Summary: ‘The Internet of Things’ (IoT) is one of the big ideas of the moment. But what are the areas in which value is being created now, and what is still technological hype? A summary of the findings of the Digital Things session at the 2013 Silicon Valley Brainstorm. (April 2013)

Below are the high-level analysis and detailed contents from a 47 page Telco 2.0 Briefing Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service here. The Internet of Things will also be explored further at the EMEA Executive Brainstorm in London, 5-6 June, 2013, and we also run dedicated IoT Strategy Workshops. Non-members can find out more about subscriptions here or to find out more about any of these services, please email  or call +44 (0) 207 247 5003.

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Introduction

Part of the New Digital Economics Executive Brainstorm series, the 19th Telco 2.0 event took place at the InterContinental Hotel in San Francisco on the 19th and 20th of March, 2013. This report covers the Digital Things track on the second day, which was developed in partnership between STL Partners and Beecham Research.

Analysis: What’s Hot in the IoT?

‘The Internet of Things’ (IoT) or ‘The Internet of Everything’ is one of the big ideas of the moment. But how much is technological hype and how much is value-creating reality?

Its close relative and precursor ‘Machine-To-Machine’ (M2M) had until relatively recently evolved as a telco-centric concept. Unlike the personality, publicity and hype driven world of smartphones and the Internet, M2M has been deeply embedded in industry processes, and generally siloed in industry verticals. ‘Industrial M2M’ is not going away: indeed it’s gathering pace and taking on new directions.

But recently the idea of ‘The Internet of Things’ has become something of a meme. It is certainly a hot topic amongst Silicon Valley technologists and investors, and this was reflected in the enthusiasm shown by the participants at our Executive Brainstorm in March 2013.

Definitions of the IoT vs. M2M are not yet standardised, although some of the common themes that are emerging are that the IoT is frequently cited as:

• More consumer-oriented than M2M. IoT is often B2B2C, and with the second ‘B’ sometimes meaning ‘Government’;
• Dependent on cross-application data (data generated by or for one application being repurposed for another);
• More like the Web – discoverable, ‘mashable’, self-registering… with all the potential hazards associated with the Web;
• Bringing added value through revenue growth and/or enhanced customer experiences as well as reduced costs.

Some of the wider excitement has also been underpinned by futuristic predictions of 50bn connected devices, an idea which appeals to chip manufacturers, vendors, and telcos alike as they seek new avenues of growth. However, the questions of ‘but what will they be used for, why, and who will pay for it?’ have to date stood their ground, mostly unanswered.

Economic necessity: the mother of innovation

Now, though, a combination of pressing economic necessities, improving economics of delivery, and increasing technical capabilities is forcing these questions up the agenda. In the North American market, the areas that are progressing fastest have clear economic rationales:

• In US healthcare, which spends 17% of GDP on health and accounts for 47% of the world’s total healthcare spending) there is the urgent need to make healthcare more efficient before it literally bankrupts the economy;
• In the automotive industry, car makers desperately need new sources of differentiation and revenues (from in-life servicing) to survive, and this is driving widespread innovation;
• In heavy Industries, it is estimated that a 1% improvement in productivity equals a 20-30% improvement in profitability, so there are clear incentives in what GE CEO Jeffrey Immelt calls the “Industrial Internet” too.

New blocks means new enablers are needed

With new opportunities come new challenges, and one of the biggest new challenges, arising from healthcare applications in particular, is how to manage the complexities of collecting, transmitting, storing and analysing highly personal and personalised health data safely, securely, and legitimately. The safety-critical control systems of the “Industrial Internet” are no less sensitive.

Evidently, effective security and trust networks are urgently required if the IoT’s potential is to be achieved, as the following chart shows.

In a world where people (and also jet engines) are having their health monitored automatically by numerous connected sensors, a lot of data is being amassed and needs to be monitored and analysed. Hence ‘Big Data’ is also a closely related topic to the IoT.

Hope, spectacle and speculation

There are several other areas that are sometimes included under the banner of the ‘IoT’, for example:

• Clothing / ‘wearables’ – this covers a rapidly developing set of application areas, enabling technologies and related devices, including as Google Glass, Pebble Watch, Nike Fuel band and Adidas connected shoes.
• Connected Media. There is a growing field of experimentation into and practice with connected signage that can show different messages and adverts, etc.
• Experiments connecting virtually anything. Someone, somewhere is experimenting with a connected version of almost every object available. As just one example, in the Silicon Valley session, Centurylink said that they had asked school children to brainstorm what might be connected and why, and examples the students came up with included a connected tooth that senses the amount of sugar eaten. Another example, launched as a final product at CES, is the connected fork.
• Tracking items. An example was given of the idea that many objects, including say a pothole in the road, could be given an identity and tracked thereafter so the fact that the pothole had been reported, and that work was scheduled, could be reviewed by anyone. Related ideas of the usefulness of being able to track goods of one sort or another, from understanding the road-miles of recycling individual objects through to tracking the whereabouts of virtually any object, have also been discussed.

There may indeed be opportunities in many of these areas, but the pressing economic, practical or social needs are not yet clear.

It is also not clear whether the definition of the ‘Internet of Things’ encompasses all of these ideas – although at present it would seem that anything that can be covered by this idea will be in someone’s world view.

What is clear is that the pace and diversity is increasing, and that new areas will continue to cross over from experiment to trial to mainstream development.

Next steps for STL Partners

We will continue to research and explore the ‘Internet of Things’ at our Executive Brainstorms, with particular emphasis on the areas that are most likely to ‘flip over’ from speculation to application.

We will also look further into the needs and applications of ‘Big Data’ into the field, as well as continuing our involvement in the World Economic Forum’s (WEF) work on Trust Networks for personal data.

To read the note in full, including the following sections detailing additional analysis...

• Session 1: Market Evolution towards Internet of Things - Strategies and Business Models
• Stimulus presentations
• Voting, feedback, discussions
• Brainstorm Output: IoT Opportunities
• Session 2: IOT Platform Requirements
• Stimulus Speakers and Panellists
• Stimulus presentations
• Voting, feedback, and discussions
• Brainstorm: building blocks for IoT
• Panel Discussion
• Session 3: Big Data - Exploiting the New Oil for the New Economy
• Stimulus Speakers and Panellists
• Stimulus presentations
• Voting, feedback, discussions

...and the following figures...

• Figure 1 - Key considerations in M2M projects
• Figure 2 - Vendor priorities in M2M/IoT
• Figure 3 - From “M2M Now” to “Industrial Internet” and “IoT”
• Figure 4 - The future M2M value chain
• Figure 5 - Connected device growth forecast
• Figure 6 - SmartThings.com
• Figure 7 - M2M 1.0 = “save money”, M2M 2.0 = “make money”
• Figure 8 - The Gap – What Else is Out There?
• Figure 9 - Focus areas for M2M initiatives
• Figure 10 - Focus areas in the M2M value chain
• Figure 11 - The key questions in IoT
• Figure 12 - Elements of IoT
• Figure 13 - The challenges – power, IPv6, and privacy
• Figure 14 - The US is enormous, but also very unusual
• Figure 15 - Health – the ultimate channel business
• Figure 16 – What is the scale of the IoT opportunity?
• Figure 17 – IoT: what type of business models?
• Figure 18 - Panasonic’s innovation priorities
• Figure 19 - Panasonic’s new businesses in the US
• Figure 20 - “Content mobility” is crucial to the connected car
• Figure 21 - Cisco – focus on the industrial potential of IoT
• Figure 22 - How this relates to service providers
• Figure 23 – Which technical building blocks are most needed?
• Figure 24 – Which business infrastructure components are most needed?
• Figure 25 - Why personal data isn’t like oil
• Figure 26 - A strawman process for personal data
• Figure 27 - A decentralised architecture for the Internet of My Things
• Figure 28 – Kynetx: companies can connect through ‘things’