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When Does IoT Make Sense?

With all the purported benefits of making any object into a "connected" object, you might think there's no product in the world that shouldn't be IoT-enabled. Yet it's worth pausing to ask whether it truly makes sense to design and produce an IoT solution.

In today’s world, there’s often more to objects than meets the eye. The Internet of Things (IoT) means that watches can be connected communication devices; pill bottles can be medication monitors; and thermostats can adjust themselves.

ALSO SEE: How to Secure the Internet of Things

With all the purported benefits of making any object into a “connected” object, you might think there’s no product in the world that shouldn’t be IoT-enabled. Yet it’s worth pausing to ask whether it truly makes sense to design and produce an IoT solution. Here are a few questions to ask during your design process.

Is the value proposition there?

Here is an example, to best illustrate the concept. One can create an IoT solution around a coffee mug, e.g. one that senses how much coffee is left in the mug and the temperature. The mug can be location-aware. This data can then be wirelessly communicated to a Cloud system connected to other web and server based data sources.

At the server, the location and mug status (volume, temperature) can be combined with other GPS data to now link the mug to the nearest available service provider to deliver coffee. This would trigger a concierge to get a message on their smartphone app telling them to come to the mug and refill with fresh hot coffee. It is the “Uber Coffee Mug.”

Ridiculous premise, right? Of course. One can create the “Uber Coffee Mug” solution. It is technically achievable. However, it is unlikely this creates sufficient value to warrant development of an IoT coffee mug. The reader can likely find many cases out there where investments are being made and product is being developed for very dubious user value.

Is the cost/benefit trade-off worth it?

There is no way around it. An IoT enabled device (and solution) will cost more than a “dumb” device. While costs for the hardware elements are dropping, they still represent an increase in bill-of-materials cost.

In addition, the cost and time required to create an IoT solution is significant (any of my peers who have tried to provision a wireless device onto a carrier cellular network know what I mean) and is often underestimated. To be successful, an IoT solution requires hardware technology and integration as well as significant software development and data analytic expertise.

If a company is going to make this investment and incorporate the increased product expense, is there enough value to the user to warrant the price increase? Is there sufficient margin in the solution for the company to balance against the significant cost and time required to create the solution? Is the risk/reward high enough to justify the exposure? These are tough questions requiring a thorough understanding of the opportunity and the value proposition to all constituents.

Is the company ready to capitalize on a new business model?

Using the “Uber Coffee Mug” example, one can imagine the local deli delivering coffee as being a company which theoretically “could” find a value proposition in delivering coffee by the mug. The way to capitalize on the value might be to have users subscribe to the service.

For a simple, monthly fee of $20/month, the deli will deliver you coffee any time during business hours, five days per week. But… is the deli ready to accept a new business model? Are they ready to hire concierge delivery people? Will the company adopt a model where coffee is not sold by the cup but by monthly subscription?

Of course, this may be a ridiculous example. Consider a large corporation that sells retail consumer products. Their traditional revenue comes from sale of individual units through a channel of distributors. What if, the revenue was not from sale of devices but from sale of subscriptions where the device is free?

You get the device and the web/smartphone based value-added application based on a monthly fee. Now, instead of revenue for a $150 device, you now take in $10/month. Direct and channel sales people were compensated based on unit sales.

Now the revenue comes from small monthly subscriptions. Perhaps the company has no means in place for taking in and managing subscription based revenues. Not incidentally, the company may not even have the new design and technical skills required to create such IoT solutions (the right consulting partner can help there). Much to consider and there is no “one size fits all” answer.

Is there sufficient funding to go the distance?

Many companies are not cognizant of the full cost related to realizing lofty IoT solution goals. Certainly, a small startup of a few people may be able to put in sweat equity for some amount of time – but may not be able to do it for a year, 18 months or two years.

The team may also not have all the skills necessary to realize the complete solution and may not have the resource to bring in development partners to help fill the gaps.

As with Olympic ice skating, when an IoT solution looks simple and elegant, it seems simple. Everyone can do it. However, as those who have been developing hardware/software systems for years know, new product development is messy.

The more elements in the solution, the more things can go wrong. This costs money and takes time. As the old saying goes, “nine women cannot create a baby in a month.” So to, it is also not always possible to brute force through a satisfactory product solution.

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