There has been a lot of buzz around the Internet of Things (IoT) over the last year and a half. We are hearing about all kinds of devices being connected to the Internet – anything from home appliances to entire factories. Investors are enthusiastic about smart hardware and wearable tech and IoT startups are popping up everywhere.
IoT companies attracted more than $1 billion in venture capital in 2013, according to CB Insights. The New York-based venture capital firm says that’s an increase of 11% from the previous year.
The IoT buzz accelerated in January when Google announced its $3.2 billion purchase of Nest Labs, a Silicon Valley startup that makes an Internet-connected home monitoring and energy management system. Other notable deals included Jawbone’s $100 million purchase of BodyMedia, a health and wellness monitoring company.
Despite these high-profile deals, questions remain about the widespread adoption of the Internet of Things. The Economist points out that estimates on the rise of Internet-connected devices vary greatly. Technology research firm Gartner says 26 billion devices will be online by 2020; ABI Research puts that number at 30 billion; Cisco estimates about 50 billion.
Challenges that need to be addressed include how to communicate effectively and securely between devices, how to transmit and store huge amounts of data, and how to protect privacy. Enabling technologies include the cloud, software and big data, which I will discuss in future posts.
In the meantime, critical IoT questions include: What’s the real impact of the Internet of Things? What are the opportunities for entrepreneurs? How do we make this concept a reality?
One way to boost IoT entrepreneurship is building neighborhood-scale demonstration areas. Examples include the Kansas City Startup Village, which aims to advance the city’s startup ecosystem by providing entrepreneurs with access to Google Fiber, and the City of Chattanooga, Tenn., which connected over 150,000 homes and businesses to one gigabit-per-second Internet speed.
Here in Cleveland, OneCommunity and NorTech are envisioning a collaboration to implement a pilot project across a neighborhood-scale demonstration area—including a designated testbed facility—which will showcase the potential of ultra-high speed broadband, sensor networks and smart/connected devices. Together, they will demonstrate many aspects of the Internet of Things in a real-world environment.
The project would be equipped with a fiber network that is many times faster and has lower latency than anything else in the country. It would provide the opportunity to focus on upstream IoT technology development, tools that analyze and manage big data, and many other critical applications in fields such as manufacturing, healthcare, transportation, infrastructure development and environmental management.
“A primary objective of such a project would be to answer the question: ‘Where does IoT have the greatest potential to create economic and social/community value?’” OneCommunity CEO Lev Gonick says. “Answering this question would place Cleveland at the forefront of a global inquiry process that could lead to significant benefits for the community and the region.”
For this global inquiry process to be effective it makes sense to distinguish between two separate IoTs: one that serves consumers and one that empowers industrial operations. It seems that currently small companies have an edge on the consumer side, while large corporations are excelling at industrial applications.
“It is really hard to create organic growth through connected devices,” the Harvard Business Review has pointed out. “It requires linking physical product and software experiences – designing for convergence – in a way that few large companies have done successfully to date […] And getting the convergence wrong can have serious implications for a company’s bottom line and market reputation.”
This Venture Beat article points out that for the IoT market to grow consumer products must offer two things: 1) utility to the user and 2) data that is valuable to an enterprise.
“From the data streams that implement the ‘digital shadows’ of people, we can use predictive analytics to understand their needs and behavior better than ever before,” Sam Ramji writes. “Every new dimension of data increases the predictive power, enabling enterprises to answer the question, ‘What does the human want?’”
Ramji believes IoT innovation and growth will ultimately be driven by global companies that invest in connected devices to gather, evaluate and utilize huge amounts of that data. Maybe that’s the idea behind Google’s purchase of Nest, and maybe your IoT startup can cash in on this trend as well.
Already, venture capital is flowing to makers of gadgets that collect and transmit data including temperature, speed, pulse, air quality, breathing, etc. The number of Series A deals for startups in this space increased by 52% in 2013, according to CB Insights.
The industrial applications of the Internet of Things tend to get less attention, but are just as fascinating. Just watch Marco Annunziata’s TED talk titled “Welcome to the Industrial Internet.” The chief economist at General Electric takes a look at how smart machines are transforming industry.
“Industrial machines are being equipped with a growing number of electronic sensors that allow them to see, hear, feel a lot more than ever before, generating prodigious amounts of data,” he says. “Increasingly sophisticated analytics then sift through the data, providing insights that allow us to operate the machines in entirely new ways, a lot more efficiently.”
Rockwell Automation, a global provider of industrial automation, power, control and information solutions, calls this “The Connected Enterprise.”
“Cisco estimates that the Internet of Things is having a potential value of $14 trillion, and that 27%, or nearly $4 trillion, will be found in manufacturing,” Rockwell CEO Keith Nosbusch told CIO Review. “This is by far the biggest opportunity across the entire Internet of Things landscape. To capture this value, manufacturing must accelerate the adoption of key Internet of Things technologies.”
Rockwell already takes entire plants online by installing Internet-linked sensors across the factory floor. The sensors help to increase productivity and save energy. They can also alert suppliers when new parts are needed and help customers deliver products quicker and more efficiently.
Other benefits of “The Connected Enterprise,” according to Nosbusch, include faster time to market, improved reliability, predictive maintenance and better life cycle management.
There’s no question that more work needs to be done to advance the IoT market and that the global inquiry process still has a long way to go. But while the total impact of the Internet of Things remains unclear at this point, it certainly shouldn’t keep entrepreneurs and economic development professionals from exploring its potential.
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