Apr 12, 2018 | 7 min read

Insight Vector:  The Implications for IoT when Connectivity Costs are Near Zero

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Innovation and market perspectives from leading IoT innovators

Our conversation with Momenta's Strategy Partner Wim D’Hondt highlighted the massive changes ahead as the cost of connectivity plummets and choice expand over the next decade. The energy industry, in particular, is poised for massive changes as providers need to embrace wind, solar and other clean sources into the oldest existing network – the energy grid.  We can’t expect overnight change, as Connected Industry encompasses several markets all with different dynamics, but over the next decade Wim expects the real promise of IoT to unfold.

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Wim D'Hondt

Strategy Partner, Momenta Partners 

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Can you tell us what has shaped how you look at IoT?

I’ve been in the industry for around 20 years, so connectivity for products is not new. However, now new technologies and new business models are coming together. We definitely do not view this as a fad; this is something that needs to build over a decade before we see the real outcomes. I have been a consultant working across Europe, Asia Pacific and North America, in the network, endpoints and business processes.  I have a couple of engineering degrees and an MBA and have seen these technologies come together and the ability to see how they are disrupting industry.

 

In what industries do you see potential for big change?

I am most familiar with the energy space.  Energy is one of the oldest networks we have, but there is so much waste. Analytics allows us to reduce waste and improve services. Today our society has a lot of reliance on handheld devices, but people forget the reliance on electricity to power devices. Another industry ripe for disruption is mining and extraction.

 

What are structural challenges and successes in the energy industry?

One of the major structural changes is the adoption of microgrids - breaking a network apart into small microgrids so that with natural disasters, networks can be designed to be self-sufficient. This is defined by necessity and the opportunities’ around renewables and regulatory change to do things more efficiently. Incorporating wind farms, solar and hydro into the grid looks easy, but it’s a nightmare for energy companies – as its both structural and cultural change.

An example is Hawaiian Electric – they are not connected to the mainland, and they were historically oil and fuel powered. They could adopt solar and wind, but this breaks the grid paradigm. They actually had to ask people to stop installing solar because it was unmanageable. The regulators had to step in and force Hawaiian Electric to rethink how they did their business. They now have a number of smart grid pilots and are working with research agencies, embracing this wave of technology to prove out and export what they learn to others.   Major Japanese companies are testing solar batteries and wind farms and smart metering in a unique situation; look for the lessons to be exported to other locations.

 

Any examples to point to that have been catalysts?

The term “IoT” is overused, but the cornerstone is connecting things. Almost like the Kindle, connectivity will get baked into the cost of the service.  With new technologies around LPWAN and 5G, connectivity will become dirt cheap, small, easy to integrate and will reduce barriers to adoption.

 

What applications could be common with cheap connectivity?

This will manifest in different ways. With energy providers, managing smart meters is not the most rewarding app. What they need is discrete margin points along the grid (for other infrastructure) that can be monitored, so they can more proactively manage their assets across the grid and extend the useful life of their assets. Energy companies can avoid large capex, disruption from major outages, or pinpoint where remediation can be performed proactively.

 

How do manufacturers adapt to an environment where the lives of assets increase?

Replacements will always need to occur. As assets produce data this creates an opportunity to add value from the data.  Manufacturers are well positioned, but in the past, third parties have been the ones that created value from services. There is a big opportunity for manufacturers to proactively use data to help clients but also create better products. You can get much better feedback from products and clients.

 

How do you look at the past few years and forward forecast?

A lot of forecasts look at IoT as a single entity, but every market has different characteristics. People like to see large forecast numbers in the $billions – but clients treat each market separately. What hasn’t been done properly is the translation of visions into real-world applications. The ideal view of IoT assumed that everyone was playing along to build a grand vision with everyone getting fair share doesn’t play out that way. The reality is that companies want to build out their own domains. This is something that will take a long time, one step at a time –and this will require collaboration across the industry.

 

What are the technological factors that may be unappreciated?

Connectivity is still hugely unappreciated- we are putting things out in the field that are supposed to last 5-10 years. Every time we move forward there are 3-4 choices and there ends up being a shakeout – but we will be looking at multi-networks to service the industry. As we get the mechanics together, we need to understand the choices of where to store the data, what clouds to use, what do we do with the data and extract value from the more data in near real time?  We need the expertise to get to the perfect answer to a business problem.

 

What does success in connected industry look like?

A good example is what Cox Communications has announced- Cox2M is built around a capability that services Cox Automotive. They have a problem managing 1 million plus cars on lots under the Mannheim brand. They are being readied for sale and repair, assets are moving around at all times. They looked at this problem and set up a unit focused on Asset Management, now they will target Energy, Smart Cities. They took an internal problem and took the solution to market.

 

Are there any books or resources you like to recommend?

The One Device: The Secret History of the iPhone by Brian Merchant. 

The story of the innovation was not the individual components but how bringing these things together made for such a strong value proposition. The processing, touchscreen, and camera were not new, but what was new was how they brought everything together and were hugely successful. 

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