Towards A More Sustainable Business Model for the Internet of Things

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The business models most companies have for the Internet of Things just won't work: they are based on unrealistic assumptions about markets and strategy and the longevity of their own business. Herewith, a few suggestions on how to Peer To Peer (p2p), open source, and better software development to get it right.

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Towards A More Sustainable Business Model for the Internet of Things

  1. 1. Wednesday, October 23, 13
  2. 2. The Next 10 Billion: Risks & Opportunities In The Internet of Things Paul Brody Vice President & Global Industry Leader, Electronics IBM Global Business Services Wednesday, October 23, 13
  3. 3. Waves of Innovation & Growth IoT: We’re Doing It Wrong Fixing The IoT Value Proposition Fixing The IoT Business Model Will it all be worthwhile? Page 3 Wednesday, October 23, 13 © IBM 2013
  4. 4. Though processor power has been doubling every 18 months or so, big new waves of computing have occurred at order of magnitude reductions $300,000 $225,000 $150,000 $75,000 $0 Page 4 Wednesday, October 23, 13 IBM System/360 PDP-11 IBM PC 5150 iPad Mini SmartThing Presence © IBM 2013
  5. 5. Though processor power has been doubling every 18 months or so, big new waves of computing have occurred at order of magnitude reductions $1,000,000 $100,000 $10,000 $1,000 $100 $10 $1 Page 5 Wednesday, October 23, 13 IBM System/360 PDP-11 IBM PC 5150 iPad Mini SmartThing Presence © IBM 2013
  6. 6. Every time an order of magnitude price reduction has been achieved, there has been a corresponding order of magnitude increase in demand and an entirely new wave of computing PC Android IOS Cumulative Shipments By Quarters After Launch Millions of Units 1000 100 10 1 0 0 1 Page 6 Wednesday, October 23, 13 5 9 Data Source: Asymco, with permission 13 17 21 25 29 33 37 41 45 © IBM 2013
  7. 7. Every time an order of magnitude price reduction has been achieved, there has been a corresponding order of magnitude increase in demand and an entirely new wave of computing PC Android IOS Cumulative Shipments By Quarters After Launch Millions of Units 1000 100 10 1 0 0 1 Page 7 Wednesday, October 23, 13 5 9 Data Source: Asymco, with permission 13 17 21 25 29 33 37 41 45 © IBM 2013
  8. 8. Waves of Innovation & Growth IoT: We’re Doing It Wrong Fixing The IoT Value Proposition Fixing The IoT Business Model Will it all be worthwhile? Page 8 Wednesday, October 23, 13 © IBM 2013
  9. 9. So far, the Internet of Things has not yet taken off with consumers or enterprises Proportion of Heavy Industrial Equipment That Is Networked 30% Page 9 Icons from the Noun Project, creative commons license. Data from IBM research as of 2013. Wednesday, October 23, 13 Proportion of Smart TVs being used for Internet Viewing 10% © IBM 2013
  10. 10. Some very high value industrial value propositions have been instrumented and engaged Page 10 Image sources: wikipedia, IBM Wednesday, October 23, 13 © IBM 2013
  11. 11. In general though, a variety of factors have come together to slow the rise of the Industrial Internet Technology Standards Risk Aversion Business Model Design Page 11 Image sources: wikipedia, IBM Wednesday, October 23, 13 © IBM 2013
  12. 12. Consumers too have embraced some items like fitness trackers and a few other items, but traditional manufacturers have largely failed to interest them in smart refrigerators YES: To Smartphone Accessories Page 12 Wednesday, October 23, 13 NO: Smarthomes & appliances © IBM 2013
  13. 13. The slow take-off in IoT can be attributed, in part, to incorrect assumptions that developers are making about what creates value in smart, connected devices. Value Through Networking Energy Efficiency ROI Ecosystem Control Opportunity Page 13 Image sources: wikipedia, IBM Wednesday, October 23, 13 Value from the networking and integration but not from individual devices Efficiency of the whole home would cover the cost of new devices and pay connection cost One manufacturer could build an ecosystem and then “tax” it as Apple or Microsoft do © IBM 2013
  14. 14. Waves of Innovation & Growth IoT: We’re Doing It Wrong Fixing The IoT Value Proposition Fixing The IoT Business Model Will it all be worthwhile? Page 14 Wednesday, October 23, 13 © IBM 2013
  15. 15. What will it take to get the value proposition right for the Internet of Things? BETTER FUNCTIONALITY Page 15 Wednesday, October 23, 13 BIG RETURNS SIMPLE INTEGRATION © IBM 2013
  16. 16. Making products better is more important than simply connecting them. With so much computing power at our disposal, intelligence should be used to make the core product function better, not merely connected: Better cooking Higher Yields Cleaner clothes Increased safety Better product reliability Page 16 Wednesday, October 23, 13 © IBM 2013
  17. 17. On the consumer side, the Nest Thermostat is one of the most elegant examples Page 17 Wednesday, October 23, 13 © IBM 2013
  18. 18. The most compelling reason to instrument technology will be to increase the return on assets Savings From Shift To Managed Printing & Copying 40% 30% 30% 20% Savings 10% 0% Dow Chemical Page 18 Boeing Nationwide LCBO Other 105 companies Data: Photizo, IBM business partner in printing & copying Wednesday, October 23, 13 © IBM 2013
  19. 19. In the case of consumers, this means instrumenting everything from appliances to cars to real estate to enable the sharing economy RENT YOUR HOUSE RENT YOUR CAR RENT YOUR APPLIANCES Images from Flickr’s creative commons. Rental property from PBDK, airport parking from Hunter-Desportes, and washer dryer from somegeekin and US CPSC Page 19 Wednesday, October 23, 13 © IBM 2013
  20. 20. In the case of consumers, this means instrumenting everything from appliances to cars to real estate to enable the sharing economy RENT YOUR HOUSE RENT YOUR CAR RENT YOUR APPLIANCES DISCOVER USE PAY Images from Flickr’s creative commons. Rental property from PBDK, airport parking from Hunter-Desportes, and washer dryer from somegeekin and US CPSC Page 20 Wednesday, October 23, 13 © IBM 2013
  21. 21. The final key to success in the IoT era will be enabling integration without ecosystem control DISCOVER USE PAY Page 21 Wednesday, October 23, 13 © IBM 2013
  22. 22. The final key to success in the IoT era will be enabling integration without ecosystem control DISCOVER USE PAY Page 22 Wednesday, October 23, 13 © IBM 2013
  23. 23. The final key to success in the IoT era will be enabling integration without ecosystem control DISCOVER USE PAY Page 23 Wednesday, October 23, 13 © IBM 2013
  24. 24. The final key to success in the IoT era will be enabling integration without ecosystem control DISCOVER USE PAY Page 24 Wednesday, October 23, 13 © IBM 2013
  25. 25. The final key to success in the IoT era will be enabling integration without ecosystem control DISCOVER USE PAY Page 25 Wednesday, October 23, 13 © IBM 2013
  26. 26. Consumers have raced ahead of enterprises, and made services like If This Then That (IFTTT) represent the future of cross-platform, self-service integration of the physical & digital Page 26 Wednesday, October 23, 13 © IBM 2013
  27. 27. Consumers have raced ahead of enterprises, and made services like If This Then That (IFTTT) represent the future of cross-platform, self-service integration of the physical & digital Page 27 Wednesday, October 23, 13 © IBM 2013
  28. 28. Waves of Innovation & Growth IoT: We’re Doing It Wrong Fixing The IoT Value Proposition Fixing The IoT Business Model Will it all be worthwhile? Page 28 Wednesday, October 23, 13 © IBM 2013
  29. 29. Current thinking about business models isn’t realistic Page 29 Wednesday, October 23, 13 © IBM 2013
  30. 30. Product revenue and cost timelines are hopelessly mis-aligned in many IoT business models Introduced: 2005 Discontinued: 2008 Generates No Revenue Still Being Supported Page 30 Wednesday, October 23, 13 © IBM 2013
  31. 31. Few enterprises are likely to have the will or the means to sustain business models that span decades Entity Longevity - Actual or Average In Years 120 90 60 30 0 London Underground Page 31 Wednesday, October 23, 13 IBM US Home Commercial Jet US Car US Company Laptop Smartphone © IBM 2013
  32. 32. Three possible keys to a better business model 1 2 Wednesday, October 23, 13 Embrace Peer To Peer 3 Page 32 Get It Right The First Time Go Open Source © IBM 2013
  33. 33. The illusion that software fixes are free is dangerous. Companies need to think more “Deep Space Probe” and less “Fix It In Production” 36 Years Old 1 MHz CPU 11kb Data TX Rate Page 33 Image sources: wikipedia, IBM Wednesday, October 23, 13 © IBM 2013
  34. 34. Peer To Peer Networking: It’s not just for copying music. It’s a mechanism to radically reduce the cost of distributing data and connected devices. EXPENSIVE Page 34 Wednesday, October 23, 13 CHEAP © IBM 2013
  35. 35. Going open source builds communities and trust that will give your products longevity without added cost and come with other benefits as well Linux Kernel, Millions of Lines of Code By Release Since 1991 16,000,000 12,000,000 8,000,000 4,000,000 0 Page 35 Wednesday, October 23, 13 2.6.11 2.6.14 Data Source: Linux Foundation 2.6.17 2.6.20 2.6.23 2.6.26 2.6.29 2.6.32 2.6.35 2.6.38 3.1 © IBM 2013
  36. 36. Waves of Innovation & Growth IoT: We’re Doing It Wrong Fixing The IoT Value Proposition Fixing The IoT Business Model Will it all be worthwhile? Page 36 Wednesday, October 23, 13 © IBM 2013
  37. 37. Page 37 Wednesday, October 23, 13 © IBM 2013
  38. 38. Thank You & Let’s Stay In Touch Email pbrody@us.ibm.com Linked In Profile : http://www.linkedin.com/in/pbrody Reading List Delicious : http://www.delicious.com/prbrody IBM on Twitter @IBM_Electronics Twitter, Sina Weibo @pbrody Page 38 Wednesday, October 23, 13 © IBM 2013
  39. 39. The Next 10 Billion: Risks & Opportunities In The Internet of Things Paul Brody Vice President & Global Industry Leader, Electronics IBM Global Business Services Wednesday, October 23, 13

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