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15 for '15 Part 2 – Our Five Forecasts for Enterprise M2M This Year

Posted by Alex Brisbourne on 01/22/2015
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enterprise_predictionsAbout 18 months ago, The Economist conducted a survey of senior business leaders across the world and, not surprisingly, found that 96 percent of respondents believed their company would be using Internet of Things (IoT) technology in some way within next 3 years. For 2015, Deloitte predicts that 60 percent of all wireless IoT devices will be bought, paid for and used by enterprises and industries. And more than 90 percent of the services revenue generated by these devices will be in enterprise markets, not consumer.

While surveys and predictions are not without their faults, there is a reliable takeaway here to lean upon: A lot of business value can be gained by enterprises from the advent of dispersed, connected, data collecting devices; the secret is in how to unearth it.

As part two of our 15 for ’15, here is how we surmise the role of M2M in the enterprise may take shape in the near term.

1. A stronger focus on product and customer lifecycles as the drivers for IoT deployments. In business, the tendency has been to view the Internet of Things as an opportunity to lower transaction and maintenance costs, as opposed to being a true basis for revenue growth and innovation. Cost reduction is certainly not bad, but a better way to broaden adoption and business value comes in creating new product and service offerings. We’ve talked about this topic before.

In 2015, the link between M2M, product performance and customer engagement will become much clearer and grow to be a standalone platform, we believe, for IoT deployments. The retail sector offers a prime example for how the concept can play out. Specifically, if you alter the traditional loyalty card so it is a mobile, connected item on customer devices, you enable it to gather much more granular and actionable data on customer usage and product sales patterns, and a retailer suddenly becomes empowered to adjust its offers dynamically per individual customer tastes, manage inventory based on localized demand and buying preferences, and even adjust pricing based more clearly on “what the market will bear.”

In this context, the IoT is positioned to fill a role in anticipating customer needs and motivations, allowing businesses to respond in kind, and boosting the customer engagement.

2. A clearer understanding of the workplace benefits of “connected.” Many companies are starting to look at wearable devices for workforce automation — to give their employees context-specific, relevant information when they need it, so that they can do their jobs more effectively and efficiently. In fact, Forrester Research Analyst JP Gownder believes that smartwatches, wristbands and glasses will actually be a bigger hit in the workplace than among consumers: “The market for company-provided wearables will be larger than the consumer market in the next five years.”

We believe the phenomenon will sprout this year in two main work environments: shift-based work and field service. In field-based work, where employees use their hands to do their jobs (think of a utility repair person fixing a transformer, or an insurance adjuster reviewing the damage of a vehicle), the opportunity to provide hands-free communication just makes sense. There’s a distinct lack of ease when workers must handle a phone to respond to incoming information; he or she typically needs to stop what they’re doing, free at least one hand, and divert attention from work to the phone. Voice interaction is one way to address these limitations, but it often conveys an inadequate amount of information and is lacking the often necessary visual component.

Businesses will start to recognize the benefits of issuing small, wrist-worn wearables to close this gap, so that employees can react more quickly to emergencies and handle frequent, routine actions like notifying a customer about their ETA or reporting back to the home office, all without having to take their hands away from their work.

Similarly, in shift based environments, such as a warehouse or restaurant, connected smartwatches have the ability to let employees more quickly (and accurately) clock in and out of shifts, add data to their time sheets, view their shift schedules, request to trade shifts with co-workers, see trade requests from co-workers, manage vacations and view overtime status. Managers meanwhile can schedule shifts, approve vacation and sick time, and track time sheets in real-time, without having to be near their computer. It really democratizes the relationship between manager and employee, and stands to improve working life in these sectors.

3. A perceptible shift of IoT data from descriptive analytical fuel to prescriptive. Up until now, analytics based on IoT data has been primarily descriptive (answering questions about what has happened) somewhat predictive (describing what’s going to happen) and just a touch prescriptive (recommending what to do about it). We believe predictive and prescriptive components will come to play a more prominent role in 2015. The question is, how?

If you look, for example, at some of the documented benefits from automated meter reading, we can extrapolate that utilities stand to save roughly the same hard costs as their customers, in aggregate. (In the UK, Parliament estimates annual savings of £26 per household from automated meters, or 1.3 billion in toto; savings for the utilities themselves tallies just beyond one billion pounds annually).

The more intriguing part, however, is that utilities could see far more significant benefits in the form of prescriptive analytics, informed by gathering data around consumer demand for power in peak use periods. By getting a better handle on this information, utilities can more precisely scope out future power needs, understand what they need to do and when they need to do it, and avoid the possibility of over-building for demand before it’s actually needed. In this equation, the total cost-avoidance for the utilities could come to several orders of magnitude beyond that of the savings for consumers.

As another, more light-hearted example, the long-heralded connected coffee machine (Keurig-style) is more than a consumer convenience; rather, it becomes an important insight tool to optimize the supply and delivery chain for coffee pods. By knowing the brew cycle patterns of all its machines in the field, on a localized basis, these providers are wholly equipped to perfect a “Just-in-time” production and inventory strategy across all the markets they serve. And for customers who opt-in, the companies have a means to ensure automated replenishment, which works to further strengthen the customer connection. But it all starts by connecting the machine itself.

4. The emergence of “privacy” as a differentiator. With all of these great opportunities to better engage customers, comes great responsibility. Customers need to know, and approve, of any data being collected relative to their actions, and have it completely explained to them how the data is being used, how it is being stored, and what they stand to gain by agreeing to share it in specific contexts (e.g., while navigating a store).

This is such an important corollary to the possibilities discussed above, in fact, that we believe companies who put privacy first and go the extra mile to be transparent will see a competitive advantage in 2015. This goes to the point of implementing double opt-in processes. “Are you sure you want to share your data so that we can better tailor our offers to your interest? Are you sure?”

I think I can speak for most everyone as to the unsavory feeling that comes with seeing Website ads pop up based on a site you just visited, without your approval, even if it does coincide with your interests. The fact that you’re being followed is just unsettling and could inspire negative feelings about a brand, in that the brand allowed the ad to be placed in the first place. In a mobile, physical context, those feelings can grow even stronger.

5. And, finally, a growing market awareness that M2M devices are naturally more secure than traditional “on network” devices. Despite public perception, the M2M environment is really quite closed as a rule. It is not a direct extension of the Web in the way that Smartphones are (which effectively create more “access doorways” into the Internet). Rather, M2M devices typically use dedicated network access to route data solely to and from specific network resources, with quite complex challenges to getting in or outside of those domains. These data streams are often subject to security processes from encryption to SSL support, and in more sensitive markets such as energy or payment processing, there are more specific overlays that go far beyond simple end-point ingress. (E.g., the Payment Card Industry Data Security Standard and the National Institute of Standards and Technology).

Fundamentally, the architectural differences of the M2M platform transcend the level of how humans communicate over the Internet, and, while they may not outright skirt security concerns, they do have a built-in defense mechanism that often gets left out of the conversation.

In our next, and final, predictions post we’ll dig a little deeper into the trend toward monetization of M2M applications, and offer a prognosis for where the most dramatic opportunities may take hold.

Topics: General

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