This is conjecture on my part. There are stadiums of people better versed in the ins and outs of Communication Service Providers (CSPs) than I am. I have the curse of not knowing as much. I also have the benefit. Sometimes the mid to long term strategic moves are a function of understanding enough to simply see the big picture.
If you know too much, you might fill in the gaps with all the details that convince you the macro trends are not really the macro trends. The move away from newspapers. The decline of bricks and mortar retail.
That said, I was struck by a recent report from TBR stating the CSP commercial IoT revenue will reach $68B in 2023. Maybe it will. Maybe it won’t. The likely scenario, however, is that it grows roughly according to the trajectory in the report, but the disparity is between those who capitalize on this opportunity and those who don’t.
There will be winners and losers, and I have a sense as to the basics of what the likely winners will do, and the losers will not. I would boil this down to three things.
One: Take the time to “get” IoT
Understanding the IoT progression and focusing core companies and organizational direction against that framework. I often refer to the Jim Heppelmenn/Michael Porter piece form November 2014 in the Harvard Business Review examining the progression of IoT. They have a graphic showing the progression from Products to Smart Products to Smart Connected Products to Product Systems to System of Systems.
It is painful to consider how long this progression is really taking, but it is the correct progression. The challenge is moving from the transition phase of Smart Connect Products to Product Systems towards and ultimately into the System of Systems world. IoT is a holistic proposition. Knowing sensor technology or communications technology or workflow and rules engines or security doesn’t make you an expert in IoT.
The power of IoT is in ultimately in the data and the insights gained from the data and actions taken as a result of those insights. But the data has to be available. It has to be accessible. It has to be affordable. It has to be meaningful and valuable. In order to get there, organizations have to put in place thoughtful architectures capable of delivering that description of data in an accessible, affordable, repeatable way.
That means understanding all the various elements as well as how the linking of those elements impact the whole. This discussion can be a book on it’s own, but suffice it to say you need a leader or a team (or and organization) that truly “get” this.
This is critical to the CSP’s because the decisions they make for delivering their solutions and services will increasingly need to be framed in the context of the holistic architecture required by their customers. They will be trusted or distrusted based on their ability to frame their offerings in the bigger picture. And the underlying options and resulting architecture for a restaurant or a factory will be different than what is needed for a vineyard or oil rig, but many of the underlying components will be the same or similar.
Decisions made regarding devices and chip sets, power sources, security, communications, privacy, data governance, filtering and enrichment, interfaces, user interfaces, and analytics ranging from operational, investigative, predictive and AI/Machine Learning will all need to work together to keep costs down while delivering strong user accessibility and high levels of functionality.
Two: Become meaningful (or better said, “don’t get marginalized”)
Value added services will be critical to augmenting the fundamental’s as described above. That can mean any number of strategies ranging from OTT solutions to industry specific packaged configurations to take the optimization complexity off the table. To the average factory manager, farm operator or distribution center operator, the communication options are largely a commodity. All the available options move the data from point A to point B. so why not use the cheapest one that delivers the baseline quality and dependability for the use case in question, right?
But the value-added services can change that equation. We have seen macro trends move towards business models based on outcomes. It is unlikely that will reverse.
The value-added services (and products in support of those) can go a long way to make a difference. But those also need to align with the holistic IoT proposition outlined above. It is the LoRa based bathroom maintenance solution in airports. It is the WebRTC solution for Telehealth. This is the combination of technologies to provide new and even more interesting or effective solutions.
Like Eric Brynjolffsen and Andrew McAfee outline in their awesome book “The Second Machine Age”, the rate of change in technology is increasing, not because of fabulous breakthroughs per se, but due to the combinatorial elements of innovation. In other words, the more and faster we innovate, the increasingly faster we accelerate innovation.
Pairing the value-added services with the holistic nature of IoT should be in the playbook of the CSPs. This is not rocket science, it’s just more easily said than done.
Three: Deliberately Innovate in line with One and Two
This is a tough one. For starters, innovating inside medium to large corporations is near impossible. Geoffrey Moore does a great job in laying out why this is in “The Target Zone”. Medium to large corporations may have the resources and the distribution channels, but lack the DNA needed to innovate in a manner that generates the meaning change desires. The incentives rarely align.
The new idea to “start-up” inside the company rarely sees the light of day, because the competing resources are quickly re-directed when the mainline business sees challenges. That’s what pays the bills.
Everyone gets it. Over the last decade we have seen a couple trends relative to corporate innovation. First, at the most basic level, corporate innovation is a thing. It is more of a thing with some than others, but it’s a thing. This is a clear indication that corporate executives are embracing the imperative to innovate as a function of remaining strong, or at least relevant.
The average tenure of corporations on the S&P 500 has dropped almost in half over the last 50 years, and that progression is expected to continue. Why would that be, other than an inability to adapt to the changing landscape? And when the landscape changes at an increasing pace, the imperative to innovate only increases. In response, we have seen the advent of startup incubators, the evolution to startup accelerators like TechStars and Y-Combinators, and more recently, venture studios.
These are perhaps the most aggressive form of speeding innovation and de-risking startups yet. The idea of taking entrepreneurs and building integrated teams that have “been there and done that” makes sense, and the track record of startup studios is attracting attention. We believe this will continue, but also be paired with specialization around both the holistic nature of IoT as well as vertical domain expertise.
That does not mean a corporation working with incubators or accelerators is not an effective strategy. Any effort that pushes the innovation imperative outside the four walls where the entrepreneurs can operate at a higher clock rate and a maniacal focus will be positive. But the CSP’s who capitalize on the significant ramp, if the numbers and ramp shown by TBR are to be believed (and we think they should), will take the time to become experts in the holistic nature of IoT, and build in value added products and services though deliberate innovation.
I’d be delighted to exchange ideas with you on these important topics; you can reach me at firstname.lastname@example.org.