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liatbenzur.com
Many large corporates across multiple verticals today are being disrupted by the
convergence of wireless, big data, and the Internet of Things (IoT). From connected
homes and autonomous automobiles to healthcare, retail and smart cities, whole
industries are being transformed. Connected factories reshape the industrial
landscape and connected homes are reshaping the fabric of our daily lives.
Costs. Furthermore, the ongoing operational costs of new cloud solutions that need
to be launched in multiple global markets, often with multiple mobile apps (which
should continuously evolve), and the need for new and more expensive digital and da
ta talent doesn’t help the financial picture. With digital innovation project costs rising
annually, executives question when all the promises of these IoT projects will positively
impact their bottom line. For most companies, connected IoT solutions have yet to
move the needle.
Security & Privacy. Then there is the challenge of privacy and security. With the
proliferation of news on security breaches in internet-connected systems, it’s easy for
executives to get skeptical of embracing technological innovations, including IoT.
While security breaches are often a sign of weak implementation of security measures
in the architecture or design of a system, large corporates (especially in highly
regulated verticals) tend to be risk averse. They may be slow to drive broad adoption
of their digital pilots in fear of security and privacy breeches. Unlike startups, these
corporates have a much more to lose as their brand and reputation reflects real
market value.
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Ways of Working. The impact of IoT on these verticals not only forces large corporate
to rethink their products and business models, it also forces them to reshape and
restructure their ways of working:
From waterfall driven product planning towards agile development and Lean
startup mentality
From transactional customer relationships to continuous, engagement-centric
customer relationships.
From top down management led decision making to dispersed, empowered
teams
From experience- and seniority-driven decision making, to data-driven decision
making
From business units working in silos to define and deliver their products to
cross company platforms that enable data sharing & transparency across
businesses and across unique solutions for new value creation
From incremental innovation pulled by the market to design-driven innovations
which do not come from the market; they create new markets. They don’t push
new technologies; they push new meanings.
Culture. Over time, these large companies learn that digital transformation will
require much more than just hiring a few digital thought leaders to drive the change.
Culture, ways of working, product thinking, go to market — it all needs to evolve. And
this isn’t easy.
IOT platform vendors must ask, “how can we accelerate the adoption of our IoT
platforms and become the de-facto partner for key verticals undergoing this massive
disruption?”
The reality is that winning the IoT platform war in large corporates is a hard for
several reasons.
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1. Customers don’t know what they don’t know. The largest corporate customers (be
it in automotive, healthcare, industrial, etc) who can drive the biggest long term value
for IoT Platform vendors often don’t fully know what they want. For them, IoT
promises new digital business models, ongoing customer relationships, or operational
cost savings are just that — promises. Executives are being asked to make bets on
digital without clear guarantees that these investments will pay off, or without clear
timelines for when such investments pay off. Their “new digital team members” are
asking them for space to “fail fast and learn.” As such, there are a plethora of IoT
pilots and small experiments (on a variety of competing IoT platforms) to test out IoT
claims and prove that connected devices or new cloud services can create value or
save operational costs. But such sub-scale pilots often don’t convince corporate
boards to go big. “IoT pilot purgatory” is the where great corporate IoT visions and
ambitions quietly rot.
2. Platform differentiation is getting harder and harder. The IoT and Cloud Platform
competitive landscape is diverse and aggressive. Startups, in-house IoT innovation
teams, and other large cloud platform companies are competing to become the de-
facto IoT platform in large corporates. Big players like Amazon, Microsoft, Google,
IBM and Salesforce, large industrial companies like Siemens and GE, and hundreds of
IoT platform startups focusing on niche problems are pitching similar stories: “Our
platforms are designed to deploy applications that monitor, manage, and control your
connected devices. We help you connect and extract data from a vast number and
variety of endpoints, sometimes in inconvenient locations with spotty connectivity.
We offer all kinds of data analytics, AI and machine learning to process massive
amounts of information in real-time. We are your infrastructure stack. We are your
platform stack. We are your user experience stack. We are cloud. We are edge. We are
fog. We are hybrid.” OK, thanks.
While IoT experts may be well versed at differentiating this vast landscape, most of
the business and innovation leaders driving verticals like automotive, retail, health and
industrial companies find this IoT platform language utterly confusing. At IoT expos
around the world, every IoT platform provider claims to be faster, better and smarter
than others. There are many impressive customer references behind every platform
backed up with cool demos, partner pilots and case studies. Unfortunately, amidst all
this chaos, more and more decisions are being made based on pricing (race to the
bottom for cloud providers) and sales relationships.
3. Complex Internal Decision Making. IoT platform sales teams must navigate the
organizational complexity in large corporates who are undergoing their own digital
transformation journeys. With so many different business units, central innovation
teams, Chief Information Officers, Chief Data Officers, Chief Digital Officers,
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But what about large corporates who are struggling with similar issues as they try to
transform into software-driven companies building new, connected digital
innovations? Given all the digital transformation challenges corporates are going
through as described above, why not offer some of these same capabilities to them?
How it could work. Like startup accelerators, IoT Platform players can eventually have
several Corporate IoT Accelerator hubs in several different cities. Each corporate IoT
hub is staffed with local IoT platform experts who know the APIs, the SDKs, the
MicroServices and tools and with IoT entrepreneurs and business experts who can
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unwillingness to commit to cloud platforms as they fear this can undermine their
business model with unforeseen operational costs.
As such, the opportunity here is for one of the IoT platform players to do to the other
cloud players what Google did to everyone in mobile with their Android platform —
give it away for free. Well, in the case of cloud platforms, maybe not totally free. The
massive fixed costs associated w building up data farms around the world prohibits
any vendor from “giving away cloud capabilities.” But by thinking long term instead of
short term, there may be opportunities to win the IoT platform land grab by offering
much more aggressive “at risk” business models to large corporates. There will likely
need to be some commercial innovation and business model testing before a scalable
new business model works.
may emerge. This will require patience and an appetitive for risks. It will require a
long-term belief that this “skin in the game” business model of at-risk will eventually
lead to more stickiness and loyalties for that particular platform and ecosystem.
There will be significant upstart costs for the Corporate IoT Accelerator hubs, the
resources needed for support and to cover the initial cloud data costs for customers.
Conclusions
Everyone seems to recognize that there is much magic yet to be created at the
intersection where mobile, cloud, data, devices meet existing, long-time industries.
The cross-boundary services of tomorrow will reshape how we think of the traditional
products and solutions we use today. The biggest hurdle is not technology. There are
many architectures and many solutions that are “good enough.” The biggest hurdle to
realize this future is often culture, especially in large companies who are currently
struggling with the disruption of their own industries. The recipe for success that
many executives have relied on for the past 20 or 30 years in product-centric
companies will no longer work in digital first, service-centric age.
I personally believe that riches will go to the IoT platform company who offers not just
great technical solutions (cloud, analytics, edge, AI, etc), but also hands on guidance
and support through the cultural revolution these companies are undergoing. The
biggest challenge with IoT is just how little we all know about its transformative
impact. We must learn, we must experiment, we must test. While seemingly simple
and obvious to most software startups, this is a huge shift for companies with big
annual strategic planning processes and who make investment decisions based on ROI
projects 1-3 years out.
Which IoT platform vendors do you think will win the long game? IoT Platform
vendors: are you game for disrupting your current business models?
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