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Internet of Things Market Insights, Opportunities and Key Legal Risks

Heng Loong Cheong, DLA Piper

Joyce Chan, DLA Piper

Louise Crawford, DLA Piper

December 2015

Presenters

2 TECHLAW Hong Kong 2015

HENG LOONG CHEONG Partner, Hong Kong and Singapore +852 2103 0610 +65 6512 9594 [email protected]

LOUISE CRAWFORD Legal Officer, Hong Kong +852 2103 0808 [email protected]

JOYCE CHAN Partner, Hong Kong +852 2103 0473 [email protected]

The Market

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Presenter

Presentation Notes

And some Asia specific headlines: The International Data Corporation forecasts that IoT in Asia-Pacific (excluding Japan) is set to explode to 8.6 billion devices by 2020, growing from a current annual market of US$250 billion to US$583 billion in 2020. It has been predicted that the size of the consumer technology market in China, the world’s second largest economy, will grow by about five per cent to US$281 billion in 2015, likely overtaking the US as the primary market for consumer technology goods. The Malaysian Ministry of Science, Technology and Innovation (MIMOS) launched the National Internet of Things (IoT) Strategic Roadmap in July 2015, to drive the adoption of IoT. This is expected to contribute US$2.49 billion to the country’s gross national income by 2020. In a recent PricewaterhouseCooper study, respondents from Asia were most likely to say that their companies are investing in sensors (key IoT technology), followed closely by Latin America. Oordeoo and Ericsson recently launched IoT initiatives in Indonesia.

Key Verticals of Adoption


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Presentation Notes

The Internet of Things (IoT) is changing our lives. Its impact on education, communication, business and healthcare will continue to grow exponentially, with one report estimating 25 billion connected devices by 2020, with IoT-related spending to reach US$263 billion in 2020. In the context of IoT, everyday objects around us will collect large amounts of data that will be stored in cloud platforms and communicated to other devices and to other parties. Internet of Things projects are wide ranging and may relate to, among other things, smart cities, transport systems, buildings, eHealth and telemedicine, wearable technologies, homes, automobiles, industry and energy. FinTech is a recent trend also, impacting many of our banking and insurance clients. We will speak more on this later on in our case study on Corporate Venture Capital. The wide range of sectors that are reorganizing around IoT projects shows us that the legal support needed by companies active in the IoT sector requires a strong understanding of the technologies involved, coupled with experience in multiple areas of law.

Why Now?


Key Enablers

Cheap Sensors

Smartphones

Wireless Coverage

Big Data IPv6

Cheap Processing

Cheap Bandwidth

Presenter

Presentation Notes

The cost of connectivity has declined at the same time that new ways to analyze mountains of data have developed. A number of significant technology changes have come together to enable the rise of the IoT. These include the following: Cheap sensors – Sensor prices have dropped to an average of 60 cents from $1.30 in the past 10 years. Cheap bandwidth – The cost of bandwidth has also declined precipitously, by a factor of nearly 40X over the past 10 years. Cheap processing – Similarly, processing costs have declined by nearly 60X over the past 10 years, enabling more devices to be not just connected, but smart enough to know what to do with all the new data they are generating or receiving. Smartphones – Smartphones are now becoming the personal gateway to the IoT, serving as a remote control or hub for the connected home, connected car, or the health and fitness devices consumers are increasingly starting to wear. Ubiquitous wireless coverage – With Wi-Fi coverage now ubiquitous, wireless connectivity is available for free or at a very low cost, given Wi-Fi utilizes unlicensed spectrum and thus does not require monthly access fees to a carrier. Big data – As the IoT will by definition generate voluminous amounts of unstructured data, the availability of big data analytics is a key enabler. IPv6 – Most networking equipment now supports IPv6, the newest version of the Internet Protocol (IP) standard that is intended to replace IPv4. IPv4 supports 32-bit addresses, which translates to about 4.3 billion addresses – a number that has become largely exhausted by all the connected devices globally. In contrast, IPv6 can support 128-bit addresses, translating to approximately 3.4 x 1038 addresses – an almost limitless number that can amply handle all conceivable IoT devices. (see page 4 http://www.goldmansachs.com/our-thinking/pages/internet-of-things/iot-report.pdf)

Key Enablers in Focus: IoT Value Proposition


Huge productivity improvement potential

Big Data technologies enable data analytics at 1/10th of the traditional cost

Investment in software and shift away from hardware

From automation-based savings to era of intelligence and value creation

Revenue Generation opportunities

Presenter

Presentation Notes

So now that we have heard about the market, the potential and some of the key enablers, what are the actual catalysts for change and adoption that we are seeing in the market. Based on the recent World Economic Forum Industrial market survey in 2014, ability to optimize asset utilization and reduce operational costs are some of the key drivers driving change. Early adopters include the likes of ThyssenKrupp, Caterpillar and Thames Water. Particularly for manufacturing and engineering companies this has led to huge productivity improvements as they move to "smart" and connected factories. Ongoing improvements in sensor technologies combined with improved data analytics mean companies can enhance existing services and enrich customer experiences – example is the latest GE locomotives / trains which have more than 250 sensors which measure 150,000 data points per minute. Another key catalyst for the sector is the opportunity for businesses to grow revenue by diversifying by offering services or new products and move from the era of automation based savings to intelligence and value creation. It is the move from automation based savings to intelligence and value creation where data analytics and big data is really coming into its own.

Key Enablers in Focus: Big Data


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Presentation Notes

The recent GE and Accenture 2015 Industrial Internet Insights Report really focuses on the importance of utilizing enhanced data analytics to make the most of your IOT propositions, because there is no point having all these sensors and collecting this data unless you are going to use it. The slide here shows companies' top fears if they are unable to implement their big data strategy. The key theme to take away is the real sense of urgency, the market is moving very fast and almost a 1/3 of the companies surveyed believe that they will lose market share to a competitor if they don't react quickly enough. Many also then believing that they won't be able to catch up and will lose key talent. I am sure this is a sentiment that resonates with today's attendees as well. Deutche Bank have noted in their recent research paper on analytics in the IOT that by introducing analytics and more flexible production techniques, manufacturers can boost their productivity by up to 30%. Key legal considerations for businesses will be to consider the data protection and privacy implications of all this data that you are collecting, particularly if you are collecting personal data, but also worth thinking about whether there are any restrictions on how you may commercialise this data (e.g. trade secrets, confidentiality, IP rights and databases, etc).

Case Study 1: Verizon

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Presenter

Presentation Notes

We are now going to look at a number of case studies to give you our perspective on what is happening within the global IOT market, but also to give you some ideas on how this may translate to your particular business or division or what you may be able to learn by osmosis from other businesses and sectors. The Verizon example here is a great example of early stage adoption leveraging IOT primarily to save costs, but also enhancing the solution if offers to its customers. Verizon is currently saving more than 55 Kwh annually across 24 data centers by deploying hundreds of sensors and control points throughout each data center, connected wirelessly. The result is a reduction of 66 million pounds of green gases per year, but also a significant cost saving on its electricity costs, which for anybody who knows about the data center industry is the key cost for running and operating a data center.

Case Study 2: Fiat Chrysler Automobiles


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Presentation Notes

In July 2015, an online magazine called Wired published an account describing how two security researchers were able to wirelessly hack into a Jeep Cherokee, first taking control of the entertainment system and windshield wipers, and then disabling the accelerator. The Wired writer was in the car and explained what happened next: “Immediately my accelerator stopped working. As I frantically pressed the pedal and watched the RPMs climb, the Jeep lost half its speed, then slowed to a crawl. This occurred just as I reached a long overpass, with no shoulder to offer an escape. The experiment had ceased to be fun…The most disturbing maneuver came when they cut the Jeep’s brakes, leaving me frantically pumping the pedal as the 2-ton SUV slid uncontrollably into a ditch.” In response to this security experiment, Fiat Chrysler Automobiles announced a recall impacting about 1.4 million vehicles. (see http://www.wired.com/2015/07/hackers-remotely-kill-jeep-highway/) While IOT technology may bring security concerns, there are many benefits if you use it right. Tesla used IOT technology to remotely recall almost 30,000 Model S vehicles sending out a remote software update fix. You can now update your car whilst you sleep and they also do remote fixes for road-side break downs Example of it you get your product recall strategy right can save you a lot of time, money, reduce legal exposure.

Case Study 3: IoT Corporate Venture Capital


Aviva Ventures

Industry of the Future Fund

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Presentation Notes

Corporate Venture Capital is another area where we are seeing a lot of growth in the IOT market as organisations look to invest in strategically important technology or services that enhance their existing product offering or enable new product offerings and distribution channels. Aviva (the global Insurer) is a great example of how businesses are diversifying and embracing IOT to support and grow their business. We have helped Aviva set up a new venture to invest in IOT and digitally focused companies to support growth and complement their product offering – e.g. of a technology provider that provides remote sensors and monitoring for warehouses with SMS alerts. Aviva has had to develop a new suite of legal docs to support this early stage, high growth funding, as well as working with new types of suppliers and start ups and to change their contracting approach accordingly. Investment is also to balance against insolvency risk. In a similar vein, global insurer Allianz has just announced a JV with Baidu and Hillhouse Capital to set up an online insurer in China. The potential of distributing insurance products digitally combined with leveraging mobile payments technology is astounding in a country where insurance penetration is still very low, where not everyone has easy access to banks, and where foreign insurers can only open up to 2 branches every 12 months. Allianz plans to offer almost all its individual insurance policies online by 2018, and plans to scale up its collaboration with FinTech groups to keep abreast of new ideas. Siemens recently launched US$100m "Industry of the Future Fund" to fund early stage start-ups and leverage businesses that can help automate their manufacturing processes. GE recently announced a partnership within Frost Data Capital to create Frost I3 which will fund and incubate 30 industrial internet start ups in the next 3 years.

Case Study 4: Home Automation


SmartThinQ sensor by LG

Smartens up old appliances

Can prevent obsolescence and prolong machine life

Presenter

Presentation Notes

LG showcased its latest smart home technology at IFA 2015 in Berlin in September 2015 to enhance the lives of consumers. The Smart ThinQ Sensor is designed to work with traditional, low-tech home appliances such as refrigerators, washing machines and others, turning them into smart appliances or, as LG puts it, making them "smart-aware." Once attached to existing home appliances such as washing machines or refrigerators, the Smart ThinQ Sensor is able to sense feedback such as vibration and temperature and communicate those readings to the SmartThinQ app on users’ smartphones. For example, attaching the sensor to a normal washing machine door transforms the washer into a smart appliance that informs the user when the laundry cycle is complete. Attach the SmartThingQ Sensor to a refrigerator and it will send a notification to a connected smartphone when a particular food item is about to expire. The sensor will also keep track of how many times the door is opened even when you’re not home. And connecting the SmartThingQ Sensor to an air conditioner or other appliances will allow users to control the appliances remotely through the SmartThinQ app.

Case Study 5: Philips (IoT partners)


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Presentation Notes

The next case study for Philips specifically focuses on a big trend we are seeing in the market which is "connected ecosystems" and "connected platforms". Philips have developed smart LED light bulbs and wireless switches powered by Kinetic energy, and is now creating an ecosystem of partners to create an integrated digital lighting solution. For example, it has partnered with design studio WertelOberfell to co-create 3D printed lamps and accessories, with carpet manufacturer Desso to develop light transmitting carpets, and with AliCloud (Cloud division of Alibaba) to support smart lighting systems. Each business will need to consider where it sees itself in the value chain and whether and how it will start creating ecosystems and platforms on which others will integrate into and practically how it sets up its contractual arrangements to support these ecosystems. Will it set up such platforms and ecosystem on an "open" basis or will it create contractual lock in through the use of exclusivity and non-compete restrictions or restrictive licenses related to the technology it is providing?

The Industrial Internet


Growth in data

volumes Internet of

Things Analytics

Technology

Importance of

Equipment to Industry

THE INDUSTRIAL INTERNET

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Presentation Notes

The Industrial Internet can be described as a source of both operational efficiency and innovation that is the outcome of a compelling recipe of technology developments: • Take the exponential growth in data volumes—that is, “Big Data”— available to companies in almost every industrial sector, primarily the ability to add sensors and data collection mechanisms to industrial equipment. • Add to that the Internet of Things, which provides even more data—in this case about equipment, products, factories, supply chains, hospital equipment and much more. (Cisco predicts that by 2020 there will be 50 billion “things” connected to the Internet, up from 25 billion in 2015) With new technologies such as data lakes, the ability to capture and process such data is now a reality. • Then add the growing technology capabilities in the area of analytics—the ability to mine and analyze data for insights into the status of equipment as part of Asset Performance Management (APM), or the delivery of healthcare, and then even to predict breakdowns or other kinds of occurrences. • Finally, add in the context of industries where equipment itself or patient outcomes are at the heart of the business—where the ability to monitor equipment or monitor patient services can have significant economic impact and in some cases literally save lives. The resulting sum of those parts gives you the Industrial Internet—the tight integration of the physical and digital worlds. The Industrial Internet enables companies to use sensors, software, machine-to-machine learning and other technologies to gather and analyze data from physical objects or other large data streams—and then use those analyses to manage operations and in some cases to offer new, value-added services. (see page 7 https://www.accenture.com/bw-en/_acnmedia/Accenture/next-gen/reassembling-industry/pdf/Accenture-Industrial-Internet-Changing-Competitive-Landscape-Industries.pdf)

The Industrial Internet: Monsanto


Smart Farming has been used by Monsanto to

analyse 25 million fields in the US producing data

which can predict which seeds will grow best

where

Presenter

Presentation Notes

Another key trend that we are seeing in the IOT market is the shift from efficient and optimised supply chain to outcome based delivery of services. One industry at the forefront of this is Agriculture. By connecting farm equipment to geo-location data, agricultural companies and farmers can now co-ordinate and optimise farm production in increasingly sophisticated ways. Great example of these "Smart Farms" comes from multinational agrochemical and technology company Monsanto. To help farmers increase crop productivity while conserving water and energy, Monsanto purchased Climate Corporation – company which has used remote sensing and cartographic techniques to map all 25 million farming fields in America by field shape, crop type, crop yields, soil capacity and other metrics. By adding Climate Corporations' data to Monsanto's data on seed yields, Monsanto is able to provide a service whereby farmers can better understand which seeds will grow best in which fields and under what conditions.

The Industrial Internet: Outcome Based Agriculture


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Presentation Notes

Another example showing how you can create true outcome based solutions is through the use of connected ecosystems and platforms. In Europe, 365 Farm Net brings together a range of farm equipment manufacturers, financial services giant Allianz, chemical company Bayer, seed producer KWS, agricultural software provider Lacos, agricultural consultants Agravis and the technology and data of the European Global Navigation Satellite Systems Agency. This ecosystem provides farmers with easy access to data and analysis on geo-location, diagnostics, crops, fertilisers, weather and other factors over smartphones or through direct connections with farm equipment. Great example of how partnering with organisations within a connected ecosystem can really enhance the product offering and solution for customers.

The Industrial Internet: Enhanced Data Analytics and Monitoring


Apache Corporation using Big Data analytics to predict onshore and offshore oil

pump failures minimizing lost production

Schlumberger monitoring subsea conditions using unmanned marine

vehicles which can travel for a year on power from wave energy

Thames Water using sensors, analytics and

real-time data to respond more quickly to critical situations such as leaks or weather

events

Presenter

Presentation Notes

The examples on this slide are some more examples of how organisations have been really leveraging enhanced data analytics and monitoring to improve their business and save costs. Apache have been using big data analytics to predict oil pumps failures to minimize lost production. They reckon that if the global oil and gas industry improved pump performance by 1% this would create an additional US$19 billion a year of revenue. Thames Water have been doing great work in terms of using analytics to respond more quickly to critical situations. So that's a quick round up of what we are seeing in the market – what we are going to focus on now are some of the key legal issues related to IOT and how best to navigate these so that you can still take full advantage of the key benefits that IOT and connected devices offer to your business.

Legal Challenges


New contract types

Intermediaries' liability

Consumer protection

Financial services laws Data protection

Intellectual Property Rights

Medical devices

Cybercrime Competition law

Telecoms

Applicable law

Product liability and recall

Presenter

Presentation Notes

New contract types With sensors embedded into products, the relationship between product-based companies and customers changes, opening up the ability (if it hadn’t existed before) of an ongoing service relationship. To hedge against unknown costs of repair and for convenience, consumers traditionally buy a service contract that covers the product when problems occur. But with monitors embedded inside, manufacturers now have access to product data and the ability to anticipate, reduce, and repair failures. By looping back this information to product design, manufacturers have the ability to fix the design fault and optimize performance. This, however, would eat into the manufacturers' business of selling spare parts and service contracts. Manufacturers — especially consumer products companies — may evolve to offer their products as a service, though the challenge will be to figure out the pricing model. Intermediaries' liability: Several intermediaries are involved in IOT devices/ products offerings e.g. internet service provider, cloud service providers…etc. When the IOT devices go wrong, e.g. the insulin pump that loses connectivity at night and fails to properly monitor blood sugar levels and deliver insulin. The connected alarm system that fails to report an intruder because of a glitch. The car that is hacked, causing a fatal accident…etc. who should be responsible? how liability should be apportioned between the product manufacturers and the intermediaries? Any malfunction of the device, the software, the connection protocols or the transmission services could trigger liability for a different stakeholder; be it the producer of the device, its components, the device's operating system or of the applications that enable different functions. Each of these providers could be found liable in the case of a malfunction. Consumer protection: limitation on liabilities vs consumer protection Note that HK laws (and most common law jurisdictions) do not allow limitation on liabilities for physical harm/ bodily injury – consumer IOT devices are however prone to the risk of causing such physical harm/ bodily injury by its nature as a physical object. Financial services laws: The vast amount of data shared as a result of interconnection of IOT devices lead to legitimate concerns for data security. Data protection: Whether disclosure of personal data via the IOT devices are permissible? Consequences of data breach? IP rights: Among the various parties to a IOT devices/ products offering, which entity owns the raw data being collected and the tabulated data being analyzed? Confidential information is the lifeblood of any organization. Can a service provider use the collected data to service other customers? If the standardised elements of technology in the IOT architecture are patented, this presents a problem because without a licence from the patent owners, third party users of the technology may infringe those patents. Medical devices: Personal data concerns and limitation of liability as outlined above Cybercrime: By nature, use of IoT is more prone to cyber-attack and hacking. Competition law: Will there be competition law/ anti-trust concerns if a certain IoT/ technology has a market dominance position? Concerns of "IoT user lock-in" (as on-going services) which may be a new form of new barriers to market entry? Telecoms: Available spectrum for IoT communications If more devices want to communicate, many of these will do so wirelessly (whether via short range or wide area comms or mobile). The key is that these exchanges don’t interfere with each other and that there is sufficient capacity available within the allocated spectrum. This may need to be regulated. Applicable law: The application of law to the IoT needs some legal thought and, without specific legislation today. What jurisdiction's law/ court should govern in view of its global nature? Product liability and recall: Reference to the Jeep case just mentioned by Heng Product liability recall insurance – but this could be expensive in view of the inherent vulnerability of IoT devices.

Key Legal Issues


Liability

Data Protection and Privacy

Cybersecurity / Hacking

Ownership of Data and IPR

Presenter

Presentation Notes

The focus areas / "hot spots" from a legal perspective are: Contractual and product liability Data protection and privacy Cybersecurity Standards and interoperability

Liability


Presenter

Presentation Notes

There are a range of reasons why IoT Products have different liability risks: New products/standards Interactivity Personal Data Informality of Trials Prominence Role of Software Difficulty of proving malfunction Insurance Interaction with Services The common liability themes are: Product liability Tort and Contract Data Loss The key issues are therefore: What types of liability will be created? Who is ultimately responsible? How can such liability be limited?

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.rcrwireless.com/20150521/europe/emea-will-connected-cars-crash-mobile-data-networks-in-the-future-tag11&ei=6hSRVcXDI4S4-AHDxIHABQ&bvm=bv.96783405,d.cWw&psig=AFQjCNHvRXAwI7EBbziQFUQZwqmuUFNuCw&ust=1435657831351990

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.digitaltrends.com/cars/denso-v2v-connected-car-technology/&ei=ERWRVbLNKMOp-QH18IDwCQ&bvm=bv.96783405,d.cWw&psig=AFQjCNHvRXAwI7EBbziQFUQZwqmuUFNuCw&ust=1435657831351990

Security and privacy risks


Cybersecurity risks:-

IOT cyber risks extend beyond "inherent" privacy and business risks: Medical devices

Connected cars

Wearables

IOT baby monitors

Light bulbs

Business Reputational

Privacy / regulatory

Presenter

Presentation Notes

One of the things you sometimes hear when you talk about data privacy is: well I don't have anything to hide. I don't really care if someone sees my facebook pictures when they shouldn't or retains my HKID number for longer than they should. That's a separate conversation entirely, but let's look at security in the context of the internet of things. Here are some of the real vulnerabilities that have been detected in connected devices: These are just some examples of some of the tangible risks of cyber threats aside from the threat to privacy as an inherent right.

Cybersecurity and IOT – the risk landscape


Volume of data

Regulation

Developing threat

environment

Multitude of interconnection

points

The media

Risk factors

The evolving information ecosystem


Data protection in Asia


What's happening elsewhere?


European privacy directives Upcoming European regulation Fines of up to 5% of Turnover Safe harbor now invalid

US: mandatory breach notifications

Presenter

Presentation Notes

IoT devices carry inherent privacy and security vulnerabilities: IoT will include 26 billion devices by 2020 (Gartner) Implication: the potential surface attack area is greatly expanded for hackers and for information collection IoT elements are active objects with advanced sensors that recognize events and changes in the environment and react to them autonomously without human involvement IoT has significant implications for privacy, safety and security Adoption will depend on the level of security (AKA consumer confidence) [Louise to update for Asia context] Impact of new regulation and much higher fines Loss of customer data resulting from the use of IoT technologies can lead to privacy-related liability for data breach (fines of up to 5% of global turnover under new EU privacy regulations) Bottom up approach to involve lawyers, much earlier Creating documentation / systems / controls – e.g. to prevent against cyber security breaches Can create defence for future challenges Consider implications of aggregating the data – can still be personal data even if anomynised independently As even anonymized collected data can be used to generate detailed user profiles Businesses need to rely on how their clients have been collecting the data do you check this? do you audit this? do you manage this in your contractual arrangements? Fines can't be insured against

Challenges in data protection compliance

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Rapid development in technology outpacing development of the law When does IOT data become personal data? Excessive collection Meaningful notification and consent Cross-border data transfer restrictions

Jurisdiction creep – which laws apply?

Presenter

Presentation Notes

[Louise to update for Asia context] The other key concerns for businesses now particularly where they have been exporting personal data to the US – following the recent European Court of Justice decision is that the US Safe Harbor regime is no longer considered "safe". So for those that don't know - data transfer of personal data used to be deemed safe and adequate under the US Safe Harbor regime, but primarily it seems because of political motives related to the NSA, Edward Snowden, snooping by the US, this landmark decision has been made. The key therefore with your connected devices, and your business is to understand which parts of the business may have relied on the regime, particularly your 3rd party suppliers or any suppliers that you operated within an IOT ecosystem with and look to put in place a compliant solution (e.g. EU model clauses or data staying within Europe) "Jurisdiction creep" connected devices cross borders Practical issues with extra-territorial enforcement

Practical steps


Principles of privacy by design Proactive not Reactive; Preventative not Remedial

Privacy as the Default Setting

Privacy Embedded into Design

End-to-End Security – Full Lifecycle Protection

Policies on BYOD and wearables Conduct an audit of privacy compliance and security

arrangements Monitor legal developments Breach response strategy Organisation-wide training

Open data how to share the data?


Presenter

Presentation Notes

Trust and support for the future development of IoT smart home devices Licensing Issues Product Development Risk Impact on Value Competitive advantage

Key Challenges and Opportunities for Businesses


Unlocking the power of data analytics

Being smart with your business to save costs

Identifying products where connectivity legitimately adds value and is not intrusive

Move from automation to intelligence and value creation

Developing and becoming part of connected ecosystems

Managing customer perceptions re: cybersecurity and privacy

Considering and adopting new business models

Presenter

Presentation Notes

So in summary – there are a number of interesting themes and case studies that you have heard today which hopefully give you some "food for thought" as to the potential for IOT and how others in the market are adopting it to save bottom line costs or to create more revenue as they diversify. The real game change for businesses is those that unlock the power of Big Data and enhanced analytics, as IOT is only as good as what you do with the data you collect. This can also enable you to be smart with your business to save costs – whether you are automating production lines or using predictive and proactive analytics to reduce failures and save energy and time. Where most organizations struggle is the development of new products where connectivity legitimately adds value and is not intrusive – you do really need to think carefully as to whether your customers will see the benefits of the product being connected. You've heard how some sophisticated users are moving past simple savings related automation to intelligence and value creation, as well as "outcome based solutions". I hope you can also see the benefit of partnering with others and starting to develop an ecosystem of suppliers / stakeholders offering an integrated solution. The Philips case study is a great example of this with their digital lighting solution. Cyber security, data privacy and other legal considerations are absolutely central to building safe and competitive products and this is an area where really managing customer perceptions can help improve sales. You only have to look at the Jeep Chrysler example as to the reputational damage and costs that this can cause an organization. Finally, IOT is all about accepting change and adopting new business models to drive growth whether this might be promoting Corporate Venture Capital, such as GE or Aviva to strategically invest in digital and IOT start-ups, moving up the value chain to provide more services and solutions (with higher margins) than just products or building out that connected ecosystem or platform for others to participate in. The example of Aviva's start up investment that your heard about earlier, is also a great illustration of a brand new business model – how the traditional insurance business model of loss indemnification is changing to more of a model of loss mitigation or even loss prevention.

DLA Piper Global Internet of Things group


200+ DLA Piper lawyers worldwide with IoT experience


Internet of Things Market Insights, Opportunities and Key Legal Risks

Heng Loong Cheong, DLA Piper

Joyce Chan, DLA Piper

Louise Crawford, DLA Piper

December 2015

Internet of Things - dlapiper.com/media/Files/Insights/Events/2015/12/DLA... · The cost of connectivity has declined at ... free or at a very low cost, ... of it you get your product

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