If you’re in a rush or have a small attention span, here’s the short answer to “what’s an IoT solution?”: An IoT Solution is a seamlessly integrated bundle of technologies, including many sensors, that organizations can purchase to solve an organizational problem and/or create new organizational value.
You can also skim down to the section with examples of IoT solutions, but if you enjoy some philosophical ramblings, a little history and a more in-depth explanation, continue reading for the long answer.
New Industries, New Vernacular
In the early stages of an emerging industry, everyone is collectively trying to figure out “what is this thing?”. Commonly understood words and phrases are extremely useful because they help reduce misunderstandings and make conversations more efficient. Instead of the frustrating experience of spending 30 minutes just to establish what you’re talking about, you can jump straight into the discussion. Indeed, this is the purpose of language generally. Language is a commonly understand communication interface that enables us to effectively and efficiently share dense information and complex ideas.
However, the birth of new industries comes with new concepts and new technologies that call for new vernacular. Phrases like “web browser”, “mobile app” and “ride-sharing” weren’t necessary 30 years ago, but today they’re valuable because they’re commonly understood and act as shorthand for a complex reality. In the past several years that I’ve worked in IoT (“IoT” is itself shorthand for a complex concept), it’s been fascinating to witness the development of this shared vernacular.
One aspect that I find fascinating is how new words/phrases have characteristics of network effects. As more people use a given word/phrase, that particular word/phrase becomes more valuable to use (as it’s now understood by more people). And the more commonly understood a word/phrase is, the more people who will use it. The end result is one, maybe two, dominant words/phrases for a given concept.
I still believe we’re just in the beginning stages of IoT, and that we’re poised to see an explosion in LPWAN Enterprise IoT in particular over the next 5 years, but we’re already seeing some winning words/phrases within IoT. One of those winners is “IoT Solution”.
I’ll expand more on what an IoT solution is and include some examples below, but first, a quick history lesson for context.
History Lesson: Technology Components vs. Seamlessly Integrated Packages
Although the term “Internet of Things” is relatively new, what it refers to is not. Machine-to-Machine (M2M) has been around since ~1970, and the fundamental concept of networking computers over distance has existed since the birth of the internet itself. Every new technology is a combination of the technologies before it, and nothing exists in a vacuum. So to discuss the history of IoT, we need to choose a somewhat arbitrary date. The term IoT was coined in 1999, but let’s start ~5 years ago in 2014 when IoT was at the peak of the hype cycle.
The buzz around IoT led to the founding of many startups, many of whom were funded by venture capital. Venture capital funds (VCs) seek outsized returns to make up for the inevitable losses from other investments in their portfolio. This means that VCs prioritize opportunities that promise huge growth (10x+ returns) over a relatively short time frame (5-10 years). Internet companies are the perfect fit for VCs (think Google, Facebook, etc.) because they require massive upfront investments (which VCs provide) in infrastructure but effectively zero marginal distribution costs (i.e. once you have the infrastructure built, adding one additional user costs nothing). This enables exponential growth and huge returns on investment.
Unfortunately, the majority of the IoT companies that were venture-funded around 2014 have failed to achieve that exponential growth and huge returns.
Timing is Everything
“Pioneers get slaughtered, and the settlers prosper”
– Daymond John
Timing is the single biggest reason why startups succeed or fail, and 2014 was too early for VC funded IoT startups. Many of these IoT startups came with a technology-component-first approach to IoT, offering just one piece of the IoT puzzle (whether that was a new sensor, network protocol or software platform) and refusing to get their hands dirty tying all those components together. This is because, right now, integrating all the different components of IoT requires a lot of hands-on, service-based work that doesn’t scale exponentially (i.e. to offer more hands-on services, you need to hire more people).
When individuals or organizations have to integrate many different technology components together to achieve the real value, there will be some early adopters, but most simply won’t do it. It’s only once the components have become standardized, bundled together and easy-to-use that a new industry can really take off and achieve mass adoption. A helpful parallel from history is the early internet.
The Early Internet
To connect to the internet in 1993, a person would have to first go to a bookstore and buy a book “How to Use the Internet”, and there would be a floppy disc in the back of the book. The floppy disc would have the software you’d need to load onto your personal computer (TCP/IP stack). You’d then have to go through dozens of steps and essentially rebuild your operating system. Then, you had to go buy a modem from a computer store, plug it into the computer, then configure the computer and the modem to work with each other (also dozens of steps). And then you had to sign up for an ISP (internet service provider), by finding them in the yellow pages and calling them. All of this could take weeks. So what finally led to the mass adoption of the internet? The standardization and packaging of all of these components plus an easy-to-use interface in the form of the web browser (From the Internet’s Past to the Future of Crypto, a16z Podcast).
Over the past several years, IoT has been like the early internet, except on the organizational level. While some organizations have been early adopters and done the hard work to use IoT, true scale and mass adoption haven’t yet been achieved. Once mass adoption is achieved, the foundation will be set for modularized technology components to flourish. The VC funded companies that entered the market around 2014 weren’t necessarily wrong in their component-first approach, they were just too early.
Solutions Are the Solution
What the industry has been coming around to over the past few years is that IoT Solutions are the solution. To repeat my above definition, an IoT Solution is a seamlessly integrated bundle of technologies, including many sensors, that organizations can purchase to solve an organizational problem and/or create new organizational value. The key phrases in this definition are “seamlessly integrated” and “bundle of technologies, including many sensors”. I added “many sensors” to differentiate IoT from other technology products/services sold into organizations.
When IoT comes as a seamlessly integrated bundle, it does two important things:
- It enables organizations to “get it”. Before you invest in something, you need to understand the value. If you’re coming with a technology component-first approach in an early market, you’re forcing your potential customers to connect the dots and see the value on their own. Most either aren’t capable or won’t want to go to the effort. Think of trying to sell a consumer a fancy modem in 1993 if they don’t understand the internet.
- It enables organizations to “buy it”. Dealing with multiple vendors is a pain and a risk for organizations; much better to have “one throat to choke” as this also simplifies the buying process. One of the biggest challenges in selling Enterprise IoT is simply getting the contracts in place to be able to sell into the organization because the sales cycle can take months.
Solving Organizational Problems and/or Creating New Organizational Value
We’ve covered the “seamlessly integrated” and “bundle of technologies” parts of our definition, but what of “solve an organizational problem” and “create new organizational value”? As the name suggests, IoT Solutions are often aimed at solving acute problems within organizations. Let’s look at some examples:
IoT Solution Example #1 – Refrigeration Monitoring
In the food services industry, if the temperature of refrigeration units falls below a certain threshold, all the food needs to be thrown out. To make sure this doesn’t happen, people manually check fridge temperatures and log them on a piece of paper. This approach is highly costly, it isn’t real-time, and it’s prone to error.
Use sensors to measure temperature in refrigeration units and automatically trigger alerts if the temperature falls below a set threshold. Resources that would otherwise be spent employing people to check can instead be spent elsewhere and the real-time monitoring and alerting drastically reduces severe issues.
IoT Solution Example #2 – Vehicle Asset Tracking
At automotive auctions and dealerships, finding a car on a large parking lot with hundreds or thousands of cars can be extremely difficult. Cars can be moved unknowingly, and then, when it’s time to find that specific car (whether to prepare it for auction or to enable a customer to test drive), it can’t be found. To make sure this doesn’t happen, people manually scan every single vehicle every day to record where they’re located. This approach is highly costly, it isn’t in real-time, it’s prone to error and it can hurt the customer experience.
Use trackers on cars to acquire their GPS position and automatically update on a map display, enabling users to know exactly where every car is right now and not waste hours hunting down a specific vehicle. Resources that would otherwise be spent employing dedicated people to scan every car and hunt down lost cars can instead be spent elsewhere.
Creating New Value
One of the most exciting things about IoT solutions is the value that can be created beyond the acute problem that the IoT solution was originally meant to solve. Going from manual data collection by people to automatic data collection by sensors is like going from paper mail to email. At first blush, email is just a better version of paper mail; it’s cheaper and faster. But if you delve deeper, you find that email opens entirely new possibilities. You can have it all stored in one place, you can search it, you can automate it and you can send the same message to multiple people at the same time and then have them all reply to the same thread.
In IoT, a concrete example can be drawn from the Vehicle Asset Tracking solution included above. The original problem was finding cars, but when an auction or dealership has access to the real-time location of all its vehicles, this opens entirely new possibilities and opportunities to create value. With real-time location information, auctions and dealerships can…
- Track cars through different stages in their process (e.g. through the mechanic shop, the detail shop, etc.) to identify inefficiencies and to trigger alerts if a car is in a given stage for too long.
- Trigger alerts if a car is taken off the property, to prevent theft.
- Automatically optimize routing when moving vehicles to prepare them for auction.
- Provide a web app to their end-customers to find cars on their own. For example at an auto auction, a dealer might want to check on a car they’re interested in bidding on.
- Etc., etc.…
“There are only two ways to make money in business: One is to bundle; the other is unbundle”
- Marc Andreessen, The Future of Work, Cars and the Wisdom in Saying ‘No’
Right now, the way to make money in IoT is to bundle and that bundle is the IoT solution. Many early IoT companies failed because they either tried to bundle too much (e.g. rolling out a nationwide LPWAN network which cost too much) or tried to bundle too little (e.g. by only offering sensors which confused enterprise buyers).
IoT solutions are bundles that focus on specific problems and seamlessly tie together multiple technologies in a way that’s easy to value and easy to buy for organizations. As the IoT market and ecosystem matures, this is likely to change, but for now, IoT solutions are key.