Many people recognize that the IoT is not actually new. For years, industries have become increasingly sophisticated in the way they collect and use data from systems and devices.
In the B2B space, the IoT market is already well advanced. The majority of new commercial buildings are ‘smart’; systems are connected to make buildings safer, more energy efficient, easier to manage and the cost of operation is significantly reduced. Even in agriculture, the IoT is well advanced. John Deere uses connectivity on their fleet of combined harvesters to remotely monitor and maintain machinery as well as provide real-time analysis of the quality of the grain in each part of the field and use the data to create a tailored plan for fertilizer. They moved from simply selling tractors and maintenance contracts to grow revenues by using data from their products to provide new leasing models and value-added services.
Consumer facing industries need to recognize that the killer app in the smart home space is bundling and getting as many devices and services pulled together into a single service offering. Consumers quickly bore with the limitations of single devices and to receive a wider bundle of value added services from channel partners. Simple examples are water leak sensors that trigger the shut-off of the water supply and initiate a call from a plumber offering support or fire sensors linked to monitoring services at low cost.
In the B2B IoT applications, industries worked together to deliver comprehensive solutions to companies like John Deere and farmers. Tractor manufacturers worked with mapping services, fertilizer companies and other groups to deliver more value to their customers. Pricing of services can be easily justified by proven ROI.
Unfortunately, in the consumer space none of the traditional channels are organized or structured to act as aggregators to bundle products and services and the ROI is not so obvious for consumers.
So who will step up to the base and act as an aggregator to deliver a truly connected experience to consumers in the age of the IoT?
Service providers such as Comcast, Deutsch Telekom and others were the first to try and this stirred traditional security companies like ADT and Securitas. They each created ‘curated’ smart home systems by sourcing a set of devices to give customers a broader smart home experience with a range of products and services—all managed through a single app.
Unfortunately, there was a weakness in their strategy. They took smart devices and bundled them with traditional security alarms to try and breathe new life into what is a tired business model. They were lured by the high monthly revenues and long-term commitment typically secured by the traditional security monitoring services and thought that simple bundling still more value would drive more growth.
Unfortunately, the large service providers failed to recognise that this business model will not scale in the mass market where consumers are simply not willing to pay high monthly subscription fees and be tied to long term contracts for what is essentially a security system. It works for the security industry because they target a narrow market segment; people with specific risk or disposable income that are willing to pay the high monthly recurring fees. Moreover, they push this with hard-nosed sales teams and aggressive marketing.
Things have started to change as the big technology players have brought a new momentum to the market in an effort to stake their claim in the IoT and smart home.
Apple, Google, and Microsoft are pressing forward with their plans but they are largely focused on delivering infrastructure solutions and none of them are really offering to act as aggregators for the consumer. Google’s acquisition of Nest and Ring is a more positive step towards providing a more complete smart home solution and it matches retailers such as Lowe’s and Amazon who are driving more ‘open’ platforms to support a broader set of devices with freemium business models. These ‘open’ DIY systems are starting to gain real traction.
Perhaps new entrants offering concierge services will start to emerge and pull together a partner network of products and services. Alternatively, big brands in traditional industries such as utilities, telecoms, or insurance will step up to the base.
Clearly, the jury is out on the winners in the IoT in the consumer channels, but the opportunity is huge and those that find the right business model will ultimately win big.
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