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Internet of Things - Forging a path to profitability



Over the past several months we’ve seen a veritable flash flood of hype around the Internet of Things, driven largely in my opinion by a “cow looking over the fence” mindset where people are asking, “what’s that shiny thing over there” and trying to find a way to get in on the action. Trouble is, not all the new applications come with a well-considered purpose and business model behind them, mostly because few have accounted for establishing a long-term value proposition, or, as importantly, a viable distribution chain.

Much of the activity has centered upon consumer-facing applications such as pet trackers, connected window blinds, remote car starters or even automatic irrigation apps. All of these do sound exciting at first blush, but in reality they have not got much traction. Even if we look at the connected car via brands like OnStar and Ford SYNC, there is still a big question mark about sustainable subscription renewals. Sure, the initial subscription is easy because it gets bundled into the purchase, but the renewal rates are disappointing for service beyond an initial term once they have to pay for the monthly recurring subscription themselves.

The real challenge here is that consumer-centric applications will always fight for a tightly squeezed share of disposable consumer income. There are some points of value to be sure, such as turning off a lamp if you forgot when you left home for the day, adjusting a thermostat from afar or checking if you left the oven on. But has society really gotten to a place where we need our toaster to tell our iPhone that our toast is ready?! Are we just being lazy if forgetting to turn off the oven no longer matters?

Consider this: approximately 1 out of every 8 iPads today gets shipped with a 3G/4G cellular connection built in; but then, and this is the revealing part, only about 4 percent of those units maintain permanent subscriptions over time. If people aren’t willing to keep their iPads connected, as this data suggests, can we really expect they’ll pay to keep their cars or their household lamps connected? Ultimately, consumer-side applications are going to have to conjure a “cannot live without” sentiment among consumers, in much the same way that Cable Television has done in most US households. Can this be done?

We can be sure of one thing: The lion’s share of IoT growth over the next three-to-five years is going to occur in market segments where the value is tangible - and these are almost wholly seen in the business-centric marketplace. Going again to the connected car concept, vehicle manufacturers and leasing companies are designing IoT applications into their vehicles to provide remote maintenance monitoring, fuel and mileage management, driver security, and other rich content. The car will be able to connect back to the dealership say, when it senses that the catalytic convertor is about to fail, so that the local service tech can contact the owner to make a pre-emptive appointment. That creates real value for the consumer and for the automaker.

To put it another way, let’s say FedEx decides to put a sensor in every one of its drop boxes, which simply notifies drivers when there are no packages to pick up. This simple application allows drivers to forego having to turn left across the highway, drive through the parking lot, exit his or her cab, check the box and find nothing in it, burning half a gallon of gas doing so and, perhaps one in ten thousand times, getting in an accident. That is an easy value proposition to quantify for FedEx.

There are of course limits. The idea of vehicles being able to communicate directly with the traffic and roadway infrastructure, and even among each other where a car warns its driver of an erratic driver nearby and automatically suggests a safer route, is still in the conceptual stage. These scenarios certainly are possible technology-wise, but here is where cultural acceptance could become a barrier. Nobody wants to have their driving monitored 100 percent of the time.

Probably the most exciting, and most pragmatic use of the Internet of Things is in telemedicine, actively monitoring patients for specific conditions or for medicines usage, 24/7. All stakeholders win - money is saved, patient outcomes are improved and managed care providers are more efficient. There’s another curious opportunity for telemedicine in supporting the trend towards “Medical Tourism.” Many first-world patients are already going abroad for surgical procedures. (While counterintuitive, certain pockets of the Third World offer extremely high-quality, low-cost surgical specialties. India is renowned for heart and lung procedures for example; Eastern Europe has a reputation for high-end orthopedics).

Telemedicine can help make this process more of a managed experience for patients and provide greater psychological comfort by connecting them with their actual doctors both pre- and post-procedure. Eventually, telemedicine may allow for data integration directly to the patients’ primary care physicians.

The “connected” industry is certainly growing, transforming lives and businesses in discreet, bottom-up ways. But if you take away one final thought, let it be this: As an industry we must guard against making too big of a splash with applications that won’t stick, and thus emptying the pond of excitement. Let us instead measure the market through both a qualitative and a quantitative lens of substantial value-adding, life-improving applications with demonstrable ROI for both the application provider and the end-user.

By Alex Brisbourne, president and COO, KORE Telematics


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Tags: connected car, fedex, ford sync, india, internet-of-things, ipad, iphone, onstar

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