is driving. Auto insurance companies are using this data to determine the insurance rates of their customers. So, basically, the auto insurance company gives you a device to install in your car and your motivation to use it is to reduce your insurance payments. You don’t buy the device directly, but the business model is structured to incentivize the consumer to use it. For insurance companies, the expense of the sensors and the data service they use is justified for a more accurate view of their customers’ potential risk.
Very similar types of models are likely to be employed by health insurance providers as we start to see the release of more health-focused wearables. Some consumers have (and will) purchase these types of IoT devices because they see direct value in them. However, I wouldn’t be surprised if we didn’t see wider adoption until people are incented with real dollar savings in their health insurance premiums to wear them.
Of course, there are enormous privacy and security issues that also have to be addressed in these kinds of applications. Even presuming they are addressed (a big if), it seems clear to me these kinds of complicated business models are going to limit the near term impact of IoT devices. I certainly think the potential for revolutionary changes are there but, even though the technology may be ready, experiments with business models are likely to continue for some time to come.
Maybe I’m getting old, but the whole IoT thing is puzzling and frightening.
On the puzzling side of things, I can’t really imagine that many things I’d want to internetize. Sure, my home is cold when I get back from a long weekend, and I’ve got to ask a neighbour to water the plants… But when I see the mess they made of my washing machine, microwave and oven, I’m fairly sure I don’t want even more ermmm… “smarts” ? in my appliances. Even my router’s web admin interface is so buggy I’ve got to jump through hoops to get it to work. i don’t want that for my coffee machine.
Also, I don’t want lock-in. We know how that works for Windows, for car repairs… if getting a Samsung smart oven forces me to get a Smasung smartphone, and from there lock, TV, all apliances… I’ll keep pushing buttons, thank you. The added value would have to be sky-high to change my mind. I’d never buy a car who forced me to get my gas from a specific brand.
On the frightening side of things, corps knowing more about me than what I tell them is an issue, as is them sharing/losing my data with abandon and 0 consequences, and hackers getting access to my devices, not just my data, is a concern too.
As well as a business model for IoT, I think we need to establish a legal framework for documenting, valuing and protecting data and access to the devices; and open technical standards for interoperability and baseline security features. Hopefully we’ll get there before we fall into another “robber barons” age.
All good points and worthy of an entire other column. The security and privacy concerns around IOT (which I just briefly mentioned in passing at the end), in particular, are an enormous challenge. As you point out, the challenge is understanding the value of what all these connected devices will provide. In many cases, it’s not at all clear, hence my concerns. Right now we really seem to be in an era of “let’s connect something because we can” as opposed to “let’s connect something because we should.” Still don’t have enough clear reasons why to make things connected, just more capability to make them connected.
Bob: Hadn’t given much thought to the “business model” issue, as my focus is entirely on the security issues.
Still thanks.
You did forget to mention the upcoming robot rebellion.
Ha! Oh yeah, will have to do that in the future…then again, it might get written for me!
I just discovered what might be my first “smart” purchase: A Bluetooth device called Automatic. This little device plugs into the universal diagnostic port found on many cars, connecting it to the car’s computer, including my ’98 VW.
The company says they have both an iOS and an Android app. So no “lock-in”. Of course, the iPhone app is probably better.
No need to be puzzled or frightened — developers are supplying the imagination you lack.
You mean the very diagnostic port used to steal BMWs ( https://nakedsecurity.sophos.com/2012/09/18/bmw-stolen-hacking-kit/ )?
Indeed, no need to be frightened… Who’s lacking imagination, or simply information, again ?
And coffee makers and fridges have been in use since 1948, so?
The article is about business models around IoT. About how Bob sees a lot of experimentation ahead.
Here’s a quote from the article about the devices themselves: they “essentially classified together by virtue of having some kind of sensors built into them—are often really only a means to an end. In most situations, they provide data that only has value if it’s been collected, organized, analyzed and made actionable.”
You have jumped from making data useful in specific cases where each of us might find different use cases personally useful to us, to “whoa, why would I want an Apple house that Apple can lock me out of.”
Apple is not skynet, and Apple is not going to make fridges and coffee makers that require other Apple appliances. But developers are going to experiment with making data useful through the everyday use of standard sensors that are already out there since 1996 or so.
Yes, people have been driving cars since 1896; that doesn’t mean that you can’t make better use of data coming from your car that is already being collected. Personally, I would like to see that data and not bother going to a VW dealer every year to check up on it. But that is just my imagination getting the better of me.
Appliances like VCRs and coffee makers have been programmable for 20 or 30 years, but no-one likes 50 incomprehensible remotes lying around.
Instead, one remote for everything you choose to “internetize”, your smartphone. Philips has their Hue lighting system, again with both iOS and Android apps.
“Things” don’t need a brain: they have standard sensors and technologies like bluetooth or wifi. They can keep the processing power of the Apollo spacecraft. The only brain you need to collect all your data and “make it actionable” is your smartphone.
The article is about how there will be great experimentation around making all this data actionable. That’s what the developers are applying their imaginations to, and what you are pooh-poohing.
Take it or leave it on individual use cases. You won’t be “locked in”.
Actually, I’ve jumped from “making data useful” to “where is that data going, how am I certain I won’t lose control of my devices, and what’s the value to me anyway”. There’s a difference between fun experiments and market-ready product. Answering these 3 issues is one of them. And to me impacts or even pre-empts business models.
As for lock-in, you’re going on misplaced faith. Car manufacturers did lock-in their car computers ( http://www.wired.com/2015/01/let-us-hack-our-cars/ ), and one of Apple’s (and everybody else’s, Apple only leaked a memo to prove it) major goal is lock-in.
“As for lock-in, you’re going on misplaced faith…and one of Apple’s (and everybody else’s, Apple only leaked a memo to prove it) major goal is lock-in.”
Well, mostly I simply believe that data is data, and sensors are sensors. The “lock-in” that Apple is going for is to provide “kits”, (home-, car-, health-, etc.) that make really good building blocks for developers to quickly and easily produce great products.
Apple just wants to be sure that you buy an iPhone and not an Android. And they will give you reasons to do so. That’s the “lock-in”. There will be Android apps to access these things, but they likely won’t be as good for the end user, nor provide as much incentive to the developer.
The personal value of your data being actionable by you, is completely up to you. You consider this on a case by case basis. For me, I can see the car device, but not a lighting device. But whatever I choose is value that can be added to the purchase of an iPhone.
If you are worried about something else, like car manufacturers increasingly using a lightning port instead of a 30 year-old data port, then I think you have a mis-guided view of “proprietary lock-in”. Sure, the new can be quite frightening.
If you are worried about where your data is going, then worry about Google. Apple’s business model is to protect privacy. Certainly, that means placing a certain amount of faith in Apple. I trust that the drivers approaching me stay on their side of the road, and they have the same trust of me. I can’t get up in the morning without trusting lots of people for all sorts of things. But why some people assume with little evidence that Google is necessarily better than their actions and self-disclosure, and that Apple is necessarily worse than their actions and self-disclosure, is beyond me.
Besides, in the scheme of things, I think data about the fuel consumption of my car is far less worrying than what my kids are putting on Facebook. But, again, you would consider on a case by case basis what sort of data you find it “valuable” to make “actionable”. Some ways of making that data actionable (I daresay the “Apple way”) will be “safer” than other ways. That’s a fact.
“Well, mostly I simply believe that data is data”.
Sure. Nobody would ever package that data into proprietary formats, transport it over proprietary protocols, DRM it,… That has never happened and never will… just don’t ask any Word, AirPlay or DVD user ?
“Apple just wants to be sure that you buy an iPhone and not an Android. And they will give you reasons to do so”.
As in: buy iDevices, or lose your movies, music, contacts, messages, docs, calendar… also, lose ability to communicate between your devices, and now to control/monitor your appliances.
“Apple’s business model is to protect privacy.”
“Some ways of making that data actionable (I daresay the “Apple way”) will be “safer” than other ways.”
Lucky us. Were would we be if it wasn’t
http://www.huffingtonpost.com/news/apple-hack/
“That’s a fact.”.
Indeed.
“I trust that the drivers approaching me stay on their side of the road, and they have the same trust of me.”
You *are* aware there are standards and laws about that, are you ? And a whole bunch of people to enforce them ?
“Besides, in the scheme of things, I think data about the fuel consumption of my car is far less worrying than what my kids are putting on Facebook.”.
Indeed. What about the data that your home is right now empty and you’re 500 miles away ? That thrice a week 5 to 7 you’re not at work but at Pamela’s place ? etc…
“But, again, you would consider on a case by case basis what sort of data you find it “valuable” to make “actionable”.”
And a great part of that equation is whether that data stays with me or not, whom it goes to if not, and whether it is only actionable by me or not.
“What about the data that your home is right now empty and you’re 500 miles away ? That thrice a week 5 to 7 you’re not at work but at Pamela’s place ? etc…”
You’re right. And if I entrusted that data to an Android App, or to Facebook (the being on vacation part, not being at Pamela’s), then I would be a lot more worried about some unscrupulous app “developer” or stalker raiding my home in my absence.
But as I am “trusting” someone all the time anyway (the point about approaching drivers, regardless of laws and regulations), I am far more apt to “trust” the approved developer who is making good money on the AppStore (or with a free app connected to a profitable product) when he *says* that the data is staying on my phone; I trust him not to sell my data to the local thug; I trust that the threat of a ban from the AppStore is sufficient to make him stick to improving and profiting from his app rather than profiting from my personal data, etc. Since that is a difficult if not impossible proposition on the Android side, I can understand your cynicism.
Apple *says* it is trying to make better products; Google (as much as) *says* they want your data and don’t care about the quality of their products. Certainly one needs to be wise and not naive, and consider what a company like Apple may or may not be allowing to happen with your data. But, If I were to start capturing and recording certain data with the intention of making it actionable because I could see some useful purpose in doing so, I am not yet so cynical to think that Apple is absolutely the worst company to turn to. On that we can agree to disagree.
Apple *publicly* says they’re trying to make better products, and *privately* adds they want lock-in and to catch up to Google’s services. That’s fact ^^
You’re aware that revenues from the PlayStore are pulling up to the AppsStore’s, so your whole schtick is irrelevant, right ?
To me, whether Apple or Google or anyone else gets my data and let (me ?) act on it is irrelevant to the underlying issues. I don’t have blind faith in, nor devotion to, any of them.
I am quite aware that public and private personas differ. Google publicly claims to be “open”, when what they really mean is open with their user’s stuff and not their own. Most public and private personas differ to some extent, so?
I just don’t think the difference in Apple’s case is nearly so vast, dramatic, nor horrendous as you make it out to be.
I already acknowledged a certain “lock-in”. Apple wants to keep adding value and capability to the iPhone, so that I never need or contemplate purchasing some other smartphone.
But whatever you think of Apple involving itself in the specifications of open standards like lightning, MP4, etc., I don’t think it is locking Android “out of” cars, for example. If you feel you are missing out on some better IoT experience or better executed third-party device or app, but find it loathsome to purchase the Apple device necessary to gain that experience, third-party app or product, then that is your problem. Commission someone else to come up with something better.
No, you don’t have any blind faith in or devotion to *any of them*, you just enjoy cutting off your nose to spite your face.
I would guess the Apple Network of Things is going to be a lot more useful much sooner than the general IoT.
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Today, I went to the beachfront with my kids. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is totally off topic but I had to tell someone!
Your style is very unique compared to other people I have read stuff from. Many thanks for posting when you have the opportunity, Guess I’ll just book mark this page.