In Part 1 of this series, I discuss how companies should be engineering products for the Internet of Things (IoT). In Part 2, I’ll describe how products designed for IoT have a profound effect on engineering.
Today there are 13 billion Internet-connected “things,” IDC tells us. Within four years, there will be 30 billion, helping to generate an annual accretion of 50 trillion GB of data.
With this rapid rise of IoT, companies across industries should be thinking about how they can take advantage of new technologies and connections in their own products. In other words, engineering should increasingly look at how they can build IoT into their designs.
The future looks smart
In some industries, this is already happening. In the automotive industry 15 years ago, most innovations were mechanical in nature. Today, 70 percent of innovation in automobiles involves information technology. In a short time, we’ve gone from a purely mechanical product to one that’s been equipped with electronics, software, and sensors to result in a highly intelligent machine. A car can now understand its environment through a broad range of sensors and connections, from video cameras to GPS to the Internet. So the car itself can automatically respond to driving conditions and safety events. And the driver can find the airport, the best hotel, and the closest parking space.
Designing products for IoT often involves transforming a simple product into an intelligent product in this way — whether it’s a consumer product, a piece of industrial equipment, or anything else. In many cases, it’s a matter of finding ways to build in sensors that gauge the operating environment and then communicate or taken action on what they find. So an industrial pump might report to a service technician an out-of-tolerance condition.
Determining which products should leverage IoT is often fairly straightforward. For example, connecting an expensive consumer product like a refrigerator or any kind of vending machine to the Internet might make sense, because you can capture failure conditions and send out a service technician before the product breaks.
Connecting a lower-cost consumer product like a toaster to the Internet might also make sense if you wanted to capture information about how it’s being used, though you’d have to convince consumers to pay a premium for an Internet-connected device they might not see a lot of value in. You wouldn’t connect the toaster to the Internet to report maintenance data, because you’d probably never dispatch a technician to repair a toaster.
From sensors to new business models
Of course, it’s not quite as simple as adding a sensor and an Internet connection. That’s because every time you do that, you need to consider the upstream consequences. If your smart refrigerator reports a failure, you need to have the infrastructure in place to respond. That means, for example, integrating the IoT data with business data, such as the customer name and location, the nearest service depot, the maintenance agreement in place, and so on. You also need to be sure your sensors aren’t generating false alerts that can cost you plenty.
But you might want to start rethinking your entire business model. Rather than simply make and sell refrigerators and other appliances, maybe you should be selling on-premise kitchen-as-a-service (KaaS).
So instead of customers buying a product from you, and seeing the relationship essentially end there, they subscribe to a KaaS offering. In this scenario, the appliances are merely components of the service. The actual offering is the ongoing maintenance and optimization of the kitchen, from the appliances to the lighting to the heating and cooling. It’s worth noting that now it probably makes sense to connect that toaster.
If you’re thinking that KaaS is beyond your competencies, bear in mind that disruptive technologies like IoT can drive new market entrants. So a large grocery chain could decide to offer KaaS, cementing customer relationships with its brand. And suddenly the appliance maker is disintermediated.
Which of these kinds of IoT scenarios are successful remains to be seen, but you can be sure your competitors — and even non-competitors — will start experimenting with them. Smart companies will stay ahead of the curve and start engineering for IoT.