Three Stages of IoT

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IoT conversations, like Uber conversations, take unexpected turns if you assume the other person’s attitude. Most people seem to be positive on Uber – after-all it did improve multiple  aspects of the Taxi industry. But, it’s not uncommon to come across an Uber hater – after-all it has systematically destroyed a supposedly protected industry and introduced ethical controversies regarding safety, insurance, and liability.

It’s similar with IoT. To avoid surprises, it’s important to figure out the other person’s awareness when the topic comes up. For example, many consider the smartphone an IoT device. There’s merit to this because something like the a radio can be replaced with a connected smartphone. However, more in the know don’t consider computers or smartphones as iOT devices. They may indeed be the only things that get a pass.

There are three generic and broad stages of IoT. If you get into specific sectors such as home automation or the retail industry then there are additional segmentations.

The First Stage is Basic Connectivity.

Everyone get this stage as IoT is indeed a thing with a connection. Here, IoT refers to some form of connection to a device. It can be one way such as a sensor, or provide more sophisticated communications such as queries or control.

A good example is a my “atomic clock.” My clock isn’t actually atomic, but receives a radio signal from the nation’s official atomic clocks here in Boulder. NIST broadcasts the nation’s time over radio, and some consumer clocks and watches are able to receive it,

Atomic clocks are very clever and I recommend them, but they are pretty basic. I use my atomic clock like the non atomic clock I had before it. Other than knowing it’s right, there’s really no difference to me, the manufacturer, or distributors. Sure, I don’t have to adjust it twice a year for DST, but that’s a relatively minor aspect of a clock’s value.

In other words, connectivity can add value, but the core value proposition and use case remains largely unchanged in this stage. There are lots of IoT examples like this because there’s so many use cases for remote information and notification. For example, the “sold out” indicator on a vending machine becomes even more useful when it notifies prospective customers AND the owner.

It is important to understand that the value of communications can be far greater than actual communications. For example, a cell phone can make someone feel safe even if they don’t use it. The connection capability of an alarm system is greater than an alarm with just a bell, but the owner would be happiest if the alarm is never needed. IoT connectivity can be free (bluetooth, dial-up, Wi-Fi, ZigBee, etc.) or toll-based (dial-up, LoRa, cellular, etc.).

The Second Stage Offers Operational Benefits.

Once a connection is made, it doesn’t take long to figure out new, more efficient operations. That vending machine above probably had a service/restock routine regardless of need. That means extra trips when it wasn’t needed and an out of stock machine at times when service was needed.

In this stage, we put two and two together and develop operational efficiencies. While the atomic clock didn’t really change much, connected vending machines could significantly improve a vending machine business. We are in stage two when IoT changes an operation. This is where most of the IoT market is.

That’s because there’s tremendous opportunity here as most of the things around us are dumb. First there’s a tremendous opportunity to add sensors to thigns that were totally dumb before -we are seeing this with things like parking lots and parking meters. There’s also tremendous opportunity to make current sensors smarter – for example stoplight sensors are about as dumb as they come. Making these things more intelligent has significant changes

Stage Three is When the Value Prop Changes.

Operational benefits are a start, but things get much more interesting when the value prop changes. This is one of the most exciting aspects of IoT as it will transform industries. Here we use IoT to change or enable new aspects of a product – sometimes turning a product into a service.

John Deere offers a great example. The tractor maker is transitioning from a product company to a service company with various sensors on the tractor. John Deere now offers personalized reporting for things like fuel consumption, engine performance, weather reports, soil analysis, and yield forecasts.

Vending machines are also changing. For example, the healthy vending machine now offers fresh salads and other perishable items because inventory and environment can be closely monitored. Coke is allowing customers to personalize mixtures on a smartphone app. Expect coinless-cashless machines, or even flat rate billing models such as candy-bar as a service.

When you look at all three stages it’s easy to look down on stage 1. “Wow, you can change your light color with an app on your phone.” But really, all three levels are important and necessary. All three are going to grow like bonkers.

Dave Michels