Winning in the Internet of Things market
The Internet of Things (IoT) industry is now moving beyond the hype to create real value for companies that deploy it—and revenues for companies that sell Internet of Things solutions. In the hype-filled market of only a few years ago, some companies seemed more concerned about marketing the Internet of Things than about creating monetization models that delivered real value to customers. But today, companies that are still struggling to develop monetization models, as well as companies still in the hype stage, must step back to evaluate organizations that are succeeding in the market.
For starters, companies that are winning in the Internet of Things market have realized they cannot go it alone, as several enterprise markets are very complex. Not only do various vertical markets’ ecosystems vary, but so also do the companies that own the customer in each segment. Furthermore, only a small number of companies globally—IBM, AT&T and the like—enjoy enough bandwidth to provide an end-to-end solution. One primary success factor in the enterprise Internet of Things market is partnership throughout a range of vertical markets with market share leaders in various industries, not least for the vertical expertise that comes by partnering with leading companies that provide a key component to an Internet of Things solution—whether hardware, software, connectivity, sensors or so on. Large enterprise customers that are deploying the Internet of Things are more comfortable dealing with brands they trust—not least because some such companies, having already been burned when deploying technology, are loath to repeat mistakes.
Companies in the Internet of Things market often fail to consider the integration of existing solutions or business processes. But integration is an integral part of success, for companies that have invested considerable sums to deploy solutions also require that those solutions work with existing processes across various business units. The adoption of other emerging technologies, such as RFID, has seen similar mistakes, with some solutions having been unable to integrate with enterprise software solutions. If a company is to be successful in the Internet of Things market, it must offer a solution that integrates with various enterprise platforms.
Targeting the purchasing decision makers and the key influencers for the Internet of Things is another key success factor. The identity of these decision makers and influencers varies from company to company, making critical insight into each organization a must. In some companies, the key department might be IT or operations; in others, a newly created unit dedicated to the Internet of Things. For companies that are looking to deploy the Internet of Things, the latter seems to be the most successful approach. A group dedicated to deploying the Internet of Things can cut across various business functions while limiting the risks each group poses to the organization. Furthermore, a dedicated group can deploy projects much more quickly, and its leadership, typically having been appointed by the CEO, tends to be stronger.
Success in the Internet of Things market requires identification of markets that are prime candidates for growth. Any firm can throw out impressive numbers about the potential size of a market, but a little digging reveals that some markets are just not ready for Internet of Things adoption. Indeed, some companies may think that a trial, or that one company in a vertical, means that a sector is ready for mass adoption—yet this is very often not the case.
In evaluating vertical markets, focus on understanding the health of the industry and how products and goods flow through it. Study the dynamics and economic health of the verticals, evaluating the readiness of each for the Internet of Things and machine-to-machine (M2M) technologies. For example, the following chart displays IoT/M2M readiness for several markets, omitting those that are already adopting at high levels, such as transportation.
Chart 1: Global Market Readiness for the Internet of Things and Machine-to-Machine Technologies, 2015
Source: 2015 Compass Intelligence.
As depicted, the seaborne reefer, healthcare and smart grid markets are most ready to adopt IoT/M2M. Intelligent buildings are a few years off, and so is precision agriculture. The intelligent building industry is trying to close the security loop ahead of mass adoption, and building owners have their own take on Internet of Things adoption. Several other industries could also be highlighted within the industrial sector, but in general, industrial is slow to adopt new technologies, especially technologies that are regulated. Accordingly, the IoT/M2M market offers several time-sensitive opportunities for growth.
To truly win in the Internet of Things market, suppliers must work closely with customers to identify success factors and to develop strategies for achieving primary Internet of Things objectives—whether cost savings, new revenue streams or new business processes, among many possible. Ultimately, the winning factor is transformation of business. For example, consider the car insurance industry, in which usage-based insurance models are creating great value, redefining the industry by basing insurance rates on driving habits. Indeed, future Internet of Things market share winners will surely be the companies that transform existing business models.