james heppelmann's mitef cambridge fireside chat
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The IoT Killer App
James E. HeppelmannCEO, PTC
A Fireside ChatConnected Things 2015 Conference
MIT Media Lab2/26/15
John SallayFounder & Managing DirecctorThe NextVista Group
James Heppelmann John Sallay
We think that the killer app certainly inthe B2B type of world for Internet ofThings is [to] transform the way thingsare created, operated and serviced.
From a broken model of things 7To a model that works 8
How IT got to be IoT 9Products have different architectures 10
Four levels of breakthrough capabilities 11The fourth and ultimate level 12
Product boundaries will change 13One step beyond that: system of systems 14
So industry boundaries will change too 15You need to know where you fit in the IoT value chain 16
We're in the second inning of IoT's evolution 17Today's CRM is obsolete 18
The ecosystem is key 19Products will become platforms for delivering new capabilities 20
Small companies have a golden opportunity 21
What about industry consolidation? 22Security concerns won't stop IoT 23
Beware of brand risk 24Centers of excellence will proliferate 25
Data privacy issues today 26Two things need to happen with private data 27
Organizational change #1: more interdepartmental teaming 28Organizational change #2: focus on after-sale value 29Service providers can't rely on sunk cost advantage 30
The tale of the connected washing machine 31Startup strategy #1: the leapfrogger 32
Startup strategy #2: work the business model 33Startup strategy #3: the ecosystem play 34
Big company strategy #1: strategic differentiation 35Big company strategy #2: operational efficiency 36
I often joke that if your oven goes down a couple ofdays before Thanksgiving, you know, youre screwedbecause on the first service call theyre going to comeout and ask what kind of oven do you have and whatswrong with it. And then theyre going to say, Give mea week because Im going to have to order the spareparts and Ill be back to install them." And the problemis two service calls on an oven costs more than a newoven. So, that models just not working.
From a broken model of things
But if you were monitoring and able to tap into that oven[via the Internet] and figure out whats wrong with it --first of all, you might prevent the problem. Second of all,you might fix it remotely. Third of all, if you have to go fixit, you go there and nail it the first time.
To a model that works
The term Information Technology was coined whenpeople realized that value chain processes would workdifferently if we would capture information and pass itfrom one step to the next. The second biggestgenerational change was the Internet when we realizedwe can have extended value chains. We can involvecustomers on one end and suppliers on the other andcan more efficiently cross departments and systemsand geographies. The big breakthrough [with Internet ofThings] is that the things are now active participants intheir own value chain.
How IT got to be IoT
If you think about smart connected things, theyre partphysical, part digital. And the digital part is partly in theproduct and partly in the cloud. So suddenly now, ifyoure shipping smart connected widgets and the cloudparts not ready, you cant ship the widget. So now weretalking about a pretty sophisticated technology stackthats behind every single smart connected product andthat has all kinds of ramifications for engineeringdepartments.
Products will have different architectures
Theres monitoring, if you can monitor things you canset limits and alerts and so forth. The next level wouldbe control. We can apply a bidirectional control loop,and begin to operate things remotely and actually get tothe third level, which would be optimize. Which meansnow we have algorithms, probably up in the cloud that[let you] say, Well, whats the best control signals I cansend to it? Or, how can a fleet of these things worktogether better as a team?
Four levels of breakthrough capabilities
The fourth and ultimate level would beautonomous interaction. Let things process minidata streams from many different souces andstart making their own decisions. Sort of theGoogle autonomous car.
The fourth and ultimate level
Companies that used to make simple things,make smart things, and then connected things.And now theyre realizing that families ofconnected things could play together. If farmequipment is part physical and part digital, and ifthe digital part was shared to some degree sothat the farm equipment was generating a geodatabase of how much each little parcel of landproduced, then next spring when its time toplant the next crop, we can vary the degree offertilizer based on production last year.
Product boundaries will change
And so if you take the farm example, its not justthe farm equipment. Then you start puttingsensors in the field to measure the moisture thatyou connect to a weather forecasting serviceand then you connect that to the irrigationequipment and you start doing localizedwatering. If a given parcel of the field is sort ofdry but not an emergency and the weatherforecast says its going to rain in two days youcan wait.
One step beyond that: systems of systems
Accenture type system integrators are alsocapable of doing that. Because by the time youget to a smart automated farm, and youre doingbroad system integration, it doesnt so muchmatter if you make tractors or not anymore.
So industry boundaries will change too
Are you making simple things? Are your things acomponent of somebody elses system? Are youmaking components? Are you making products?Are you making integrated families of products product systems as we call it? Or are youmaking systems of systems? Are you a player insystems of systems? Or are you a competitor insystems of systems?
You need to know where you fit in the IoT value chain
We are in the second inning. Youve seen a littlebit of the game, you sort of understand how itsplayed, but theres still surprises. And you haveno clue how it will end. I mean, a lot of stuff isreal. Every automotive OEM is makingconnected cars right now. But theyre onlyscratching the tip of the iceberg. We dont knowwho the winners will be. But we can see how thegames played and its a pretty interesting game.
We're in the second inning of IoT's evolution
CRM, like we know it today, is completelyobsolete. Because the whole notion of a helpdesk system is that the customer monitors thething you sold them. And if the thing you soldthem isnt working the customer should call you.Well, how backwards is that?
Today's CRM is obsolete
What its going to take is ecosystems of peoplespecializing in every layer [of the technologystack] and then aligning together in anecosystem so that I can buy someday off theshelf a solution to manage a fleet of trucks or areal home automation solution or something likethat and there are different specialty firms atevery level contributing bits of communicationtechnology, big data technology, analytics,application platforms, security, end userapplications, and so forth.
The ecosystem is key
On the hardware side, you know one of thethings we talk about and has come up manytimes in our research is the idea of product as aplatform. I want to design a thing that I shiptoday and I want to keep adding to that thing. Iwant to deliver an automobile but I want to keepdelivering new capabilities into that automobileand maybe I want an ecosystem that can delivercapabilities into that automobile. A platform tome just means something thats reusable in ashared sort of way.
Products will become platforms for delivering new capabilities
If you ask the big companies, the Internet ofThings strategy from Microsoft, Oracle, SAP,even IBM is a little weak. Theyre just notfocused on it. Theyre big tanker ships that arehard to turn and people are protecting thebusiness they have. On the other hand its prettyeasy, particularly on the software side of thestack, to found a startup company. But then itshard to get traction with it. So, what we did, wasacquire two startup companies.
Small companies have a golden opportunity
I think there could be consolidation of the currentgeneration of players. But at the same time theintroduction of next generation players that areleapfrogging into the industry with innovativenew ideas like Next did. Whod a thought, shortof the Internet of Things, that you could get intothe thermostat industry?
What about industry consolidation?
When customers, say, Oh, security, security, Isay, Hey, are your computing systems, relativelyspeaking, more or less secure today than theywere 10 years ago? I mean anybody who thinkstheyre more secure today despite all theinnovations in security [is wrong] because thebad guys have been advancing pretty quicklytoo. So I say, "Okay, do you plan on stop usingcomputers? Of course not. So, were going to dothis. Were going to brute force our way throughthis."
Security concerns won't stop IoT
Maybe youre a company that makes, lets say,diesel engines. Youve been making dieselengines for a hundred plus years. Youve gotthat mastered. You dont know anything aboutputting software in the cloud. Thats the problem.So, I think there going to be some products thatcome out that are amazingly bad products fromsurprisingly good companies. And thats going tobe brand damage and thats going to be adifferent kind of risk that people worry about.
Beware of brand risk
A lot companies that are sayin