Capturing Value in the Internet of Things

Javier Zamora talks big data, business as a service and digital mindsets at MWC

24/02/2016 Barcelona

Mobile World Congress

By 2020 we’re looking at an estimate of 20 billion things connected to the Internet / Photo: © GSMA

We’re at “Year Zero” in the Internet of Things.

The opportunities are vast, but exploiting them will require a comprehensive ‘re-tuning’ of our business models. That, and acquiring a digital mindset.

This was the message shared by IESE Professor Javier Zamora at the Mobile World Congress (MWC) in Barcelona on February 24.

“The future is happening today and it’s happening fast,” he said. “We are living in a world where the connections between people, business and things are growing exponentially.”

Delivering a talk entitled "The Internet of Things (IoT): Blurring the Frontier Between the Digital and Physical Worlds," Zamora said that IESE and other business schools have a key role to play in “making sense” of the digital transformation for companies who may be blindsided by change.

“The magnitude and speed of transformation is so great, it’s almost a case of being unable to see the wood for the trees.”

And he makes an excellent point.

The sheer scale and diversity of the innovation on display at the MWC 2016 exhibition halls bear testimony to the impetus of global digital transformation.

“Since 2007 when Steve Jobs unveiled the iPhone at Mobile World Congress and ushered in an era of connected people on the go, we have seen the order of magnitude increase year over year. Just last year everyone was talking about big data. This year the buzz is about 5G, the Internet of Things and virtual reality.”

We are at a “singularity moment,’” says Zamora. “There will soon be more things than people connected to the Internet.” And the pay off in terms of data is stunning.

“We’re transitioning from Gigabytes to Yottabytes to Brontobytes. By 2020 we’re looking at an estimate of 20 billion things connected to the Internet. And by 2050 that estimate rises to 100 billion.”

So what does this all mean for business models?

Emerge, Adapt or Die

There was a time when individuals or businesses looking to raise capital had little option other than banks or venture capitalists.

In today’s world of hyper-connectivity, emerging business services like Kickstarter are leveraging the Internet to raise capital at a huge and rapid scale.

New business models are disrupting and creating new markets, says Zamora, citing other examples such as Uber, mytaxi and Airbnb.

And these models are flourishing thanks to what he describes as increasing “digital density” – or the percentage of interactions per unit of social activity realized through digital technology.

The trend towards new and emerging business models is set to continue, says Zamora, because digital density is increasing. All of which is good – yet “challenging” – news for industry.

“To put it simply, as digital density increases it makes things possible that weren’t possible before. The sharing economy is a clear example of this.”

“On the other hand, digital transformation has created a real imperative for industries to re-think their business models. Headhunters, for instance, have had to re-invent their services with the rise and rise of LinkedIn.”

“It’s all based on commodities being available to everyone.”

From Products to Services and Beyond

A good example of how increasing digital density is driving change is the automobile industry, says Zamora.

The impact of technology was first felt in car design, and later in the browsing habits of online consumers using the web. With the rise of social media and the sharing economy, we’ve seen a shift to new service-based models such as car sharing. And as cars have become smarter, we are now entering the era of the driverless, autonomous vehicle.

Digital, says Zamora, is moving us away from a product-selling towards a service-based business model.

“Sensors in Rolls Royce engines are transmitting performance data that is impacting the volume of unscheduled stops – it’s a move towards preventative service. Innovations like the Nest thermostat have the potential to recalibrate the energy industry to the extent that consumers could have personalized heating and pricing plans.”

Moreover, the explosion of new types of apps and services entering the market is generating completely new value propositions.

“The Waze traffic app is another digital service that permits users to identify traffic hotspots and avoid them. What we’re seeing here is how digital is impacting physical behavior to blur the lines between the two. In a sense we are entering an era where the physical can be programmed – and that is a completely new value proposition.

But capturing value does not come without its challenges.

New Opportunities, New Challenges: Big Data and the Digital Mindset

First off there’s the issue of data.

Zamora talks about the four “Vs” associated with big data: volume, veracity, velocity and variety. Add to that the dimension of trust, and companies face a genuine challenge in how they treat data in corporate decision-making – and customer relations.

“Governance and trust are defining issues in our immediate future,” says Zamora. As Marc Benioff of Salesforce says, trust too is being transformed by digitization. “Your customers won’t use your products unless they trust you.”

Critical to this is the creation of IoT standards, regulation and a new approach – that of data as an infrastructure.

And then there’s what Zamora describes as the “meaningful use case.”

“Oftentimes what we see is companies trying to use digital to reproduce the analog experience. But the challenge is to create meaningful services with new technology.”

Doing so calls for businesses to adopt a digital mindset, says Zamora. One that “strikes at opportunity.”

“Instead of connecting a thing in isolation we can connect different components to make a value proposition for tomorrow. We can program the business model to imagine new services. We can create new experiences.”