February 17th, 2016
By Rob Lambert
We are told to expect 20 billion devices will soon be connected – some say by 2020. But today, the internet of things and its supporting business models are still poorly defined. There is little evidence of mass adoption of internet of things, and certainly not at the level of demand to require billions of devices. So why aren’t our coffee cups part of the internet of things already?
A ‘Smart’ or ‘IoT-ready’ coffee cup will integrate sensors and communications technologies in order to share its data with the world. This technology will need to be at a price that is acceptable to the consumer and should require minimal input from the user.
Low cost sensors have been available for a few years now, and we are beginning to see ultra-low cost sensors produced for specific, currently niche, applications. Examples such as connected smart patches for medical applications use technology that is virtually disposable (with price points around $0.50). Within two years sensing technology should be ready to offer a route to cheap instrumentation of most “things of interest”.
Cost is still an issue when it comes to wide area networking – beyond the ranges of a few centimetres offered by today’s low cost devices. Technologists haven’t yet cracked mobile communications for anything close to one dollar, getting data from sensors in the wider environment is still likely to cost $5 per device, and more once operating costs are included.
However the evidence of Moore’s and the incentive of the potential market size mean that this is likely to be addressed in the near future. It may require a change to tariff models for existing networks or possibly even the use of new network approaches but the potential of $20 billion devices and the associated traffic is already providing an incentive.
What’s stopping mass roll-out of the internet of things?
So where’s the barrier to mass roll-out of the internet of things? Early adopters of the IoT concept have tended to be high-value scenarios – fleet or asset tracking; smart meters; remote station monitoring. In these scenarios, the business case works; deploying sensing technology can deliver a major reduction in maintenance or servicing costs. However for typical consumer products and services, the return from adopting the internet of things is less clear – the benefits may range from increased customer engagement, engaging consumers in change, encouraging customer loyalty and providing indirect services; but these things are hard to account for on the balance sheet, particularly when weighed against a major technology spend . This challenge makes the business case for the internet of things difficult to justify.
So where’s the need for change?
Businesses are perhaps not ready for the structural changes that are needed to embrace the benefits of the internet of things – there’s no visible burning platform. So the internet of things business case tends to be conservative, and ultimately unconvincing.
However, this is an inward-looking perspective. Recent history shows that businesses face major risk from disruptive competition coming from agile new entrants flexible enough to exploit new technologies, and social trends. The high-street ecosystem supporting 35mm photography was stable for many years with equipment suppliers a feature on most high streets. The advent of digital photography, low-cost printing and internet services formed a perfect storm which few survived.
So what if coffee cups were smart?
So back to the coffee cup, imagine a cup that knew how full it was, how hot the coffee was, where it was, when it was last used. Each of these pieces of apparently simple data has the potential to be integrated with other data and exploited by agile new entrants. A smart coffee cup that integrates intelligent loyalty and preference data, with separate reward records for multiple coffee outlets, incentivises customers to carry their own mug, connects the consumer to the brands and reduces waste from cardboard cups.
Like many IoT models the benefits are widely felt: cost advantage to coffee suppliers, loyalty to outlets, and the environmental savings. The concept has potential to transform the market with a new stakeholder loyalty service provider providing services to customers and brands alike and gathering data at a market level. This scenario is plausible and the risk to the existing market is being reactive rather than proactive to the market transformation.
So do my products need to be part of the internet of things?
Connecting to products and services ultimately extends to the range of possibilities and the end customer. The internet of things offers businesses the data that can drive change within the market and within the organisation. This change may be internal, in terms of personalising marketing or customisation of products; it may be within the supply chain in terms of real-time optimisation of supply; or it may be in driving consumer behaviour for increased loyalty or changes in demand.
Whatever happens, the lessons of early generation of the internet are that emerging technology creates opportunities that entrepreneurs will exploit and existing businesses rest on their laurels at risk.
Rob Lambert is a technology expert and Managing Consultant at PA Consulting Group. PA is an employee-owned firm of over 2,500 people, operating globally from offices across North America, Europe, the Nordics, the Gulf and Asia Pacific. Their sector expertise embraces energy, financial services, life sciences and healthcare, manufacturing, government and public services, defence and security, telecommunications, transport and logistics.