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Has Anyone Seen A Real Internet of Things Ecosystem?

Smart Systems and the Internet of Things is real and many, if not most, of its silicon, software, and network pieces are finally beginning to fall into place.  But creative business development among technology developers has not kept pace with their technology innovations. The tech tools may be 21st century, but the business thinking of the tool “creators” has too often remained in the 20th. Yet, despite considerable progress in many areas, the potential for Smart Systems is still largely untapped – potentially billions if not trillions of nodes could be connected if the right technology and business architectures are in place.

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Today the relationship between the evolving technologies driving the Internet of Things and the business models that these systems could inform is “disconnected” and problematic at best. Players like Apple and Google in the consumer space present an interesting case for how smart business models are developing.  They have forced the pace of network computing catching larger rivals off-balance and effecting fundamental shifts in market leadership.

Apple is primarily a consumer-focused tech vendor, with no need for the vertical industry capabilities required in B2B applications. Still, Apple provides a model for creating a Smart System solution that pulls together technologies from multiple domains and packages that solution in a way that wins buyer acceptance. Looking beyond Apple to Amazon, Facebook and other players coming from their roots in the evolving mobile Internet arena, there are a variety of new business models emerging from cloud and related services platform players that are the embodiment of Smart Systems. Beyond their core technology innovations, the momentum these players are creating has grown from their nurturing of application developer communities — Amazon has thousands upon thousands of developers building applications and businesses; Apple’s App Store has created a phenomenal market momentum — they are all driving entirely new forms of collaboration and peer product development.

The traditional notion of M2M applications has largely grown up in a B2B context — equipment manufacturers developing remote services and support automation tied closely to their equipment service contracts.  These models are focused almost exclusively on customer support and automation — not on new Smart Services value beyond support.

From an ecosystem perspective, the software developers and solution players enabling these systems for product OEMs have largely forged a few “hub and spoke” relationships with wireless carriers or professional services providers, but alliance development for smart systems today looks nothing like the mobile and consumer Internet worlds.

Why is this?  The mobile phone business spent years looking for its killer application and, as things turned out, the killer application turned out to be the ecosystem of application developers exemplified by the rapid growth of the iOS and Android platforms. Is the Internet of Things suffering from the same issue? What would ecosystems for the Internet of Things look like and what potential could they inform?  How should innovative players, large or small, engage in new collaborative relationships to drive market development?  Are there fundamental barriers that need to be overcome? What maneuvers can players execute to address them?

As these B2C and B2B networked business models inch closer to each other in the marketplace it is increasingly evident that the consumer Internet models provide many lessons for the “cloistered” B2B players. The benefits of large-scale collaboration and ecosystems in the B2B dimension of the Internet of Things arena are just beginning to be recognized.

What technology players looking to leverage collaboration or benefit from connecting “smart products” to the Internet need to understand is we have entered a phase in the marketplace where ideas can emerge from anywhere in the world. And need to. The collection of dull and dreary equipment automation, meter reading and fleet tracking applications that comprise much of the M2M opportunity today are not exactly what someone might call innovative, particularly when compared to the rush of innovations occurring in the mobile Internet arena.

Smart Systems represents the most profound business discontinuity imaginable.  Everything will be utterly changed—from product development and innovation to marketing and the transforming role that all these new offerings will play in our personal and business lives. The traditional value chain of the technology sector, particularly where technology companies primarily sold to each other, is no longer a valid way to look at opportunities.

No single company should look to innovate on their own.  Collaborative developer communities will both inform and express the Internet of Things opportunity.  They need to be designed to enable multiple values simultaneously, not the “command and control” relationships we see today in the traditional M2M space.  We desperately need new dynamic networks of connected products and people to drive the new information values we expect from intelligent device networking.  Competitive differentiation in human and device collaboration structures falls to those who best understand how to use this information and technology to get and keep a key influencing position.

From our view, no really significant ecosystem or network of collaborators has emerged in the IoT arena.  Sure there are early and very interesting efforts being made by players like ThingWorx, Pacific Controls, Xively and GE’s Industrial Internet initiative.  But these are still very emergent alliance developments and have not attained the scale, scope and momentum we expect will be required to really drive this opportunity to its intended and expected scale.  Most of the attempts thus far to drive an ecosystem advantage have failed to scale and reach critical mass.  This just underscores how challenging building a high velocity network of partners can be.

So what’s really required to drive innovation and new collaborative business models for Smart Systems? 

Changing the risk/reward formulas for alliances and new relationships for the Internet of Things involves three interrelated elements: a vision for how collaboration networks will drive “catalytic” innovation to help focus participants; a platform to organize value creation which provides leverage to reduce the investment and effort participants need to make; and relationship enablers and incentives which persuade participants that the ecosystem developer is serious and can really scale entirely new value creation and delivery systems.

These three ecosystem design and development elements combine to help the “organizer” quickly attract and mobilize a critical mass of participants. This is what is required to unleash the powerful network effects we all expect to see as the Internet of Things evolves.

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