With telecommunications reaching a greater ubiquitous state, the capability for sensing, tracking, and predicting is now achievable and implementable into wider areas – with it comes a suite of powerful analytic tools. The meaning and potential impact of the Internet of Things on business and personal life is recognized as enormous when considering the development and utilization of Big Data and recognition of conscious, unconscious, and natural patterns in a multitude of systems. The purpose of this report is to summarize the recent history of corporate efforts around the development of the Internet of Things and propose a way forward for GE. Market Research

Report

James Baho

2015

Table of Contents Executive Summary ....................................................................................................................................... 5

The Evolving Market ................................................................................................................................. 5

How to Capture the Opportunity .............................................................................................................. 6

Development and Evolution of IoT ............................................................................................................... 7

The 3 Layers of the Internet of Things ...................................................................................................... 7

Recent Developments ............................................................................................................................... 8

Growth Expectations ............................................................................................................................. 9

Connectivity and Intelligence .................................................................................................................... 9

The Internet of Things’ Disruptive Nature .............................................................................................. 10

IoT Investment – Producer Incumbency ................................................................................................. 11

IoT – User Requirement .......................................................................................................................... 11

Industry Players........................................................................................................................................... 12

The Value of Brand .................................................................................................................................. 12

The Brand’s Value ............................................................................................................................... 13

Fragmentation of the Field ................................................................................................................. 13

Competitor Analysis ................................................................................................................................ 14

PESTLE Analysis - What are the advantages and impediments of the Internet of Things? ........................ 17

The Opportunities for Service Providers ............................................................................................. 18

The Market Opportunities for Many Smaller Developers .................................................................. 18

IoT Service Provider Activities – Supply Chain Analysis ...................................................................... 19

Supply Chain Improvements for Manufacturing and HealthCare ...................................................... 20

Porter’s 5 Forces ......................................................................................................................................... 21

Conclusion and Recommendation .............................................................................................................. 24

Recommendations .................................................................................................................................. 25

Developing an App Portfolio ................................................................................................................... 25

Brandings: The Divided Sides of the overall Industry ............................................................................. 26

Partnering with Fellow Industrial Giants in Health Care ........................................................................ 27

Partnering with Manufacturing Giants in Industry ................................................................................. 27

In Conclusion ........................................................................................................................................... 28

Works Cited ................................................................................................................................................. 30

5

Executive Summary

The term Internet of Things (IoT) is defined as the connection of everyday objects that have network

connectivity, allowing them to send and receive data. The current generation stands at the threshold of

global interoperability and the market is facing more attention than ever before. Nearly 20 large capital

corporations are pouring their energies into the industry; consortiums are beginning to emerge to

standardize the protocol; usage is available to devices of all sorts meaning there is a market for literally

everyone and everything on the planet.

It is the last point that draws the most interest. Billions of devices are already online and billions more

are predicted to be online in the near future. Considering the enormous growth potential, the IoT is an

industry well worth investing in. The questions remains, “Which segment to pursue?” Since everyone is

a potential customer since everything can become a connected device. The following data is a

commonly found forecast:

1990 to 2015: 25 Billion connected devices (over 25 years)

By 2020: 50 Billion connected devices at a market value of $7.1 Trillion

The Evolving Market

General Electric has made it clear of its belief about servicing the digital domain is going to help it

generate income, but more importantly how GE will stay relevant because of the IoT. Developing the

Industrial Internet will not only help the company manage its own assets, but sell the service to other

companies to help them manage theirs as well. As the global economy becomes more service-based,

having a service that will underpin the operations of the world’s economy will be GE’s greatest asset.

GE must remain aware of competitors of its non-core businesses. The main threat of the upcoming years

is how non-traditional competitors will operate in the same market space. Industrial manufacturers will

soon compete with Internet advertising firms; software manufacturers will compete with computer

hardware manufacturers. Companies are acquiring assets and skills. Just as Microsoft bought Nokia’s

handheld mobile division, Google acquired Motorola and Nest. Wireless communication will allow for

new levels of work, engagement and analysis. This is due to the IoT removing barriers like never before.

With barriers removed, companies that dealt solely with their core business must now face a new reality

and must acknowledge the fact that they must compete in a service environment. For manufacturing

and Internet companies, this is a challenge for everyone. New competencies must be achieved in order

to deliver meaningful applications and analytical tools for daily use. This will cause an insourcing of skills

as companies harness the ability to manufacture a quality, relevant product and provide ongoing IoT

services.

6

Although the consumer market will not be its initial focus, GE is entering a market with companies in

which it was never before in the same arena. Apple and Google are honing in on the consumer segment,

therefore, keeping apprised of these companies’ decisions and innovations may help prevent their

encroachment into the industrial field. Apple and Google have proven themselves masters of creating

software people want; learning from their inventions and product enhancements will be worth keeping

note. This addresses a critical concern: GE will initially focus on business to business marketing – does it

want to move into the business to consumer market or simply keep tabs on competitor developments?

How to Capture the Opportunity

GE’s strengths derive from its history of envisioning big answers to big questions, but it cannot go it

alone. Developing the Industrial Internet for its own purposes will improve internal efficiencies, but GE

will further succeed if the service can be sold so others who can utilize the same technology. The

Industrial Internet will benefit from external buy-in. Developing partnerships with medical,

manufacturing, and commercial companies to integrate designs and functionality will enhance the

capabilities of upcoming applications and machines, and ensure continued success.

Hardware reliability will become the commodity the IoT trades on. Companies that create a compelling

proposition through a large variety of feature-rich applications and dynamic tools will enlist droves of

customers. The main competency GE must develop is its software. Second and third party applications

will add to the library of tools, but mastery of the Industrial Internet’s core software must be developed

and remain under GE’s control.

http://www.embeddedintel.com/special_features.php?article=2721

7

Development and Evolution of IoT

“The paradigm of the IoT is not displacement and replacement, but connectivity and

recombination.” (Marco Iansiti, 2014)

In 1999, Kevin Ashton combined Radio Frequency Identification (RFID) technology with fast-moving

consumer goods to track their whereabouts. After further work on developing the useful application of

RFID with more objects, he coined the term “Internet of Things” in a presentation at Procter and

Gamble. Although the first successful remote data retrieval was from a Coke machine of a machine was

at Carnegie Melon University in the early 1980s, by the time Ashton made his presentation at network

of machine-to-machine communication had taken root. The rollout of broadband communications,

wireless communications, and increasing computing power has helped to complement growth.

The 3 Layers of the Internet of Things

The Internet of Things can be divided into 3 layers. The first is the Internet of Things, the second layer is

Big Data, and the third layer is the intelligent usage of all the information, entitled Smart given the

ability to learn, adapt and predict. At the first layer, the collection of communication enabled devices

simply transmits information: temperature, moisture, on/off status, wind speed, watt usage, weight,

etc. These are the tens, hundreds, or thousands of physical devices that communicate their signal

creating a network of devices, the Internet of Things.

This information by itself does little, but when the sensors are combined into a network, the greater

volume of information becomes more meaningful, it becomes a coherent story that tracks the progress

of a situation more accurately. Individual instances become a pattern, a baseline norm by which to

monitor against volatile changes. As the thousands of data points relay information, the data begins to

shape a narrative. The collection of sensor information and its digestion by software is the second layer

of the IoT, Big Data.

Information by itself does nothing. Information

gives insight to a situation through dashboards

or reports. The third layer is where action can

be taken on the amalgamation of data and

creates a saving benefit of resources. These

feeds tie in directly to the third layer of the IoT,

the Smart Environment when utilizing such

software as Predix, will work towards making

the human experience much more comfortable

and economical.

Layer 3: Smart Environment- Actionable Information

Layer 2: Big Data - Consolidating the informatoin and finding

patterns in the data

Layer 1: IoT - Raw Sensor Information

8

Recent Developments

The Internet of Things has been receiving a lot of attention recently. Technology reviewer Gil Press of

Forbes online notes that the IoT is nothing new, but credits the recent attention to an inflation of media

press coverage. He conceded, however, to the fact that the technological capability has reached a point

where functionalities become a reality. He noted, “The price of sensors, processors, and networking has

come way down. Since Wi-Fi is now widely deployed, it is relatively easy to add new networked devices

to the home and office” (Press, 2014). What is clear is the huge potential value of the market. GE’s own

estimates the added value of the global GDP at $15 trillion over the next 20 years (GE, 2013); Cisco

estimates an incremental $19 trillion over the next decade (Chambers, 2014).

Although the forecasts range in value and time, the estimates predict a trajectory that calculates

connected devices in the tens of billions. While the accompanying figures chart the historical trend of

populations growth correlated with connected devices, with the continued miniaturization and

innovation of wireless devices, the projected additional 25 billion devices connected through the

Internet does not seem farfetched.

Considering the growth rate of data

communicating devices, the next 5 years will be a

defining period of protocol and standard setting.

As the picture states, connected devices will

outnumber people at 6-to-1. This ratio signals a

surge in the development of applications to

manage equipment and facilities.

“Estimates for Internet of Things or IoT market

value are massive, since by definition the IoT will

be a diffuse layer of devices, sensors, and

computing power that overlays entire consumer,

business-to-business, and government industries. The IoT will account for an increasingly huge number

of connections: 1.9 billion devices today, and 9 billion by 2018. That year, it will be roughly equal to the

number of smartphones, smart TVs, tablets, wearable computers, and PCs combined” (Adler, 2013).

With the growth of connected devices, the development of technical capabilities and analytics is

inevitable. Many applications at present focus on energy management or some kind of remote access.

However, where much of the promise of IoT exists is in its increased efficiencies, increased safety, and

both professional and medical pattern recognition of Big Data’s raw format interrogation.

9

Growth Expectations

For GE, business value will be based on service provided. What is not in question is the need for the

service to handle billions of devices. With 25 billion devices currently connected since the inception of

networking, the amount is set to double within the next 5 years. The acceleration in connections to the

network is expected to deliver trillions of dollars in value. Gartner, the information technology research

company, noted, “By 2020, component costs will have come down to the point that connectivity will

become a standard feature, even for processors costing less than $1. This opens up the possibility of

connecting just about anything, from the very simple to the very complex, to offer remote control,

monitoring and sensing” (Janessa Rivera, 2013).

Devices and Dollar Value

2015: 25 Billion devices after 25 years

1 Billion devices per year(average) 2020: 50 Billion incremental devices

5 Billion devices per year(average) 2013: $1.9 Trillion Market Value 2020: $7.1 Trillion Market Value (Press, 2014)

(Adler, 2013)

Connectivity and Intelligence

Connectivity and communication are the staples of the IoT. Connectivity will enable ordinary devices to

perform work in ways and relay constant status updates to optimize performance. Enabling devices to

communicate their location and status have added new potential to businesses to better understand

their clients, better manage their inventory, and respond better to the factors that influence the

environment since analytics can be added into a live data stream.

The need to redefine and continually add new types of data will be a defining aspect building

intelligence into the product and key to success. With the increase of volume, velocity, and variety of

data, Big Data looks to add to traditional data standards, which cannot cope with emerging classes of

data, thus missing these research opportunities. Analytic tools, such as Predix, will help to understand

customers, a logistics pattern, or the environment, which are all business needs with numerous

variables. The possibility of obtaining a better understanding for any business decision can be the

difference between success, failure, or even future innovation.

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The Internet of Things’ Disruptive Nature

The Internet can arguably be the most disruptive creation of recent times. It transformed the

professional and personal lives, and transformed and invented new industries. It destroyed sustainable

technologies for companies with cash cows and ushered in new ways to consume information,

effectively speeding up product lifecycle and reducing the margins. Further consequences include a

whole host of new inventions, models of selling, and modes of communication.

Although it destroyed some industries, if global GDP and employment levels are any barometer of the

Information Era’s benefit, the disruptive nature of the Internet has been true to its definition. As Clay

Christiansen phrased it, “It’s important to remember that disruption is a positive force. Disruptive

innovations are not breakthrough technologies that make good products better; rather they are

innovations that make products and services more accessible and affordable, thereby making them

available to a much larger population” (Christensen, 2012).

Since Internet communication is becoming increasingly wireless, new opportunities continue to emerge.

When Kevin Ashton presented on the “Internet of Things” in 1999, most devices where bound by

Ethernet cables. Progressively, communication devices have become cheaper and smaller thereby

enabling devices of all size to communicate through a network. Using sport medicine as an example,

Nike sells Nike+ a chip that inserts into their shoes, which monitors time, speed, distance, as well as

heart rate. This information can help a runner set goals and monitor progress more easily than ever

before. This example of time, speed, distance, and condition has been applied to equipment of all sorts

in industries around the world.

How the attachment of sensors can benefit society will become evident when the information starts

serving society. In the example by Libelium Smart World (Libelium, 2013), the uses become widespread

and range in usefulness from a common citizen to a municipal worker. When intelligent objects begin

delivering readily available information, speed, utilization and safety can all be increased.

At the pinnacle of the Internet of Things is

Intelligent Community. Intelligent Cities, for

example, look to optimize energy expense,

decrease waste, and maximize convenience

through the amalgamation of all the work

done by the IoT’s sensors and Big Data’s

analytics. A city’s inhabitants will create a

constantly changing environment. At some

point or another, a greater or lesser

quantity of data will be needed and having

a mechanism that delivers reporting is

exactly the kind of useful information the

IoT will deliver.

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IoT Investment – Producer Incumbency

Grasping the idea and bounds of the IoT quickly reveals its potential to interconnect people and devices,

and its global expansiveness. In Alfred Chandler’s article, “The Enduring Logic of Industrial Success”, the

successful companies Standard Oil (commodity), Bayer (chemicals), and IBM (business machines), all

made upfront investments in production, distribution, and management (Chandler, 1990). The first

mover in the area of chemicals was Bayer; it did make the investment in production to gain command of

the economies of scale and invested in management to gain the economies of scope.

In the modern day, Internet connectivity is a basic necessity. However, no one has created the end-to-

end service, although there are efforts to do so. Various companies have built software suites, which

means Chandler’s concept has been reapplied to computer software. Evidence of Apple’s, Google’s, and

Microsoft’s management is the continual development and refinement of their products and services.

The IoT has adjusts the field. Since no one is fully prepared to offer an end-to-end solution, traditional

incumbencies are diminished. With the market able to include literally everything, software

manufacturers will need to reach into the physical world, while industrial manufacturers need to reach

into software design. This creates new competitors as companies move into non-traditional areas,

hardware and software, respectively. The new circumstance creates a race very similar to Alfred

Chandler’s article. Manufacturers will have to deliver a scalable solution and compete in a variety of

areas, i.e. scale and scope. This leaves incumbency in a question state.

IoT – User Requirement

The IoT is becoming more real every day. Even if the deployment of an IoT network is not fully

understood by management, companies that do not invest in it may lose favor with their capital

contributors who simply understand the cost of business is higher, revenues are being missed, and

opportunities to save are lost. An IoT solution can boost investor confidence by the simple fact that

“everyone else is doing it.” A decline in confidence may have greater impact than anything else a

company may face. It goes to say, without the most up-to-date information companies are leaving

themselves vulnerable to missed opportunities and for competitors to exploit their error.

Investing in the IoT would increase a company’s offensive and defensive capability, thus increasing

competence and increasing investor confidence. Those companies that invest now will have capabilities

that will allow for a company to obtain a momentary competitive advantage. Since the technology will

become more common, the technological advantage will diminish. What may be retained is the

technical knowledge and customer insight gained from the head start. Filtering the data and anticipating

customer expectations may be the differentiating factors that create a sustainable competitive

advantage.

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Industry Players

The companies developing technology for the Internet of Things include: Apple, ARM, Amtel, Bosch,

Cisco, Ericson, Freescale, GE, Google, IBM, Intel, Microsoft, Oracle, PTC, SAP, Texas Instruments, and

Qualcomm. These companies have all shown levels of excellence in business at some level through

invention, innovation, or execution. The threat to GE is not competing with most of these companies,

but being made obscure by some of them. Four of the top five most powerful brands are tech

companies in direct competition with GE in the IoT. It is important to mention brand is due to the new,

widening awareness of the IoT industry. Due to consumers’ lack of familiarity with IoT services, they will

rely upon their brand knowledge, which will bias their opinion and preference.

The Value of Brand

As companies create something new, the connection to the past will help

pull clients into the new field. Brand loyalty helps sustain the continuity

between product launches. As new products emerge, and the sales

exchange is repeated, loyalty increases over time with repeated, successful

exchanges.

As consumers become more confident in the brand, brand loyalty increases.

The benefit of greater brand loyalty includes the ability to charge a premium

to products and services, and straight rebuys become quicker and more

efficient. Also, consumer willingness to experiment with new product lines is

less onerous, especially if is packaged with a preexisting product. With

greater brand awareness, the publicity of making moves into new channels

has greater organic growth and natural traction.

Google differs from GE, IBM, Intel, Oracle and Cisco in one key way: it is a

service both businesses and consumers knowingly and willingly use on a

daily basis. GE, IBM, and Cisco are creators of the infrastructure and tools

that the modern, digital world runs on, but it is Google that is used by

people of all ages who are able to use the Internet. As important as GE’s

work has been, it is not in the minds, have the loyalty, or the daily, repeated

traffic Google does. Google has embedded itself into many nations’ psyche

due to its excellent search results to the point that it has become the

reference brand for conducting searches.

Google’s birth came at a time when it was possible to be born global. In an

instant, it reached more people than it took GE to do in decades. The genius

of Google’s core product would require a book of its own. Google’s users - their product - use free

services in exchange for being sold to advertisers. Extending their products and services to mobility

extends their research and resale capability to advertising companies.

http://www.forbes.com/powerful-

brands/list/

13

The Brand’s Value

In each of its sweet spots, GE, Google, IBM and Cisco have strong brand recognition with its clients and

respect from the business world. In terms of the IoT, there are no points of reference, no standard by

which people can measure services. Without the ability to benchmark competing services, business and

consumers will favor familiarity and a semblance of predictable expectations.

This demonstrates how the value of the brand increases the return on investment. A strong, welcomed

brand will reduce the costs to raise brand awareness, and shorten the time a consumer will take to

make a purchasing decision. This is how brand will sway customers to make their decision at a time

when there are gaps in the information.

Fragmentation of the Field

The Internet of Things is a budding industry. Early on, competitors have recognized what is at stake, the

potential value of the market, and their own weaknesses. Differentiating between the industry

participants is still too early to determine who will hold what market position. What is certain is alliances

are being made between previously disparate companies, the move to partner has already begun to

compensate for weaknesses. For example, IBM partnered with AT&T to complement each other’s

strengths to capture this opportunity.

When considering only large capital companies engaged in developing the Internet of Things, the total

comes to 17 competitors. Although the IoT can be segmented into Home, Business, and Industry, it is

Apple and Google who are receiving much of the publicity. In Leon Spencer’s article on the IoT, the

forecasted $7.1 Trillion market value would be divided between Apple and Google, who are focusing

initially on the Home and Business segments (Spencer, 2014).

Although this is not true, it is not entirely false. Neither truth nor falsehood matters in this case as the

entire article mentions only two companies from the host large capital corporations actively working on

solutions to answer the IoT demand. With continued publicity for their Home segment efforts, Apple

and/or Google will become the reference brand just as the iPhone is for mobile telephone models or

how Google became a verb for searching. Dominance in other segments will be important to monitor as

expectations for services maybe dictated by what applications users utilize in the Home segment.

14

Competitor Analysis

Traditional strengths are going to govern the initial stages of the IoT industry. For example, GE has a

large, historical installation base for a diversified field of industrial goods. GE, therefore, developed its

strategy to create its Industrial Internet in tandem with Predix, its Big Data analytical software, to

capture the manufacturing and health care markets. Similarly, IBM is developing its Smarter Planet and

Smarter Cities initiative to capture the enterprise market. Meanwhile, Cisco is developing its IoT offering

to deliver services into places such as manufacturing floors, energy grids, healthcare facilities, and

transportation. On a more personal level, Google is grooming it Nest acquisition in order to better

penetrate the home market and attract users will multiple smart devices.

Without extensive excellence in the field, the following SWOT diagrams, although not focused on IoT, do

reflect the positioning each company is taking in the IoT industry. Although the SWOTs look at the whole

company, it does accurately reflect how the companies are approaching the new market with how they

are segmenting the market.

Strength Weakness

Industry Recognition Culture of innovation Diversified product portfolio Strong revenue growth

Low Debt Rating Substantial Debt Burden

Opportunity Threat

Increased demand for commercial airplanes Global Project Opportunities Key acquisition strategy

Environmental and other government regulations Projected labor cost increases

http://www.marketingteacher.com/general-electric-swot/

Strength Weakness Open source products and services Quality and customer experience are the primary objects Financial situation Access to the widest group of internet users worldwide Strong patents portfolio Product integration Culture of innovation

Relies on one source of income Unprofitable products Patent litigations

Opportunity Threats Growing number of mobile internet users Obtaining patents through acquisitions Driverless electronic cars Growing into electronics industry Google fiber cables

Growing number of mobile internet users Unprofitable products EU antitrust laws Competition from Microsoft

http://www.strategicmanagementinsight.com/swot-analyses/google-swot-analysis.html

15

Strength Weakness

First mover in cloud computing solutions for enterprises Brand reputation Diversified business Strong competency in acquisitions Integration of products and services

Expensive service and software solutions Focus mainly on large enterprises

Opportunity Threat

Expand services and software divisions Increasing demand of cloud based services

Increasing competition in the cloud computing market Slowing growth of world economy

http://www.strategicmanagementinsight.com/swot-analyses/ibm-swot-analysis.html

Strength Weakness Geographically Diverse Business Economies of scale lower cost and increases margin Diversified into many segments and tapping sophisticated markets Market leading position brings many benefits Robust financial performance Known for its strong R & D division A culture that experiments produces better long term values

Declining storage networking market Weak presence in BPO technologies/markets compared to global leaders

Opportunity Threat Expansion through Strategic Alliances and Acquisitions Smart grid infrastructure could increase demand Wi-Fi Home Calling and mobile broadband Data intensive applications Data Mining

The use of cloud servers is lowering sales and especially profits margins for Cisco's core business. Open Source Competitors High competitive rivalry Virtualization

http://www.mbaskool.com/brandguide/telecom-service-providers/6254-cisco-systems.html

Comparative Strengths

Each of the companies mentioned have a storied history of success. Each of them has grown to employ

over 50,000 people. With the exception of Google, all of them are approaching the market from a

business-to-business point of view. GE, Microsoft, and IBM have all pitched their ideas to entire

municipalities; GE extends into its sweet spot as it develops the Industrial Internet. On the metropolitan

level, even Google has deployed Google Fiber in Kansas City.

Where Google differentiates itself, however, is by how it targets that market segment. Analysts believe

Google’s acquisition of Nest is a direct attempt to extend their reach into the connected home. The Wall

Street Journal reports, “Mr. Fadell (Nest’s cofounder) said he sees Nest fitting in Google's vision of a

connected world that spans from pocket devices to automobiles to homes” (Winkler, 2014). With

Google’s presence in the general consumer’s mind and its popularity of wearable devices, the extension

of its connected home offering is going to strengthen Google’s presence as a fundamental tool in today’s

digital age. Additionally, as of June 2014, Google opened its Nest labs to outside developers. (Barr, 2014)

16

The following table demonstrates GE’s strengths, which come historically from industry, investing and

divesting into fields of business, invention and innovation, a diversified portfolio of business. Google’s

newer foundation is not a detraction from its strength as a competitor; it simply means they have

different strengths.

GE’s Strengths Google’s Strengths

1. GE Health Care – Global leader in equipment development and manufacturing 2. Industrial Diversification 3. Native Products to equip with data sensors

1. Native Skill of Data Analysis 2. Google Fiber 3. Main Stream Consumer Portfolio (Chrome, Android, Gmail, Google+)

Notes

1. Health care is where much of the IoT will be implemented. Forecasts suggest a full 15% of IoT growth will be health care related. (Gartner, 2013) 2. Globally, the IoT will be involved in all of the same areas GE conducts business. 3. Aerospace, resource extraction, and transportation are all areas that will require regular maintenance of equipment.

1. Google search engine code and the information they compile on user searches is their primary source of income. 2. Unlike IBM and GE who partnered with AT&T, Google owns its own data transmission network. 3. Google is a highly recognized brand name, delivers products and services at low prices, and has a loyal following of millions.

17

PESTLE Analysis - What are the advantages and impediments of the Internet of Things?

As the IoT will solve several problems, increase efficiencies, and increase safety, it does come with a

host of issues to consider. As the Internet accelerated globalization, it created a number of issues arising

from the same capabilities. Although the IoT will increase productivity and generate opportunities for

the IoT designers, programmers, network designers, it will contain some sticking points that

governments, labor, and society may contest.

Political: If the IoT is developed to manage a municipality, it could be considered a public-private

partnership. In stable nations, the robust respect for business will recognize the sovereignty of each

entity, but in less stable parts of the world, the partnership may be nationalized.

Economic: Consider the adage, “There is no such thing as a free lunch.” Considering the positive

economic and ecological impact the IoT may have, the increased productivity and automation of work

will change the future job skills requirements. With any change, improvement or not, follow-on

adjustments have to be made. Civilization’s adjustment to the IoT will vary in degrees of acceptance.The

change in economics has similar learning points in relation to reports of climate change.

Political

•Allowing one nation's company to control the flow of information

•De-centralizing information analysis, management and utlization

Economic

•Increasing productivity and increasing the global GDP by $15 trillion over 20 years

•Integrating product lines

•Evolution of collorabtion and innovation

•Shift in labor skills

Social

•Fear Factor: People's acceptance of transmitting personal data, loss of control

•Allowing the machines to predict owner's habits/ think for them

•Evolution of personal habits

Techonological

•The language by which all manufacturers will use to ensure proper communication between devices

• Productivity and automation increase

Legal

•Transmission and utilization of sensative (personal and corporate)

Environmental

•Increased efficency will save natural resources, locate ideal locations for renewable energy centers

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Social: To quote a Discovery Channel article, “Evolution can be fast, but not fast enough to keep up with

the rate of human-caused climate change” (O'Hanlon, 2013). The simile between climate change and

technology change derivefrom the point that most things are not ideally suited for quick change.

Physically and mentally, the preparation for change always takes time for the vast majority of people.

Although the IoT may deliver cost savings for companies and the end consumer, it will impact

employment, social exchanges, and spending habits.This may seriously impact the reception of the IoT.

The Opportunities for Service Providers

The “sweet spot” identified by most of the IoT service providers are based on the business-to-business

segment. Cisco, IBM, Microsoft, and GE have all delivered solutions to cities to manage some aspect of

their daily tasks or infrastructure. They all knew they had to do something big. Referring to the

Economic section of the PESTLE, the IoT is expected to increase productivity, decrease cost, and add to

the global GDP. The following is a sample of IoT implementations.

The company that will succeed in the market will be the one that allows for the most access and

functionality. Microsoft’s Windows operating system for PC is the global leader due to the amount of

programs written for the platform. Google’s Android operating system for mobile devices is the global

leader due to the amount of applications written for the platform. Since more and more work will be

done over the Internet, becoming the service of choice for the Internet of Things will be highly

dependent on if users can get the most usability. By partnering with developers, the association will

effortlessly increase the product’s value.

Cisco July 2014, Invests $30 Million in IoT center in Barcelona

Cisco and Intel

March 2015, Challenge Up, a joint Internet of Things (IoT) accelerator for start-ups from the Europe, Middle East and Africa (EMEA) region

IBM December 2010, Opened a Smart City Operation Center in Rio de Janeiro

IBM and AT&T February 2014, AT&T will manage sensors' communications and tracking happening over the cellular network and IBM will use its analytics platforms

Microsoft March 2015, Announced Azure IoT Suite that combine business intelligence capabilities (Power BI) using real-time data (Azure Stream Analytics) with Azure Machine Learning capabilities

Microsoft and Motorola Solutions

October 2014, Orleans Parish installed Azure to consolidate emergency services into one terminal to improve response time

Google March 2013, Kansas City becomes the test ground for Google Fiber, Gigabit speed Internet connectivity, moving Google into the Internet delivery market

Google and Nest October 2014, Google acquired Nest to stay ahead of competitors to control the next generation of smart devices, including appliances and household devices

The Market Opportunities for Many Smaller Developers

Similar to developers for mobile telephone operating systems, an entire industry is likely to sprout up

due to the opportunity to deliver applications. Literature and advertisements from IoT service providers

uses universal language about unbeatable security, improvement of efficiencies, extending asset life and

19

versatility. Except for Google, what IoT service providers do not mention is the compatibility with any

device or the opportunity for 3rd party companies to write programs for the platform.

The list of activities represents large contracts that preside over a large physical area, but the service still

comes down to the individual user. The operator will want ease of use and functionality across the range

of their devices. With potentially dozens of devices to manage, if even one device is not compatible, or

uses a differently structured graphical user interface, the disruption could slow the user’s integration

into the operating system.

Based on mobile telephone experience

Apple and Google have strong following of their products. Google, with its search engine dominance, its

mobile OS dominance, and its move into the home with the acquisition of Nest, it is positioning itself to

be the choice of millions of consumers. Those same consumers work in local and national government

as decision makers who will be required to decide which company will be the backbone of their

network. Their Home market experience may influence expectations and choices for their company.

Woo the User

Although GE will connect devices that make the world work, is it addressing the market of the people

who do the work? Having a fundamental, underlying network connecting millions of people and product

is one thing; having a network that connects into people’s lives, brings them joy and satisfaction is

something else completely. Although the B2C market may not be the focus, creating informative market

messages will go a long way to inform people of the relevancy of GE, the Industrial Internet, and Predix.

Is the Home segment experience being over represented? No, in the sense of how users will interact

with the IoT: smart phones and tablets will be a common medium of utilizing IoT data. Although the

segment GE is pursuing is business-based, that does not mean the clients expectations of an interface

will be a dull, lifeless, and confining GUI. Also, the interface must be attractive with commonalities

across industries. The lessons to learn from the consumer are to listen to their feedback. Apple and

Google have created intuitive interfaces that require no instructions to become an intermediate user.

IoT Service Provider Activities – Supply Chain Analysis

Benefits if the IoT deliver value in three key areas: Pervasive Visibility, Proactive Replenishment, and

Predictive Maintenance (Mondazzi, 2014). The table from Opportunities for Service Providers

summarizes activities by those companies looking to get a foothold into the IoT market. Through these

activities, each of these companies addresses the key areas of the IoT’s supply chain benefit.

For example, IBM and Microsoft are delivering the capability of Pervasive Visibility and Predictive

Maintenance as authorities can better manage their municipalities. Google is delivering Proactive

Replenishment on the consumer level (Google Fiber), and this type of activity transferable to other

industries with which GE has dealings.

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Supply Chain Improvements for Manufacturing and HealthCare

Industrial companies are looking to add analytics to two major areas: assets and operations

optimization. Classic macroeconomics state, “a facility is operating at 100% utilization if 85% of the

machines are working.” This rationale is based on the need for repair and maintenance of equipment as

it breaks down since actual one-hundred percent utilization is possible only in short-terms before parts

fail. What a Smart Factory would able to achieve is a higher utilization rate through better forecasting

and sequential planning to minimize downtime, thus boosting equipment utilization.

Manufacturing Assets

Pervasive Visibility, Proactive Replenishment, and Predictive Maintenance will all be factors in managing

the operations of any kind of Smart Facility. Visibility into the workings of equipment could have a lot of

meaningful applications such as improving production time and costs. For example, unanticipated

downtime of equipment could have knock on effects reaching both horizontally and vertically in the

supply chain. The ability to manage the expectations of a production cycle and greatly improve the

quality of the product and extend the life of the equipment, saving on reinvestment costs.

Manufacturing Operations

Business works best with predictable variables. A steady stream of material is need for inputs to deliver

a consistent output. Consequences of fluctuations require extra energy. Visibility can deliver

consistency, optimizing performance.

Health Care Assets

The benefit to healthcare is not just patient care. Saving a life may be due to numerous reasons.

Certainly, the development and miniaturization of wearables will improve the patient experience, but

similar to the benefits to the manufacturing floor – equipment breaks down. Increased reliability

through the installment of sensors can prevent the malfunction of equipment at a critical moment.

In a report on the UK’s National Health Service, a 2014 report found 309 people had died due to

malfunctioning equipment, seriously injuring 5,000 more, with a total of 13,000 incidents (Steere, 2014).

In addition to the sheer altruistic value of lives not needlessly wasted, improving service would have a

massive impact on insurance costs, thus reducing malpractice lawsuits and overall costs in general. If the

average wrongful death settlement is $1.4M, the quantifiable savings could easily reach hundreds of

millions of dollars per year across an entire country (Murphy, 2013).

Health Care Operations

The wealth of Big Data derives from the ability to develop pattern recognition software. Although this is

a derivation of predictive tools from machinery maintenance, the same concept can be applied to

healthcare management and patient diagnosis. Ranging from managing patient flow time in order to

increase the speed of patient admittance can greatly improve the stratification of serious medical

conditions from lesser conditions. Additionally, and more importantly, predictive medicine could come

in the form of an algorithm that is connected to a patient’s monitoring devices and prevent an

emergency.

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Porter’s 5 Forces

The IoT is about to face a huge wave of growth. Declining prices of intelligent devices and components

will mean an increase in their presence. The industry is about to introduce newly affordable capabilities,

as well as foster new industry for developers. Considering these factors, all that has been said

concerning the companies involved and the market segments, the situation deserves to be summarized

simply. Using Porter’s 5 Forces model, a value has been assigned to each for with a weight of Low,

Moderate, or High. In order, the value rates the intensity of the force from light to contentious.

When considering the companies involved alone, it is possible to get an intuitive grasp of how

competitive the market will be. There are several large companies vying for market share; the only thing

lacking is incumbency. Since the market is still relatively new, no one company possesses a dominant

position in the industry, let alone in the Home, Business, or Industrial segments. This could signal a

volatile first generation of the IoT as the services expand and mature, and providers determine if the IoT

is worth the effort, or if they are capable of competing.

Competitive Rivalry:

High

Threat of New

Entrants: Moderate

Bargaining Power of Buyers:

High

r

Threat of Substitues: Moderate

Bargaining Power of Suppliers: Moderate

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Threat of New Entrants – A set field of many competitors

New entrants to the IoT market would face several large companies in the field that are already

developing services.

High start-up cost: Developing a differentiated service and marketing it to the segment.

Distribution of service: The challenge of delivering a service on any significant level would

require network planning, access to a client’s network, and robust security.

Hadoop software: At the core of the IoT is analytics. A meaningful aspect of using an IoT service

is optimization of a client’s business. The analytical possibilities that Big Data services provide

deliver information from sensors and transactions in areas such as logistics, customer service, or

farming. The software needs development, testing, and delivery.

Less competition, not more: With nearly 20 large companies vying for market share, it is likely

some of those companies will divest from the industry. This would entrench remaining

competitors.

Power of Buyers – Buyers will have service provideroptions, but not the option to do without service

Initially, customers will be able to pick and choose from the numerous service suppliers. Since the

market will be local, regional, national and global, no one customer will impact the market too much,

but there will be the option to switch services.

Dozens of suppliers: Nearly 20 large companies have been identified as service providers. This

does not include the medium and small companies, or the niche suppliers.

Standardization of protocols: If the language becomes standardized, suppliers will have to look

for incentives to keep customers or install “switching cost” provisions in contracts.

Service importance: The IoT will become the normal cost of doing business. IoT services will

become a necessity in how people and businesses will operate on a daily basis.

Availability of Substitutes – Alternative services will persist to be a threat to suppliers

The possibility of customers switching service will be a treat, especially if switching costs are low. This

may mean customer retention may face a huge churn rate as customers switch from provider to

provider.

Large number of buyers: Households, business, local/state/national government create a sum of

billions of customers. Even a small percentage of billions of customers could mean huge profits,

even if churn rates are high.

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Large scale purchases: Big business and government contracts will involve hundreds of

thousands of connected devices from printers to vehicles. Service purchases such as these will

involve network planning and likely long-term contracts.

Sales and service plans: GE’s diversified portfolio can be a “foot in the door” for IoT service

plans. The sale of machinery can come with a product warranty that can be monitored by its IoT

service.

Power of Suppliers – Prominent names in the field with considerable R&D

For the companies in the industry already, they have completed trial sites and are capable of deploying

network service. Swaying the customer to contract with their service becomes the issue.

Brand loyalty: Although the retail space comprises only 8.3% the IoT market (Newton, 2014),

Google’s name is very prominent in the field.

High fixed costs: Maintaining a data collecting network will limit the number of new entrants

into the field and eliminate some suppliers.

Buyer Incentives: Bundling IoT services with equipment sales.

Government restrictions or legislation: Could IoT services become a public utility or come under

some legislation that could alter the business environment.

Competitive Rivalry – Home, Business, and Industry segments each have their field experts

Of three segments mentioned, not one company is master, or viable competitor, in all of them. Home is

where Google is making its move; Business becomes a grey area that is mixed for all; Industry where GE,

IBM, and Cisco proclaim excellence.

Service differentiation (hardware): The main issue is the similarity of substitutes. GE’s

outstanding point will be able to offer service after its products.

Service differentiation (municipal): The main issue is the similarity of substitutes. GE, IBM,

Microsoft all have Smart City success stories. The municipal area may be much more

contentious.

Smart Buildings: Managing the resources of a building is just as important as city management,

but mostly belongs to private firms. Rudin Management has shown credible savings through the

development of their DI-BOSS software. Smart Buildings will be highly valuable and the middle

ground between Home service providers and Industry service providers.

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Conclusion and Recommendation

At present, General Electric needs to work through the current challenge of developing Predix and

establishing it as the industrial standard. The Internet of Things is a new field with much yet to be

defined, with territory it to be staked, with a lot for potential development. In terms of its life cycle, the

phase the IoT is in is the introductory/early adopter stage with its high investment costs and small

market size. At this early stage, there is a lot of room to develop the technology, the peripheries, the

partnerships, and the message.

Based on the positions companies are building, there are two ideologies to consider: Those that target

the fewer big customers that operate something large (B2B), or those that target the many smaller

customer that primarily look after themselves (B2C). A consideration GE will have to keep in mind is how

to address current B2B needs and prepares itself for the next steps and the challenges to come. It has to

assess the threat of current competitors that operate in its market segment and later address those

competitors that captured the personal space of consumers and consider if, how, and when the

consumer space it not enough and moves into the business space.

Companies that subscribe to either camp do so for historical reasons – how they historically approached

the market. In 2010, IBM installed an intelligent operations center in Rio de Janeiro that unites 30

municipal entities into one situation room. In 2015, GE installed its Intelligent Cities Platform in San

Diego to control over 3,000 city street lights. These examples demonstrate the perspective used to

target the fewer, larger customers in a B2B setting, based on their success of delivering solutions on a

large scale. A sample of segments where large companies should look to monopolize is the following:

Geographically dispersed companies

Centralized municipalities overseeing daily operations

State and national government overseeing daily or emergency operations

Military services

In comparison, in 2014, Google bought Nest. A diametrically different approach to the Internet of

Things, Google is targeting the general consumer by entering into their homes. With a presence in so

many aspects of people’s lives, from mobile to desktop to automotive to home living, Google’s data

gathering capabilities is becoming ever more ubiquitous and further ingrained into people’s lives.

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Recommendations

The following four recommendations are put forward as a course of action.

1. Develop an “App Store”

2. Advertise and Define the Brand

3. Prepare for the inevitable contest between Home, Business, and Industry

4. Partner with health care equipment manufacturers

Developing an App Portfolio

As the mobile experience guided and helped define unified communications, applications on smart

devices will be how users learn to interact with IoT enabled devices: user interfaces that can be used on

a range of touch screen devices, and allowing universal access. Large and small customers will start

migrating to the IoT once they can understand its benefit. Since GE’s diversified portfolio of business is

widespread, having a narrow set of predefined applications would hinder the company’s ability to

adequately offer support to its customers. As part of the Industrial Internet offering, GE must develop its

suite of programs to support customers’ needs.

GE does not have the foresight, insight, or knowhow to develop all of the applications to manage the

billions of data points presently in place, nor the billions to come. Although GE has recognized the need

to capture information from data points, selling the analytics is only one possible aspect of IoT

salesmanship. Control and implementation of networked devices will become key, yet no one can

presently predict what those needs will be. In order to successfully fulfill those customer criteria, GE will

have to partner, purchase, or outsource the creation of IoT applications.

Internally developing core applications for network security, maintaining core competency, and

developing insight into the industry should be a primary consideration. If it is core to the business, GE

should work to become experts in the field and manage the application internally. These applications

should allow for customers to reach their goals and teach GE how to better serve the customer.

Externally developed applications should be welcomed and encouraged. The possibility of an external

developer creating an useful application is highly likely. Often time, opportunities are exploited based on

an user becoming a business when there was a gap in service. The history of business is strewn with

stories of how needs went unfulfilled, propelling customers into the role of entrepreneur. Applications

are a new field of business and it is reasonable to believe developers will create apps that the founding

companies failed to see. Since each industry has specialized activities, GE should welcome the creation

of a consortium of developers to identify, trial, and implement a variety of programs to complement the

Industrial Internet.

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Brandings: The Divided Sides of the overall Industry

A question to consider is,“Win the land in which people live or win the loyalty of the people?” These two

approaches are evident from the positioning, acquisitions, and partnerships each IoT service provider is

taking. The approaches to the Big Data market stem from two approaches: the business-to-business

approach of GE, Microsoft, IBM, Cisco and Oracle, or the business-to-consumer approach of Apple and

Google.

Focusing solely on the B2B segment not only weakens GE in the cost of doing business, but by focusing

exclusively on the B2Bs, it will have to work hard to differentiate itself from its competitors and create a

brand and service that is distinctive. Being grouped with other providers could prove counterproductive,

especially while Google can come to dominate the Home market and become the reference brand for

another Internet service, again.

In a simplistic view of how the field is balanced, as GE, Microsoft and IBM battle for dominance and

market share in the B2B space, Apple and Google and can work in creating a duopoly in the B2C space.

When the time comes for continued growth, Apple and Google will be able to draw on its experience

and financial resources to become contenders in the B2B small and medium enterprise space, starting

with off-the-shelf solutions for small businesses and begin to scale up. It will use those learnt lessons

and gained resources, as well as its brand recognition and product familiarity, to more easily convince

business to use their service.

Although the IoT for business and industry may eclipse home usage by billions of connected devices and

have a greater value by trillions of dollars of assets under management, it will be mostly unspoken by

the general public, business journals, or investors. Most peoples’ interaction with the IoT will be through

their mobile device, car, or computer to control their home, car, or entertainment center. Perhaps the

value of each home user may range up to a million dollars of managed assets – which will pale in

comparison to the billions of dollars of equipment business control – but, it is what people will imagine

as the standard for service delivery.

GE will have to do two things: Differentiate itself from other Industrial Internet service providers, and

prepare for making growth moves into the Business segment.

1. Without differentiation, customers will see brand switching as a tactic to hold over GE.

Creating a service with irreplaceable value will prevent brand switching, increase loyalty, and

command a premium. The service has to be created, refined, improved, delivered and publicized

in a way that awes its user and creates excitement for future users.

2. In the inevitable battle for the Business segment, GE has to start making its name known now

as service provider that can scale from a global level down to professional SME level. This will

deliver the message that GE is interested not only in airplanes and heavy equipment, but the

network of thousands of companies with smaller investments. The space between global

corporations to the local SME contains a lot of people, a lot of companies, and a lot of

equipment to manage.

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Partnering with Fellow Industrial Giants in Health Care

Siemens and Phillips represent the two remaining giant manufacturers of health equipment. With GE

included, the three manufacture the vast majority of the globe’s medical equipment. Each one has a

storied history of greatness and a strong reputation for quality. However, neither Siemens or Phillips are

as prepared as GE for the Internet of Things; neither are developing their own network to manage their

own devices, though they are working towards making their devices communicate with each other.

In a dossier by Siemens, the company noted a threat to the roll out of the IoT is the lack of standards.

“One obstacle impeding the growth of the Internet of Things is the lack of technical standards. These

ensure that all devices from all manufacturers can communicate with one another. A key technology for

connecting everyday objects to networks is radio frequency identification (RFID), in which data from a

chip is transmitted via wireless links.” The dossier continues, “RFID is no longer the only industry

standard, however. Sensors are now being connected via WLAN, Near Field Communication (NFC),

Bluetooth, and Zigbee. Market research firm Navigant Research reports that in 2012, almost 40 million

devices around the world were equipped with Zigbee. In 2020, that figure is expected to grow to over

200 million — a more than five-fold increase within just eight years. On the other hand, completely new

approaches are being tried too: researches at the University of Washington have developed sensors

without batteries that can engage in wireless communication with other devices. They use the

attenuation of radio waves as a signal path – a technology that could allow a significant expansion of the

Internet of Things.” (Rohling, 2014)

In a high-value market such as health care, no one would want exclude their products from the newest

generation of technology. Especially in a regulated, data sensitive, high-demand-for-quality industry

such as the medical profession, it would give health care providers, insurance companies, patients, and

families peace of mind that a hospital’s equipment was able to communicate with complete access and

accuracy to other medical devices, no matter the manufacturer. Allying the major manufacturers around

a common cause can be beneficial in several ways.

Quicker development of a standard language

Reduced development cost

Strong Corporate Social Responsibility

Standardization of code may reach into other fields

Partnering with Manufacturing Giants in Industry

Caterpillar, Inc. partnered with Uptake to manage the data analytics of millions of earth moving units

around the world. Although the largest heavy equipment manufacturer partnered with a different IoT

provider, this leaves other heavy industry companies such as Volvo, Mitsubishi, and Siemens in need of a

network to enable their equipment and carry intelligent signals from work sites. Being involved in the

manufacturing of equipment at the design stage can better integrate the intelligence components,

which could make the overall process more efficient, reliable, and easier to repair.

28

Other manufacturers could include John Deere, manufacturer of farming equipment. As much as

preventive maintenance and equipment service contracts are the initial focus of the Industrial Internet,

improved productivity could be a positive consequence by offering GPS guidance to farmers, or field

management planning for the best route to take for harvesting equipment. A GPS guidance system

could automate the machine’s navigation, freeing up the time of the farmer to tend to other matters.

With the continued development of driverless cars, large, slow moving equipment in open territory,

developing a program to guide them is an achievable feat.

Lastly, partnering with heavy equipment manufacturers also makes good public policy given their use in

the erection of buildings, bridges and roads. Not only do the sensors have to be embedded in

equipment, the very infrastructure that is built needs monitoring and upkeep. At the Association of

Equipment Management Professionals Asset Management Symposium, Chris Rezendes commented on

Intelligent Roads. He said, “We have 70,000 bridges in the United States and at least 30 percent have

national economic, security and natural disaster response implications.” To further the point,

“Intelligent road systems are another lucrative market. Right now the $150 billion transportation market

in the United States is almost “all dark,” Rezendes says, meaning almost none of it is wired and

monitored by sensors” (Jackson).

In Conclusion

The Internet of Things is a market already in motion, yet no service provider has a strong market

presence. With a strong beginning, later entrants to the market will face a higher barrier of entry,

ensuring further success. However, those companies entering the market now are very strong and very

capable. Success will come through quality, collaboration, clearly defining the market segment, and

being sure the market segment clearly understands the offering.

The recent focus on the IoT is due to numerous forecasts predicting the size of the industry to double

within the next 5 years from 25 billion connected devices to 50 billion. The industry took decades to

reach its current connected level and is set to accelerate its growth. Even with this enormous potential,

there is still no common standard or leading market provider.

The four steps mentioned will begin to prepare for the next phase of the GE’s IoT. They are steps that

work as necessary, preventive, or as consolidative steps. The first recommendation is to build a portfolio

of applications that allow for users to take action on the analytics of data gathering. The second

recommendation is to define the brand in the mind of its customers, thus defending the brand from

poachers and make it easier to extend into segments in the future. The third recommendation

consolidates the health care industry, giving GE a strength it may need to utilize in future developments

of service delivery and innovation. The fourth recommendation reaches out to other manufacturers of

heavy equipment and offers them a service that will increase the attractiveness of the products and

keep them competitive. Also, partnerships in heavy industry will likely have a knock-on effect of

exposure to public construction or private facility construction. Both types will benefit from installing IoT

enabled sensors and continuing a service-based relationship with the owner.

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The Internet of Things is an opportunity to extend the enterprise. Strictly selling equipment and parts is

morphing into a continuous conversation with the customer. The world will still need machines built,

but the next generation of growth will connect company and customer in new ways. With continued

daily dialogues, the ongoing engagement will provide companies new ways of driving revenue through

ongoing services. Analytics vertically extends the relationship beyond the sale and into providing a

service that will become more and more valuable, the service of providing the information needed to

make the right business decisions. Predix will make deriving Big Data analytics possible and the data

meaningful; the extension is creating an environment that will allow for even the basic user the access

to control the network of devices on demand.

30

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