The Internet of Things comes of age, but who’s leading the charge?
As I write this, I’ve just returned from the gym, and being in San Francisco, I couldn’t help but notice all the “fit tech” on show around the treadmills. Sensors abound, glowing hot shunting digital signals from devices worn proudly as a badge of tech honor to be dumped into spreadsheets and analyzed at length by techy hypochondriacs. Welcome to 'Wearables City' where even Google Glass is almost passé. Indeed, you know a gadget’s cool factor in SF is dwindling when a rubric emerges in the local press on how not to be an annoying, rude, and intrusive geek when wearing the still slightly weird-looking “specs meets Star Trek” comms device in public places. Or in Google speak, how not to be a glasshole.1 But I digress. To add to the emergence of the digital gym and reinforce the notion that the Internet of Things (IoT) era has truly, finally, without a shadow of a doubt…well, just maybe…arrived, just visit the tech hipster coffee shops of the city’s Mission district and listen to the hum of geek speak buzzing about the latest wave of start-ups to emerge from Y Combinator et al. This time, it’s, um, all about the sensors, dude.
For those in the know, the media hype around wearable tech and the broader IoT market is not representative of a sudden, seismic shift in the tech landscape, but rather, a signal of a steadily building market momentum around machine-to-machine (M2M) technology and its application in a variety of new mobile markets. Indeed, M2M has been an increasing force for growth across and beyond the TMT sector for the past few years now. It’s already established as a game changer in sectors such as the health care, energy, and automotive industries where mobile tech is being rapidly adopted into the core of new business models by innovation-hungry firms.
Just how significant is this likely to be? Well, the projected growth of the IoT category makes it an increasingly prominent slice of the pie when it comes to mobile and wireless data traffic growth, which itself has experienced an explosive upward march over the last five years in US and global markets. This phenomenon has been well documented around the industry. Cisco’s respected Visual Networking Index report, for instance, has long been forecasting exponential growth in mobile data and Internet traffic—recently predicting an 11x rise from 2013 levels through 2018.2 In terms of exabytes of traffic per month, that’s a monumental surge with the subsequent ripple effects likely to be felt across the mobile value chain. But to pinpoint where the subsequent revenue opportunities are emerging, particularly in the IoT markets, it’s important to first note the driving forces behind the surge in wireless data traffic, the biggest of which is perhaps the impact of the 4G mobile network era. With the rollout of 4G LTE (long term evolution) and networks firmly in place across the United States and increasingly around the globe, super charged network technology is helping to super charge mobile technology innovation. Sure, we can debate the predicted looming spectrum shortage another time (and it’s important to do so), but in this context, 4G networks are laying the foundations for a new wave of mobile growth—one that goes beyond the already established smartphone and booming tablet device markets as the PC era begins to decline.
It’s this disruptive shift that is providing a launch pad for the rise of the machines to take full effect, or more accurately, M2M network connections to spike, forming a far-reaching connectivity landscape. Begin to peel the onion, and the commercial potential behind the Internet of Things starts to make sense. In sectors as varied as energy, health care, transportation, and the consumer products market, M2M technology is enabling wireless communication to flourish via mobile products and services that connect people to people, people to machines, and machines to machines (or “things), utilizing sensors to collect and convert raw data into intelligence that improves wireless communications and ultimately, decision making. Without doubt, the age of ubiquitous connectivity is upon us.
This evolving landscape goes some way in explaining the recent frothy coverage in the press, which predictably, has tended to focus on the headline-grabbing, Jetsons-esque “smart home of the future” predictions often associated with IoT. In this scenario, domestic appliances such as the humble family fridge are often shown seamlessly communicating with social web applications, including online supermarket accounts signaling when to stock up or down on food items, which of course, may impact the data streaming from your health activity tracker that links to your bathroom scales, which, in turn, shouts, “slow down, fatty!” if you’ve emptied the freezer of ice cream too many times, once more alerting the grocery account to stock up on Chunky Monkey, and so on.
But despite concerns that few organizations have made a compelling enough argument for monetizing the smart home of the future, it’s the core IoT industry markets that are getting the analysts and the C-suite excited. Cisco’s CEO, John Chambers, states the Internet of Everything will be “bigger than anything that’s ever been done in high tech,”3 while according to analyst firm Gartner, the IoT market can expect a hypothetical $1.9 trillion in total economic value add by 2020.4 This is perhaps why Google’s recent $3.2 billion acquisition of Nest Labs (considered one of the few companies providing a comprehensive vision of the smart home) is seen as a jump on rivals with similar ambitions.
And if further proof is required that IoT is the next big mobile growth wave, Deloitte’s recent Rising tide5 report on the mobile semiconductor sector is enlightening. With chip companies often seen as the bellwether for what’s coming next in tech, this report explores seven leading chip companies’ growth and innovation strategies for the mobile era. The findings confirm that not only are key IoT markets such as mhealth, energy, automotive, and commerce emerging as the new battlegrounds for mobile growth, but that quietly and effectively, savvy chip companies have stolen a march in leading the development of new products and services in each of the signature IoT markets. What’s the secret sauce behind all this? For starters, it seems a relentless focus on platform leadership strategy is critical, more on which I’ll cover in my next essay on the growth tactics at the core of the new mobile era.