The future is ear: Why “hearables” are finally tech’s next big thing

The explosive growth of their AI voice assistants has Google, Apple, and Amazon racing to put your entire smartphone in an earpiece.

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In October 2016, an impressive group of tech industry royalty took the time to get a demonstration of a product from a startup called Doppler Labs. Microsoft cofounder Bill Gates and CEO Satya Nadella each got one, as did Apple Internet chief Eddy Cue and Jimmy Iovine, head of Apple’s Beats headphone group. So did C-suite executives from Amazon, Facebook, Google, and Tencent.

Donning pre-production versions of Doppler’s Here One wireless earbuds, they experienced the device’s ability to cancel out unwanted background noise, amplify the voice of a particular person in the room, and even converse with people speaking in another language. About a half-second after a Doppler staffer asked a question in Spanish, the wearer heard a computerized translation back into English.

At least two of the companies made informal acquisition bids, but none offered a high-enough price to convince Doppler to give up its dreams of launching a momentous new product. Sales failed to take off, and a year later the company was shuttered. But that’s not the end of the story. Within weeks of its closing, more than half of Doppler’s top technologists were working for the tech giants.

Amazon, Apple, and Google each have high-priority projects to pick up where Doppler left off. All three are working on products that combine the utility of the hearing aid with the entertainment value of a pair of high-end headphones, and potentially much more, say sources. Since all three have announced plans to get into healthcare, they could easily add fitness and health monitoring sensors for everything from counting steps to measuring oxygen saturation. And while it may take years to happen, none want to be left behind should it become possible to create a general purpose, in-ear computer that allows consumers to leave their phone in the desk drawer.

“Ultimately, the idea is to steal time from the smartphone,” says Gints Klimanis, Doppler’s former head of audio engineering. “The smartphone will probably never go away completely, but the combination of voice commands and hearing could become the primary interface for anything spontaneous.”

Spokespeople for Amazon, Apple, Google, and Microsoft all declined to comment for this article.

Why Hearables, Why Now?

For half-a-decade, Doppler and other startups have been trying—and failing—to come up with a “hearable” with the combination of sound quality, battery life and cool factor to become a mass market hit. So. why the sudden interest from the big guys? Because personal voice assistants such as Amazon’s Alexa, Apple’s Siri, Google Assistant and Microsoft’s Cortana, have suddenly emerged as the biggest interface revolution since the iPhone popularized the touchscreen.

Our desire to use technology without the hassle of touching it has made smart speakers the fastest growing new hardware market in years, says Strategy Analytics’ analyst Cliff Raskind. By 2023, 63 percent of U.S. homes will have a device like the Amazon Echo or Google Home, up from .03 percent in 2014 and 16 percent in 2017.

By then, Americans will speak rather than type more than half of their Google search queries, predicts Comscore. The market for ads delivered in response to voice queries will be $12 billion, according to Juniper Research. And these predictions don’t even contemplate a future when consumers have computers in their ears for more of their waking hours, providing tech giants with even more data on their movements and desires—not to mention a channel into their brains that makes shopping as frictionless as saying “Alexa, buy (fill in blank).”

The Future is Ear

“There’s much more that tech companies can do with ears than amplify music and make phone calls,” says Satjiv Chahil, a former Apple marketing executive who has advised hearing aid maker Starkey Hearing Technologies in recent years. “It’s about allowing your virtual assistant to whisper in customers’ ears throughout the day, while also enhancing their health and well-being.”

Your ears have some enormously valuable properties. They are located just inches from your mouth, so they can understand your utterances far better than smart speakers across the room. Unlike your eyes, your ears are at work even when you are asleep, and they are our ultimate multi-taskers. Thousands die every year trying to text while they drive, but most people have no problem driving safely while talking or dictating messages–even if music is playing and children are chatting in the background. Ears are not in the front of your face, so it may be easier for the Jony Ive’s of the future to come up with fashionable or even invisible designs for the ear than for the eye. Remember Google Glasses?

Those are just the obvious advantages. With the right sensors and processing on board, a hearable can tell if your head is pointed toward a store shelf in front of your face or at a billboard down the road. Add in a heart-rate monitor to measure stress and an electroencephalogram sensor to analyze spatial brain activity, and it could know what you are thinking about to some degree—say, how much of your attention is being paid to the sound of footsteps coming up behind you, says Poppy Crum, chief scientist at Dolby Laboratories.

Yes, AI-enhanced hearables in the future will be able to understand more than the words we speak. A Cambridge, UK-based startup called Audio Analytic is already licensing the ability for a device to recognize the sound of a window breaking or a baby crying. At this rate, it won’t be long before Amazon can send ads for Robitussin when it hears you cough.

The Hearable Challenge

The ear also presents nasty challenges for any company hoping to sell a mass-market computing device. Such a device must be tiny, nearly weightless and fit perfectly in each person’s anatomically unique ear canal to be comfortable for long stretches of time. At the same time, it must have enough battery power to last at least as long as a smartphone, not to mention a strong antenna and on-board processor. There’s also the problem of earwax, and the unsolved mystery of how to use an ears-only device without too much head-shaking, hand-waving, ear-tapping, or self-talking. According to one recent study, only six percent of Americans said they were comfortable talking to their voice assistant in public.

Then there’s the stubborn stigma against hearing aids. While hundreds of millions of people think nothing of wearing head or earphones, only 16 percent of the 48 million Americans who could benefit from hearing aids have purchased a pair, says the Hearing Loss Association of America. Those that do buy tend to put it off for an average of seven years.

Tight regulation of the industry hasn’t helped. Because hearing aids have been defined as medical devices, manufacturers must get products approved by the Food & Drug Administration, and consumers need to get a doctor’s prescription and pay to see an audiologist, usually with no help from insurance. Content to go for profit margins over sales growth, a stodgy oligopoly of five companies has been able to dominate the $6 billion-a-year hearing aid industry , selling products that cost an average of $2,700 per pair, according to Consumer Reports. A top-of-the-line pair will set you back $10,000 or more.

Now, that regulatory anchor is about to come loose. Last August, Congress passed the “OTC Hearing Aid Law of 2017”. When it goes into effect in August 2020, if not sooner, companies will be able to sell hearing aids over the counter to people with mild to medium impairment online or at any drugstore, just like glasses makers sell $10 readers to people who don’t want to bother with an optometrist.

This opens a large and growing market. The World Health Organization says that 1.1 billion children and young adults around the world are at risk of hearing loss, having grown up with earphones blasting away at point-blank range.

The law could have dramatic impact. Suddenly, anyone who finds themselves saying “what?” more often than they would like will be able to walk into a Walgreens and buy a consumer-y looking device for a few hundred dollars. Very likely, they will pick it up in the electronics aisle next to colorful iPhone covers and FitBits, not in the aisle for Depends and other products for the elderly. The device may not be marketed as a hearing aid at all, but as Bluetooth earphones with “hearing enhancement” or “personalization.”

“I’ve been waiting for this moment for 20 years,” says KR Liu, Doppler’s former vice president of accessibility, who has worn hearing aids to battle severe hearing loss since she was three. “You have these amazing companies that can do amazing things and have the branding power to de-stigmatize hearing aids.”

Doppler’s Influence

Doppler didn’t invent the hearable, but it had outsized influence during its brief existence. Music industry exec Noah Kraft and former Microsoft executive Fritz Lanman created the company in 2013 to come up with a product the Coachella crowd could use to customize the sound of live music, such as the ability to add a “fuzz” effect or put an upper limit on the volume. By early 2016, it had assembled an impressive team of audio experts and was working on the Here One, which added more “hearing augmentation” features as well as the ability to make phone calls and stream music.

As word of the product’s capabilities began to spread, Doppler began getting inquiries from tech giants interested in catching the hearable wave. Although the Here One was supposed to come to market within months, Kraft, the company’s CEO, declared that October to be “Demo Month.” A small team set up shop in a swank conference room overlooking San Francisco Bay in the offices of Universal Music Group, one of Doppler’s first investors.

Visitors included venture capitalists such as Mary Meeker and Yuri Milner, and teams from Amazon and its Silicon Valley-based R&D unit, Lab 126, as well Google, Apple, and Facebook. While a few companies put some informal bids on the table, none offered anything close to the valuation Kraft and Doppler’s board felt the company was worth.

Any unicorn dreams faded away after the Here One went on sale in early 2017. The tech press praised the device for its innovative design, but abysmal battery life and difficulty explaining why this wasn’t just another wireless earphone led to poor sales. There was one bright spot, however. Nearly a quarter of the buyers had purchased it as cheaper, better sounding alternative to hearing aids—without any marketing effort by Doppler to reach this audience. With Apple’s AirPods taking the consumer earphone market by storm, Doppler decided to pivot. While the engineering team focused on hearing functionality, Liu took a lead role in lobbying for the OTC bill in Washington D.C.

By the time the bill became law last August, Doppler was in dire straits. Kraft re-approached potential acquirers, who immediately agreed to meet. A team from Microsoft, including Nadella, explored whether hearables could be used to boost worker productivity. The companies collaborated on several interesting ideas. Since the Here One had an inward facing microphone that amplified the sound of the wearers own voice, why not create software commands Word or Excel users could whisper so quietly that workmates wouldn’t even notice. In the end, Microsoft decided to pass.

Several teams from Google took another look and passed, including one from the X “moonshot factory” and one from the company’s hardware division, which was looking for help finishing up its soon-to-be-panned Pixel Buds (aka “Pixel Duds”).

In September 2017, Apple sent a large team for another round of talks. It clearly didn’t need Doppler. Apple had been learning about hearing technology since 2011, when it began forging partnerships with hearing aid makers, so customers could pipe sound picked up by the mic in an iPhone directly into their hearing aids (a student, for example, could put their iPhone near a teacher at the front of the room to hear the lecture more clearly). The company had poured big money into creating technology such as the W1 communications chip, which has helped make the AirPods a stand-out in terms of sound quality, battery life and ease-of-use. AirPods captured 24 percent of all wireless earphone sales in the first half of this year, far ahead of runner-up Beats with just 3 percent, according to NPD Group. Still, Apple remained interested in an aqui-hire of key Doppler technologists, particularly those working on hearing algorithms, but wasn’t willing to pay enough to interest Doppler.

Talks with Amazon lasted the longest and were the most serious. With a powerful hearable, it’s customers would be able to shop via Alexa even when not near a smart speaker—and without having to depend on an iPhone or Android device. The Lab 126 team had been looking for years for a way to “get Alexa out of the house.” But aware of Doppler’s fast-declining finances—and possibly because it had learned so much about Doppler’s technology and business during negotiations–Amazon’s deal-makers only offered a low-ball bid

Rather than accept any of the bids, Kraft chose to shut down the company a few weeks later. He later sold Doppler’s intellectual property to Dolby, which specializes in audio software to enhance the sound of movies and other media. Dolby has not confirmed any new products based on Doppler’s patents, but “we are spending time identifying how our technology, ecosystems, and knowledge are relevant to the hearable marketplace,” says Crum, the company’s chief scientist.

“It’s good to hear that Doppler’s vision lives on even though the company doesn’t,” says Kraft via email. “We’re proud of what we built and proud that the Doppler team is helping others bring the in-ear computer to fruition.” Kraft declined to comment on any discussions with Amazon, Apple or any other suitors.
Next Up

Doppler is gone, but the vital signs of the hearables market are getting stronger. Salaries for audio technologists are soaring, with big tech companies often paying $200,000 salaries to top talent from startups and the traditional hearing aid companies. Mobile chip giant Qualcomm introduced its first family of chips specifically for hearables in March, and other chip companies are expected to follow suit by the end of the year.

Amazon, Google, and Apple are keeping their cards to the vest. Three former Doppler employees say Amazon already had a team of 70 people working on hearables when the companies were in talks last year. While Google’s hardware team continues works on Pixel Buds and other products, Google’s X unit is looking at developing fully independent in-ear computers, while the Google Voice unit focuses on ways to make that personal assistant more accessible via ear-based devices, says a person that’s had dealings with all three.

Apple is also marching ahead in its deliberate way. Rather than build a revolutionary new product to usher in the hearable era, it will continue to add new capabilities in familiar form factors, sources say. According to Bloomberg, the company will announce high-end headphones for music lovers by the end of the year, and will introduce a water-resistant upgrade of the AirPods, that includes the ability to activate the device by saying “Hey, Siri.”

Other pioneers of the hearables market are already preparing for the big guys’ arrival. Bragi, a Belgian company founded shortly before Doppler, recently decided to stop selling its hearable devices in favor of licensing its software.

“When you’ve got Apple and others coming directly after you, you need to change where you invest,” says CEO Nikolaj Hvvid. “On the other hand, it’s nice to suddenly be getting all this company.”

Source: FastCompany


The Internet Of Things Is Transforming Industries You Would Never Think Of


I was eleven years old when my family got its first computer in 1981. It didn’t do much. Mostly, I used it for writing reports for school and playing video games. My dad also ran some spreadsheets to help him run his business, but for the most part, the family computer was something us kids spent time with.

Things hadn’t changed much by the early 1990’s when I started working either. Computers were mainly tools for automating secretarial tasks, not for professional work. Economist Robert Solow observed around that time, “You can see the computer age everywhere but in the productivity statistics.”

But in the late 1990’s computers became truly transformative. Combined with the Internet and email, they became conduits to a continuous flow of information that could be processed, analyzed and turned into action. As digital connectivity begins to transform physical machines, it’s likely that we’re now in the early days of a similar productivity boom.

The Sensors That Are Transforming Agriculture
Agriculture is just about the last thing that comes to mind when people think of technology, but in fact, it has always been an engine of innovation. The plow was, of course, among mankind’s first “killer apps.” Later, the industry became an early adopter of the internal combustion engine and transformed backbreaking work into a highly mechanized field.

It was with that spirit in mind that IBM teamed up with Gallo wines to bring the Internet of Things to the farm. Using a wide array of data from sensors in the soil along with satellite imagery and weather forecasts, the company designed a “personalized” irrigation system for each block of vines, greatly reducing water consumption and increasing output.

It’s not just industry giants like IBM who are doing exciting work in this area either. Israeli startup Prospera recently attracted $7 million to fund its approach, which is to install cameras along with other sensors in fields and compare crops “leaf by leaf” with its database of thousands of plants to identify problems like pests, parasites and nutrient deficiencies.

“We ask ourselves what’s the minimal substantive data that leads to the maximum value,” Daniel Koppel, Co-Founder and CEO of Prospera told me. So far, the approach is working well. Prospera clients get, on average, a 500% return on their investment in the service and, as data and analytics improve, Koppel thinks they can do much better.

Data Driven Ecology
Lake George in upstate New York is just about the last place you would expect to see the future of technology. Sometimes called the “queen of American lakes” for its pristine beauty, it population of about 3500 people swells to nearly 50,000 during the tourist season. Yet its remote location belies a pathbreaking technological experiment going on there.

Under the auspices of the Jefferson Project, IBM has teamed up with Dublin City University Water Institute to launch a pilot program that uses the Internet of Things combined with advanced analytics to monitor and manage ecological systems. If successful, it may serve as a model for environmental management around the world.

Traditionally, water systems have been monitored through technicians gathering water samples by hand and sending them to the lab for analysis. Yet with sensors becoming cheaper and more durable, it is now possible to place them in water systems and continually gather data. That, combined with geospatial coverage, can help to create full models of ecosystems that scientists can use to identify problems and intervene before they become full blown ecological disasters.

“Many people believe that water is the new oil,” IBM’s Harry Kolar told me, “because environmental issues are creating problems that affect our economic, political and biological well being. Our hope is that we are developing the technology to manage ecological issues more effectively, at lower cost and with smaller impact on commercial and political systems.”

Driving Productivity In Construction
Brothers Willy and Jabbok Schlacks started EquipmentShare with the idea of making it the “AirBnB” of the construction industry. The concept was simple. Owners of construction equipment can rent out idle machines to get a better return on their investment and renters can reduce costs. Everybody wins.

Yet soon it became clear that there may be an even bigger opportunity. The brothers noticed that some potential customers who weren’t interested in renting out their equipment were willing to pay for the telematics technology EquipmentShare had developed to track the machines and analyze their usage.

Willy Schlacks told me that he sees an even bigger opportunity in more advanced analytics, such as using predictive analysis to lower maintenance costs, using drones to monitor entire construction sites and aggregating data so that contractors can measure their performance against industry benchmarks.

Considering that the construction industry accounts for over a trillion dollars in the US alone, even a small percentage increase in productivity can unlock tremendous value.

Innovation Is Combination
Let’s return to Robert Solow’s observation about computers and productivity. When he made his now famous remark, the work you did on computers was mostly stuck in a box on your desk. If you needed to add data to an analysis, you had to insert a floppy disk or input it by hand and if you wanted to share your work, you pretty much had to do the same thing.

Computers only became truly valuable when we could start combining them with other things. First, through the Internet, we were able to combine them with other computers. Then we combined them with other technologies, like telephones and now we’re starting to combine them with everyday machines.

It is this third wave, commonly known as the Internet of Things, that has the potential to unleash a new revolution in productivity. Yet it is not only technology that we need to combine. To create truly effective systems like those described above, we need computer scientists working with agronomists, environmental scientists construction engineers and specialists of all kinds.

Innovation, at its core, is combination and that goes not just for technology, but for people. As the bits in our computers begin to invade the atoms of our machines, we all have a part to play.

Source: Digital Tonto

All grown up: The IoT market today

Using a data-driven analysis to understand IoT technology adoption.


Although we’ve been talking about it for years, it was in 2016 that the adoption of the Internet of Things (IoT)—among consumers and businesses—rose dramatically. At least in part, this was due to factors like the increased numbers of sensors and connected devices, a growing pool of skilled IoT developers, and real-time data and analytics support for IoT systems.

As consumers, we now live with and are helped by IoT devices in our homes, our cars, even our toys. In the business world, the impact is even more pervasive. One of the industries that comes to mind for many of us when we think about the IoT is manufacturing, where connected technologies can improve safety, maintenance, and efficiency. Globally, the impact of the IoT on manufacturing has been evidenced by national initiatives such as Germany’s Industrie 4.0 and China’s Made in China 2025. But that’s old news. In the past year, we’ve seen businesses use IoT technologies in other ways, and with wider applications. Innovations like advances in deep learning that can be applied to the IoT make it likely that the growth of the IoT will continue to accelerate. If last year the IoT “grew up,” 2017 will mark the year that the IoT starts to become essential to modern business.

A newly published report, The Internet of Things Market, by Aman Naimat, presents a current snapshot of the IoT business landscape, describing a data-driven analysis of the companies, industries, and workers using IoT technologies. Making use of web crawlers, natural language processing, and network analysis to process over 300 TB of data, Naimat uncovers some surprising results. For one, the IoT landscape looks different than the market for big data tools in several ways: which companies are adopting IoT technologies, their sizes, and their locations. Secondly, we found that the current use cases that incur the most spending on the IoT are not the ones that have been predicted to become the most valuable: health care and smart cities, for example.

The report opens by looking at the number of companies using IoT technologies and the maturity level of their projects.

What do we mean by IoT project maturity? Level 1 projects are still under development, meaning products have not been deployed; strategy, design, scope, and infrastructure are all a work in progress. Level 2 projects have been deployed either within a specific department or for a single use case, such as inventory control. Level 3 maturity projects represent companies like Nest or Amazon, that have made the IoT a strategic directive for their businesses and have deployed IoT tools or products to address multiple use cases.

While the numbers listed in the figure may not seem large, they represent actual adoption of IoT technologies and are, in fact, similar to the current level of adoption of big data technologies. Given the buzz around big data began as early as the 1990s, much earlier than interest in the IoT began, this points to a faster adoption curve for IoT.

Ever increasing data sets and more robust compute power and scalability will doubtless lead to more IoT breakthroughs—and therefore business investments—in the future. But to know where we’re going, we need to understand where we currently are. The Internet of Things Market report can help you get your bearings.





Winning in IoT: It’s All About the Business Processes

The B2B market for the Internet of Things (IoT) is taking off. And huge numbers of vendors—including software, hardware, and internet companies; startups; service providers; and telcos—are jockeying for position and market share. With so much action in the IoT space, one question should be at the top of every IoT provider’s list of concerns: Where are the growth opportunities?

To understand how IoT is being deployed by businesses today—and where the major growth opportunities will be in the future—we analyzed trends currently shaping the IoT landscape. Our analysis uncovered three major findings. One, there is no such thing as “the” Internet of Things: today’s market is heavily driven by specific use case scenarios. Two, while in the aggregate, companies will spend an incremental €250 billion on IoT in 2020 (over and above their normal technology spending), three industries will account for approximately 50% of that spending. And three, although all layers of the IoT technology stack are poised to grow through 2020, the layers are not equally attractive.

Growth Opportunities in IoT
From 2015 through 2020, all layers of the technology stack are expected to have achieved a compound annual growth rate of at least 20%, but certain layers have much higher growth potential than others.


IoT’s real value, from the customer’s perspective, is in the top two layers of the technology stack; that is, services and IoT analytics and applications. We expect that by 2020 these two layers will have captured 60% of the growth from IoT. The rest of the technology stack—identity and security, IoT backbone (cloud and platform), communications, and connected things—are enabling components with lower growth potential.

Use Cases Driving IoT Adoption
Companies will likely spend some €250 billion on IoT, but they need to know which IoT applications have the potential to deliver the most value. Determining this requires recognizing that business leaders are using IoT to solve discrete business challenges. They’re asking, How can IoT help our company increase customer satisfaction, improve quality, support new business models (such as data-driven services), and reduce costs?

A few use cases are driving IoT adoption and growth and will continue to do so through 2020 at least. To gain meaningful market share over the near term, companies need to focus their IoT product offerings on the right use cases.

With this in mind, we identified a wide range of use cases for IoT. From this long list, we pinpointed ten IoT use cases that are poised to mature rapidly and experience widespread adoption (in a B2B context) through 2020. Insight into where customers plan to invest in IoT, when they will invest, and how much they plan to spend helps clarify which use cases will drive IoT growth through 2020. Ten IoT use cases show the most promise.
Predictive Maintenance. Inevitably, businesses lose valuable time and money when equipment malfunctions or breaks down. And many companies also lose money each year by adhering to fixed maintenance schedules by which equipment vendors make routine calls—even when no maintenance is required. IoT technologies can predict or detect when a machine requires maintenance, reducing or eliminating unplanned downtime, extending maintenance cycles, and reducing costs. A host of industries—including utilities, discrete manufacturing, transportation and logistics, energy, and health care—can benefit from predictive maintenance. Of course, solutions need to be tailored to suit specific industry needs and applications.

Self-Optimizing Production. Connected factories and plants can use IoT to monitor and optimize production processes in real time, making automated adjustments to improve quality, enhance efficiency, and reduce waste. This use case is ideal for discrete manufacturing and process industries.

Automated Inventory Management. IoT can provide much greater insight into the status of inventory and the supply chain, allowing companies to track inventory location and condition (including, for example, temperature, humidity, and damage). The ability to monitor products across the supply chain allows companies to increase processing and response time, reduce stockouts and inventory pileups, and improve just-in-time production processes.

Remote Patient Monitoring. Physicians can track patient health remotely, in real time, to improve health outcomes and reduce health care costs. By tracking patient data and monitoring compliance, health care providers can help patients stay healthier and recover more quickly.

Smart Meters. Sensors can be used to monitor utilities—including electricity, gas, and water consumption—in real time. Smart meters can help consumers monitor their usage, reduce the number of technicians needed to read meters, provide real-time billing data, and enable more dynamic pricing.

Track and Trace. IoT sensors are ideally suited for increasing systems’ efficiency. They can, for example, enhance transparency in order fulfillment and provide information that can help reduce workstation transition times. The sensors can be used in the assembly area to identify the status of products and to locate tools, components, and materials.

Distributed Generation and Storage. IoT can be used to automate and optimize supply and demand across multiple energy sources. By remotely monitoring and controlling distributed energy generation and storage, companies can balance energy usage across the grid and reduce energy costs.

Connected Cars. Through new types of sensors, wireless connectivity, and onboard processing units, vehicles are increasingly connected, and many consumers already expect this type of functionality. Connected cars offer enhanced navigation, better safety features, and various creature comforts, including advanced music and entertainment options. Some features of connected cars are expected to mature slowly over the next five to ten years.

Fleet Management. In addition to tracking inventory and parcels, IoT is being used to track vehicles in real time. With better information related to fleet location, usage, and condition, companies can be more efficient, reduce maintenance and repair costs, and allow for dynamic rerouting to avoid congestion and delays. This use case is expected to mature quickly—within the next one or two years.

Demand Response. IoT is starting to change the way end users interact with utilities. Through demand-response programs, customers can allow the remote control of their use of certain appliances—air-conditioning systems, washing machines, and other energy-intensive appliances—during peak-demand periods. These processes can be automated to reduce supply and demand volatility and lower customers’ energy bills.
An Industry-Specific View
Although advanced-technology companies already have integrated digital capabilities, the same cannot be said for companies in other, more conventional businesses, such as industrial goods or logistics. IoT is certainly an important source of growth for technology companies; for less technology-centric companies, it can be utterly transformative.

By cross-referencing use cases with industries, we can see, from an industry perspective, where the most value will be created in the coming years. Three industries will likely account for approximately 50% of IoT spending: discrete manufacturing, transportation and logistics, and utilities.
Some use cases, such as predictive maintenance, represent a great opportunity for all industries. Still, each offering must be tailored to meet any given industry’s unique needs. The expected time to maturity is significantly different for each use case, depending on its share of customers and how quickly it scales.

Players and Plays
There’s plenty of room for all kinds of companies to grow in IoT—and there are numerous possible ways to engage in the IoT market. Major industrial companies are increasingly transitioning from being IoT customers to being IoT providers. General Electric, for example, released Predix, an end-to-end IoT industrial operating system designed to help GE customers’ machines run more efficiently, in 2015. Siemens, with its MindSphere platform, is pursuing a similar path. Other companies are focusing on a specific layer of the stack and making a horizontal play, as Microsoft has done with its Azure IoT Suite. The SAP HANA Cloud Platform, IBM Watson IoT Platform, and Cisco IoT System all allow companies to build and deploy their own IoT applications—and they are providing specific applications as well. Device makers, such as Intel and Bosch, are offering hardware and complementary operating systems to provide customers with a more comprehensive IoT ecosystem.

Although a wide variety of players has entered the IoT space, our survey shows that 40% of today’s IoT customers prefer to use traditional and well-established software companies for their IoT solutions. In selecting an IoT software vendor, customers’ top three criteria include product functionality, the vendor’s reliability, and assurance that the solutions can be integrated.

This last point about integration is very important. Today’s IoT customers are looking for end-to-end solutions. World-class applications and services deliver value only when the underpinnings (the connected things, communications, backbone, and security layers) work seamlessly with the top layers. IoT providers don’t necessarily have to master all the components within the technology stack, but it is essential to craft a go-to-market plan that takes into account the customer’s desire for an end-to-end solution.

Winning in IoT: Key Questions
To compete successfully, IoT vendors need to develop a strategy for where they will play and how they will win. Executives who are strategizing about where to play should respond to the following sets of questions:

  • Addressing Use Cases. What are the company’s strengths and how can these be leveraged to address use cases? Do we want to address one or more use cases within a specific industry (for example, targeted solutions for medical-device manufacturing) or build a single adaptable solution that can be used by a number of industries (automated inventory management)?
  • Targeting Customers. What types of customers do we want to attract? Is the company better positioned to directly serve clients that operate assets (such as transportation companies that need predictive-maintenance capabilities) or should we pursue clients that manufacture IoT-ready assets for these businesses (such as large industrial manufacturers that supply products to oil and gas companies)?
  • Developing End-to-End Solutions. What will the company offer our customers? Can the company develop an end-to-end solution that covers all layers of the stack under our brand, or will we specialize in a particular layer of the stack (as a means to enable other IoT solution providers)?

Once an IoT vendor decides where to play, management must determine how to win in that space. As companies explore this angle, they must address the following:

  • Leveraging Partnerships. How can the company leverage existing assets and capabilities to optimize its position within the technology stack? Is a software company, for example, well positioned to build up talent and capabilities in hardware? Or is it preferable to form strategic partnerships with other players, such as hardware companies, service providers, and systems integrators?
  • Understanding How Sensor Data Will Be Used. In IoT, sensors can provide a flood of data, and it’s critical to ensure that the data is linked to clear business objectives (such as increasing revenues and reducing costs). What business metrics will we measure once IoT sensors are in place?
  • Building Capabilities. What new capabilities does the company need? Should we build up internal capabilities, pursue M&A, or establish partnerships?
  • Crafting a Go-to-Market Strategy. What is our go-to-market strategy? If the company has focused mainly on B2C, for example, how should the strategy change to reach B2B customers? If the company has historically sold software to IT departments, how will we reach out to business stakeholders? IoT conversations have to be centered on use cases and business value.
  • Evolving the Business Model. Given the granularity of available sensor data, new business models are emerging. Instead of selling equipment for an upfront fee, for example, companies get compensated for the actual use and uptime of that equipment. How can we capture more value through these new business models and create a compelling business case for our customers?

The right path forward will vary depending on each company’s starting point:

  • Enterprise software companies need to leverage their brands’ strong reputation and build an end-to-end solution through M&A or partners. As far as most customers are concerned, platforms don’t drive major value in IoT solutions: 80% of the IoT customers we surveyed were not at all aware that they were using a platform. Nonetheless, platforms represent an important horizontal play and hold enormous potential to scale over the long term.
  • Established internet players need to leverage their strong B2C position and make a more aggressive move into the B2B space.
  • Specialized startups should carve out their sweet spot for highly targeted IoT offerings—ideally in a segment that will not be better served by larger competitors.
  • Industrial and technology companies must extend their product offerings to defend their large B2B customer base and find new ways to engage with customers across the product life cycle.
  • Telcos can leverage their telecommunications assets and capabilities—including data access—to push beyond connectivity and provide higher-value offerings.

IoT offers tremendous opportunity, and hundreds of companies have already made big bets in this space. But it’s not simple to provide the end-to-end IoT solutions that customers want and need. It is not easy for a hardware manufacturer of connected devices, for example, to acquire (or become) a software provider that delivers value in the applications and analytics layer. Moving up and down the technology stack will be a challenge.

But there is good news: companies need not simply grit their teeth and build these capabilities through hiring or M&A. They can pick the areas in which they want to compete and develop partnerships with other companies in order to build a powerful suite of end-to-end offerings. With a clear vision of where—and by whom—dollars are actually being spent in IoT, companies have a timely opportunity to gain significant traction in the IoT space, and they can position themselves to stake a claim in one of the biggest market opportunities of our generation.

Source: Boston Consulting Group