Great discussion last night with a spirited defense of the much maligned Internet Fridge, and the shock revelation that Evrythng are planning an IPO in the next five years ;-).
Many thanks to our panel: Wolfgang Emmerich (Zuhlke Engineering), Niall Murphy (Evrythng), Andy Yeoman (Concirrus) and Giles Pavey (DunnHumby).
Here are our notes from the main discussion.
Is the money in the internet or the things?
AY: neither, it’s in the business process.
NM: It’s in the data, stupid! IoT drives more traffic, but it’s the data that starts the process of value creation. But do businesses have the competencies to extract that value?
GP: IoT does apply to how businesses are run (operational efficiency) but also to customers, which is where Giles’ expertise is. Is it as simple as how can the internet and big data put buyers and sellers together more efficiently. If you can do that, everyone wins
WE: the IoT is networking everyday things. Camden BC has network enabled lampposts, which might bring about efficiency improvements for Camden council but is not intrinsically that valuable. The money will come from the insights that the data offers.
ML: IOT lamp posts are interesting – useful for working out what is going on in a micro environment. Connecting street lights is more about controlling brightness at different times of day, changing power as new types of lights are installed etc and that all leads to power savings. Of course, they are a lot more interesting than say, internet fridges…
AY: why aren’t Internet fridges exciting? I can’t conceive why my fridge might order milk. But it can be helpful if they adjust their power cycle to turn off compressors when grid demand is high – when the ad break comes on in coronation street for example. (ML: but how does that benefit flow back from the power company back to the consumer?). One of the things that might characterise the IoT is the constant reuse of data by a number of different parties, the business models for that are being worked out right now so I wouldn’t rule it out.
NM: we tend to think of the IoT in these big utility scale models because the benefits are large and obvious but what’s fascinating is the small puddles of data that are beginning to generate value , for example real time pricing for media rental. When you introduce IoT into consumer items it could completely change the business model, you might subscribe for a supply of baked beans and the model then becomes the bean manufacturer acquiring the sale for the retailer, rather than the retailer acquiring the sale for the manufacturer.
GP: People want three things, broadly in terms of what big data can provide 1) make life more convenient, anticipate what I’m going to do 2) predict and suggest new things that I might enjoy, give me some recommendations 3) protect me – warn me if this things has nuts in it, don’t buy this this week it’s on promotion next week.
In this country a third of all food that get s bought is thrown away. A system that allows you to know what food you’ve got is valuable to the planet as well as customers – eg fridge.
Customers also want inspiration, they’d like to know if they have five out of six ingredients for paella for example. But there are lots of problems before you can get the IoT fridge to work. Not least how does it know what’s in it.
WE: People seem to be challenging the idea of what it is you can do with the connected fridge. This is the wrong way of thinking about it. The original designers of internet protocols had no ideas what they would be used for. Its the same with Big Data, its’ about finding out patterns and information in your data that you didn’t know existed. Big Data could enable innovative business models that don’t exist now but we can’t imagine at the moment.
NM: yes, this is a crucial point – Metcalf’s law says the value of the network accelerates exponentially with each node that is connected with it. So one of the problems we have today is that there are isolated closed loop environments eg Nike Fuelband has a closed system while Jawbone Up, which has an open API and a thriving developer ecosystem. So there is a big challenge for organisations to think about their connected products as nodes on a larger network and to figure out how to share their data, legally and technically, so that the creativity of the internet can be unleashed on them.
What will be the thing that people will be talking about when they talk about the IOT in five years time?
NM: They’ll be talking about the IPO of my company Evrythng
AY: the IOT offers potential to democratise many services, for example home security that is tied to hardware with hard wired alert systems. So you can decide what constitutes an alert, as the price of hardware declines and a more personal set of rules about what it is used for can apply. The insurance industry might have some interesting discussions as it starts to disaggregate.
NM: in five years its still relatively soon and there’s a lot of social transformation in mobile adoption left to shake out from 2010. I think people will be talking about creepiness, as there becomes an extreme rise in personalised data, it can be a bit wierd where you turn up to do something and the thing already knows who you are that can be a bit wierd
GP: agreed. The psychology part of this is as important and ripe for change as the technology part. The idea of what ‘consumers want’ is no longer helpful as different people want different things so the market fragments. It will be really interesting to see what happens in the discussion between people who really want every connected and those who don’t and who the politicians want to back is an interesting question
WE: I think people will think ‘what a stupid term’ that a few terabytes of data is not that big and it’s not the size of the data that is the issue, it’s how to generate the question.
ML: how much is the M2M space moving toward IoT?
WE: well M2M is moving away from the proprietary protocols that have plagued it for many years and it will now be more integrated with mainstream IoT
Why is Nest worth 3 billion? A lot of people have asked this one.
NM: Tony Fadell is an awesome product developer – it’s an expensive acqui hire
AY: a thermostat can tell you some interesting things about occupancy, energy consumption, holiday patterns etc. These are data streams that Google hasn’t had before and might be very valuable to them
GP: I don’t have an informed opinion on Nest, but I do think that cars will take us all by surprise. Once cars start talking to each other and deciding on the best routes the non linear effects could be substantial so the acquisition of Waze, particularly if it gets together with self driving cars.
Audience: there are wireless chips inside the Nest, an obvious platform for a whole home system
Aud 2: this is a big signal from Google about their serious intentions in IoT
Aud 3: Nest was a Google Ventures investment and Google have also invested in Calico, in the home space, so there are obvious synergies there
Aud 4: It took 20 years for the internet to get to the point where those concerns about security and privacy became widespread. When will this become a serious issue for the IOT?
WE: it won’t be very long. Partly because we have had the experience with the internet, so security concerns are on people’s minds.There are going to have to be failsafes and security devices built into these systems from the ground up, and unfortunately the data is not going to be so obvious as it when defending a website from attack can also be found by applying analytics again. For example people hack your smart meter to find out that the power has gone out
NM: I don’t think there is a tipping point about this. There is no consumer hysteria around penetration and the internet of things. IN Europe there is about 90% penetration of incredibly insecure home networks. But there is a tipping point as product manufacturers have increasing exposure to their customers the customers are learning which brand they see as most trustworthy.
In the UK consumers were more willing to check in with their Facebook registrations than they were to create new identities for sharing NHS data
GP: I work mainly in food. The food industry, food retail in America is very similar except for GM foods, you’d find it difficult to find it here but it’s opposite in the US. That’s nothing to do with science, it’s about social mechanics and lobbying working in a slightly different way. So there’s a possibility that this could switch quite rapidly for poorly understood reasons.
AY: and it’s also a generational thing, black box data for car insurance illustrates that 18 year olds are very comfortable sharing their data for financial gain.
Audience 5: beyond geolocation, Google glass etc, do you see a market for an internet of people? Geolocating people?
NM: we have one today – everyone’s phones are tags, they are a proxy for people’s location. We are focused on products but also on mapping the interaction of people and products and there’s a lot of value in that.
GP: people being connected together? Yes, we’re foreseeing a rise in people power: telling businesses what to do. Buyers clubs etc. We did some work on reviews recently comparing products with online reviews. If you have products with no reviews playing products with one star review the one star review will sell more
WE: I think we will see a convergence between social media and data connected in the IOT that will create some real valuable propositions. WE uses Strava for his cycling: convergence between data connected on the IoT and people.
Audience 7: Practical question: tell me about a real practical IoT business that a consumer can buy that has benefit.
Audience 8: I went to the school computer awareness evening which was scary. Are we going to see a reaction against the loss of privacy or is this just going to become the norm?
WE: so the first question really was, isn’t it a stupid thing to do, to put the fridge at the centre of the house? Well, yes, there were plenty of stypid dot.com ideas that came in the early days of the internet but I firmly believe there is value in connecting everyday things and using protocols to get them to exchange data
NM: I was looking at an awesome medical application last week which involved an ophthalmologist diagnosing eye conditions off grid in Kenya using smart phone. So we shouldn’t assume that IOT gains are only going to be seen in the developed world. On the privacy front, the creepiness factor is going to be variable for people and needs sorting out, the challenge is to provide applications that have real value for the people whose data it is.
GP: Disappointed we didn’t have the fridge spam joke. Yes fridges could be hackable, but so are your PCs, and life goes on. I think the big companies will have to respect people’s privacy: they can’t afford a PR backlash.
AY: Something else that is changing is that everything else gets more difficult, so for example the traffic patterns in London are getting worse and these technologies will be forced upon us to maintain the status quo: to allow the aging population to stay in their home. In terms of big data I’m cynical about big data because knowledge is not enough: you need to induce new behaviour.
ML: OK, so we’re going to have to wrap up there and continue the conversation in the networking. Thank you all for coming and thank you in the audience for some very thought provoking questions. Huge thanks to our supporters, Zuhlke Engineering and Taylor Wessing for making the CEO Tales happen.
Don’t forget, the Internet of things Forum, a one day event to bring investors, corporate customers, entrepreneurs and the people that are making the Internet of Things a reality is on April 15th, Robinson College, Cambridge, 2014. A few tickets still available but likely to sell out by end of next week. Worth your time or your money back.