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Ten challenges the international IoT community needs to master (2/2)

6 3 min
old industrial buildingSource: fotolia/Martin Debus

In my first blog about the 10 challenges the international Internet of Things community needs to master, I mainly focused on five tech aspects: robust connectivity, useable security, big data, big code and information models. Now there come five societal and business challenges.

Challenge #6: Governance

After five tech challenges, governance is first societal one, and I have to say it is double-edged. This is an unusual message, as the success of the internet was based on bottom-up governance from scientists, coders, hackers, and communities. Whereas internet top-down governance is hot on today’s Europe’s and many national states’ digital agenda. Governance initiatives have to be both top-down and bottom-up. And the biggest issue currently for the IoT is that the two governance “engines” are not liaising with each other. Which is to say, official governments and unofficial internet communities rarely trust each other or communicate with each other. We, as the international IoT community, need to make the two sides start engaging in a trustful dialog.

Challenge #7: Accountability

In my opinion, accountability ultimately has the potential to become a show stopper for the IoT, because trust – an important aspect in the IoT – is strongly linked to accountability. Our current understanding of accountability traces back to a rather black-and-white picture: when a business contract is not fulfilled or an illegal action is conducted. Our usual reaction is to go back and check what went wrong. But how can we trace the root cause of a defect, e.g. in a line of code, in our super-connected world with billions of devices, billions of users, and millions of decisions taken every second? We can’t just shut down the internet to investigate an incident. With lots of stakeholders from software agents to operators, service providers, system builders, programmers and users, the only way to establish accountability in the IoT is by creating trust-building mechanisms that are not focused on single-company or personal responsibility but on collective accountability. This leads us toward a rather collective insurance model and less to a personal accountability mechanism.

"The most important aspect for IoT is open platforms, which are a technical basis on which to do business."
Stefan Ferber, Senior Vice President for Engineering at Bosch Software Innovations Tweet this

Challenge #8: Open X

For the IoT, the aspect of openness is both a technical but even more so a business consideration. Open Source communities have been central to developing the internet. The IoT brings more aspects to the table: open innovation, open standards and open hardware. The most important aspect for IoT, however, is open platforms, which are a technical basis on which to do business. I am convinced that if we continue delivering data in silos or closed systems we will not get the full benefit of the IoT. Open platforms will allow us to create niches in which companies add to the platform with technology or business services. Of course, in these niches there will be competition, but overall the market space is getting bigger and bigger. You build open platforms on some old acquaintances: transparency, trust and a clear license model. In the end, we might have more than one platform; maybe three or five worldwide, which might even fulfill specific requirements, but I assume there will be less than ten. If there were thousands, the IoT wave would never hit the beach.

Challenge #9: Business Models

Business models are a tough cookie for most companies: conventional Web 2.0 business models – advertising being the most outstanding – don’t have the potential to scale or work for the IoT. Advertising is limited, as you can generate only a certain value: time and the number of people watching/looking at advertising are limited. Population growth will not compensate for the investments it would take to make the IoT successful, for example for equipment or products. And unlike software and services, advertising not easily scalable. For the IoT, we have to find ways to combine conventional internet business models with product business models. One idea is to generate more insights from your product and offer predictive maintenance services. This generates additional value for the user of a product.

Challenge #10: Business Ecosystems

What do you think?

These are the ten challenges that I consider to be the homework for the international IoT community – a blend of technology, societal and business aspects. Like a puzzle, they are interrelated and it is not enough to solve any one of them in isolation. They are glued by the purpose of IoT. Did I miss out on a particular challenge? Please add to my list, I am open for an extension of my blog series.

Now comes the IoT’s crown: ecosystems, which are the space on top of open platforms. In an IoT environment, conventional value chains – picture a Newton’s cradle – reach their limits: the balls hit each other in a linear way, and if one fails, all will fail. Energy is needed from the outside to get and keep the balls going. An IoT business ecosystem, however, is more like a coral reef. There is an abundance of species, symbiosis, and co-evolution. A reef is not always a cozy place, as there are hunters and prey. But a reef’s infrastructure allows the species present to help keep each other alive and adapt to change. In an ecosystem, the number of participants – from the corporate world and consumers – is large, decisions are shared, competitors are also often partners sharing similar values, and a shared fate contributes to sustainability rather than volatility. There is one thing that the IoT community needs to be conscious of: the current approach, which sees every start-up and every big company creating “its” open platform instead of joining existing ecosystems, might limit our joint efforts for the IoT.

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6 Comments

  • 13. May 2015 at 18:09

    Thx Stefan for this challenge compilation, it is a great sumary and job to be don agenda.

    Cheers,
    A.

    Reply
  • 4. November 2013 at 15:18

    Stefan,

    To your question about a willingness to pay extra for privacy or security there is some evidence that companies are already addressing these issues. I am doing a couple of projects in this area and can not comment in detail although I plan to write a bit more about this in the coming year.

    Best regards

    Ken

    Reply
  • 16. October 2013 at 9:53

    Rick,
    today the cost of connectivity and running platforms is clearly an obstacle. But the good news is that prices in IT both hardware and software are falling every year. That’s why we can start with expensive assets where the overallcost will not change due to connectivity and then move to “cheaper things”. Connecting a car or a production machine is not a cost issue any more. Connecting your coffee machine clearly is.
    Stefan

    Reply
  • 11. October 2013 at 16:32

    Hi, Stefan.

    I think you’re missing the #1 element that is inhibiting mainstream IoT adoption, and that is the overall cost of development and deployment of connected products and applications. The entire value chain needs a substantial amount of cost driven from it. It’s happening at the hardware/device layer (which always gets commoditized first), soon the communications layer (the MNO monopoly will be broken one way or another, and not every app needs 3G/4G).

    We’re driving cost/time down 10X in the software and application development layer, which is actually one of the major cost components when launching a new product or service. Doesn’t matter whether you’re connecting 10 devices or 10,000,000, the application still needs to be created (along with the business processes, integration points, and so on).

    The biggest competitor in the market is “do nothing”, and relates to the overall complexity and cost of the connected product/service value chain.

    I view most of your other items as “table stakes” that any modern IoT platform or solution would need to include. But the innovation and value creation will result from *applications* along with new insights that these applications provide and the new products or services they can enable, whether data-centric or not.

    Cheers,

    Rick

    Reply
  • 9. October 2013 at 14:45

    Ken,
    thanks a lot for your great comment and the thoughts behind it. I aggree with you that we are in a very modest installed base and that IoT business is still in early stages.
    Internally, we question how Bosch can “Developing IoT Privacy as a Value Proposition” compared to other companies in the Internet. I was also part of the open IoT assembly to come up with a IoT manifest for this specific topic: http://blog.bosch-si.com/openiot-bubbles-and-a-bill-of-rights/
    In practice this turns out to be quite difficult as there is not so much willingness to pay extra for privacy or security. Any thoughts from your side on this?
    Stefan

    Reply
  • 2. October 2013 at 23:52

    Stefan,

    You have done a very useful job of identifying important elements that will contribute to the development of the IoT market.

    Currently, the promise of huge numbers of connected devices is at variance with a relatively modest installed base. To close this gap, a lot more needs to be done to crystallize demand; businesses are still not fully aware of how to capitalize on IoT opportunities and the examples that most analysts discuss tend to deal with ‘cool’ devices as distinct from high-volume, commercially viable products and services.

    At the implementation level, there is too much reliance on buzz-words related to ‘this year’s hot-topic’. For example, much is talked about big data whereas the business logic and work-flow involved in supporting many applications often depends on small amounts of data. It should not be a surprise that designers unfamiliar with signal processing heuristics are drawn into over-sampling which then gives rise to ‘big-data’ storage and retrieval costs.

    To your point about accountability, consumers (who are in many cases the providers of data) need to be aware of how their data is appropriated. There is a case for turning the concerns over privacy into an opportunity to create new value propositions from privacy (http://www.more-with-mobile.com/2013/06/developing-iot-privacy-as-value.html). The basic elements to enable this will emerge with developments such as digital, nano-currencies and small-value settlement mechanisms.

    Reply

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