With telecommunications reaching a greater ubiquitous state, the capability for sensing, tracking, and predicting is now achievable and implementable into wider areas – with it comes a suite of powerful analytic tools. The meaning and potential impact of the Internet of Things on business and personal life is recognized as enormous when considering the development and utilization of Big Data and recognition of conscious, unconscious, and natural patterns in a multitude of systems. The purpose of this report is to summarize the recent history of corporate efforts around the development of the Internet of Things and propose a way forward for GE. Market Research Report James Baho 2015
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With telecommunications reaching a greater ubiquitous state, the capability for sensing, tracking, and predicting is now achievable and implementable into wider areas – with it comes a suite of powerful analytic tools. The meaning and potential impact of the Internet of Things on business and personal life is recognized as enormous when considering the development and utilization of Big Data and recognition of conscious, unconscious, and natural patterns in a multitude of systems. The purpose of this report is to summarize the recent history of corporate efforts around the development of the Internet of Things and propose a way forward for GE. Market Research
Report
James Baho
2015
Table of Contents Executive Summary ....................................................................................................................................... 5
The Evolving Market ................................................................................................................................. 5
How to Capture the Opportunity .............................................................................................................. 6
Development and Evolution of IoT ............................................................................................................... 7
The 3 Layers of the Internet of Things ...................................................................................................... 7
IoT – User Requirement .......................................................................................................................... 11
Industry Players........................................................................................................................................... 12
The Value of Brand .................................................................................................................................. 12
The Brand’s Value ............................................................................................................................... 13
Fragmentation of the Field ................................................................................................................. 13
Developing an App Portfolio ................................................................................................................... 25
Brandings: The Divided Sides of the overall Industry ............................................................................. 26
Partnering with Fellow Industrial Giants in Health Care ........................................................................ 27
Partnering with Manufacturing Giants in Industry ................................................................................. 27
In Conclusion ........................................................................................................................................... 28
Works Cited ................................................................................................................................................. 30
5
Executive Summary
The term Internet of Things (IoT) is defined as the connection of everyday objects that have network
connectivity, allowing them to send and receive data. The current generation stands at the threshold of
global interoperability and the market is facing more attention than ever before. Nearly 20 large capital
corporations are pouring their energies into the industry; consortiums are beginning to emerge to
standardize the protocol; usage is available to devices of all sorts meaning there is a market for literally
everyone and everything on the planet.
It is the last point that draws the most interest. Billions of devices are already online and billions more
are predicted to be online in the near future. Considering the enormous growth potential, the IoT is an
industry well worth investing in. The questions remains, “Which segment to pursue?” Since everyone is
a potential customer since everything can become a connected device. The following data is a
commonly found forecast:
1990 to 2015: 25 Billion connected devices (over 25 years)
By 2020: 50 Billion connected devices at a market value of $7.1 Trillion
The Evolving Market
General Electric has made it clear of its belief about servicing the digital domain is going to help it
generate income, but more importantly how GE will stay relevant because of the IoT. Developing the
Industrial Internet will not only help the company manage its own assets, but sell the service to other
companies to help them manage theirs as well. As the global economy becomes more service-based,
having a service that will underpin the operations of the world’s economy will be GE’s greatest asset.
GE must remain aware of competitors of its non-core businesses. The main threat of the upcoming years
is how non-traditional competitors will operate in the same market space. Industrial manufacturers will
soon compete with Internet advertising firms; software manufacturers will compete with computer
hardware manufacturers. Companies are acquiring assets and skills. Just as Microsoft bought Nokia’s
handheld mobile division, Google acquired Motorola and Nest. Wireless communication will allow for
new levels of work, engagement and analysis. This is due to the IoT removing barriers like never before.
With barriers removed, companies that dealt solely with their core business must now face a new reality
and must acknowledge the fact that they must compete in a service environment. For manufacturing
and Internet companies, this is a challenge for everyone. New competencies must be achieved in order
to deliver meaningful applications and analytical tools for daily use. This will cause an insourcing of skills
as companies harness the ability to manufacture a quality, relevant product and provide ongoing IoT
services.
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Although the consumer market will not be its initial focus, GE is entering a market with companies in
which it was never before in the same arena. Apple and Google are honing in on the consumer segment,
therefore, keeping apprised of these companies’ decisions and innovations may help prevent their
encroachment into the industrial field. Apple and Google have proven themselves masters of creating
software people want; learning from their inventions and product enhancements will be worth keeping
note. This addresses a critical concern: GE will initially focus on business to business marketing – does it
want to move into the business to consumer market or simply keep tabs on competitor developments?
How to Capture the Opportunity
GE’s strengths derive from its history of envisioning big answers to big questions, but it cannot go it
alone. Developing the Industrial Internet for its own purposes will improve internal efficiencies, but GE
will further succeed if the service can be sold so others who can utilize the same technology. The
Industrial Internet will benefit from external buy-in. Developing partnerships with medical,
manufacturing, and commercial companies to integrate designs and functionality will enhance the
capabilities of upcoming applications and machines, and ensure continued success.
Hardware reliability will become the commodity the IoT trades on. Companies that create a compelling
proposition through a large variety of feature-rich applications and dynamic tools will enlist droves of
customers. The main competency GE must develop is its software. Second and third party applications
will add to the library of tools, but mastery of the Industrial Internet’s core software must be developed
Strength Weakness Open source products and services Quality and customer experience are the primary objects Financial situation Access to the widest group of internet users worldwide Strong patents portfolio Product integration Culture of innovation
Relies on one source of income Unprofitable products Patent litigations
Opportunity Threats Growing number of mobile internet users Obtaining patents through acquisitions Driverless electronic cars Growing into electronics industry Google fiber cables
Growing number of mobile internet users Unprofitable products EU antitrust laws Competition from Microsoft
First mover in cloud computing solutions for enterprises Brand reputation Diversified business Strong competency in acquisitions Integration of products and services
Expensive service and software solutions Focus mainly on large enterprises
Opportunity Threat
Expand services and software divisions Increasing demand of cloud based services
Increasing competition in the cloud computing market Slowing growth of world economy
Strength Weakness Geographically Diverse Business Economies of scale lower cost and increases margin Diversified into many segments and tapping sophisticated markets Market leading position brings many benefits Robust financial performance Known for its strong R & D division A culture that experiments produces better long term values
Declining storage networking market Weak presence in BPO technologies/markets compared to global leaders
Opportunity Threat Expansion through Strategic Alliances and Acquisitions Smart grid infrastructure could increase demand Wi-Fi Home Calling and mobile broadband Data intensive applications Data Mining
The use of cloud servers is lowering sales and especially profits margins for Cisco's core business. Open Source Competitors High competitive rivalry Virtualization
Each of the companies mentioned have a storied history of success. Each of them has grown to employ
over 50,000 people. With the exception of Google, all of them are approaching the market from a
business-to-business point of view. GE, Microsoft, and IBM have all pitched their ideas to entire
municipalities; GE extends into its sweet spot as it develops the Industrial Internet. On the metropolitan
level, even Google has deployed Google Fiber in Kansas City.
Where Google differentiates itself, however, is by how it targets that market segment. Analysts believe
Google’s acquisition of Nest is a direct attempt to extend their reach into the connected home. The Wall
Street Journal reports, “Mr. Fadell (Nest’s cofounder) said he sees Nest fitting in Google's vision of a
connected world that spans from pocket devices to automobiles to homes” (Winkler, 2014). With
Google’s presence in the general consumer’s mind and its popularity of wearable devices, the extension
of its connected home offering is going to strengthen Google’s presence as a fundamental tool in today’s
digital age. Additionally, as of June 2014, Google opened its Nest labs to outside developers. (Barr, 2014)
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The following table demonstrates GE’s strengths, which come historically from industry, investing and
divesting into fields of business, invention and innovation, a diversified portfolio of business. Google’s
newer foundation is not a detraction from its strength as a competitor; it simply means they have
different strengths.
GE’s Strengths Google’s Strengths
1. GE Health Care – Global leader in equipment development and manufacturing 2. Industrial Diversification 3. Native Products to equip with data sensors
1. Native Skill of Data Analysis 2. Google Fiber 3. Main Stream Consumer Portfolio (Chrome, Android, Gmail, Google+)
Notes
1. Health care is where much of the IoT will be implemented. Forecasts suggest a full 15% of IoT growth will be health care related. (Gartner, 2013) 2. Globally, the IoT will be involved in all of the same areas GE conducts business. 3. Aerospace, resource extraction, and transportation are all areas that will require regular maintenance of equipment.
1. Google search engine code and the information they compile on user searches is their primary source of income. 2. Unlike IBM and GE who partnered with AT&T, Google owns its own data transmission network. 3. Google is a highly recognized brand name, delivers products and services at low prices, and has a loyal following of millions.
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PESTLE Analysis - What are the advantages and impediments of the Internet of Things?
As the IoT will solve several problems, increase efficiencies, and increase safety, it does come with a
host of issues to consider. As the Internet accelerated globalization, it created a number of issues arising
from the same capabilities. Although the IoT will increase productivity and generate opportunities for
the IoT designers, programmers, network designers, it will contain some sticking points that
governments, labor, and society may contest.
Political: If the IoT is developed to manage a municipality, it could be considered a public-private
partnership. In stable nations, the robust respect for business will recognize the sovereignty of each
entity, but in less stable parts of the world, the partnership may be nationalized.
Economic: Consider the adage, “There is no such thing as a free lunch.” Considering the positive
economic and ecological impact the IoT may have, the increased productivity and automation of work
will change the future job skills requirements. With any change, improvement or not, follow-on
adjustments have to be made. Civilization’s adjustment to the IoT will vary in degrees of acceptance.The
change in economics has similar learning points in relation to reports of climate change.
Political
•Allowing one nation's company to control the flow of information
•De-centralizing information analysis, management and utlization
Economic
•Increasing productivity and increasing the global GDP by $15 trillion over 20 years
•Integrating product lines
•Evolution of collorabtion and innovation
•Shift in labor skills
Social
•Fear Factor: People's acceptance of transmitting personal data, loss of control
•Allowing the machines to predict owner's habits/ think for them
•Evolution of personal habits
Techonological
•The language by which all manufacturers will use to ensure proper communication between devices
• Productivity and automation increase
Legal
•Transmission and utilization of sensative (personal and corporate)
Environmental
•Increased efficency will save natural resources, locate ideal locations for renewable energy centers
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Social: To quote a Discovery Channel article, “Evolution can be fast, but not fast enough to keep up with
the rate of human-caused climate change” (O'Hanlon, 2013). The simile between climate change and
technology change derivefrom the point that most things are not ideally suited for quick change.
Physically and mentally, the preparation for change always takes time for the vast majority of people.
Although the IoT may deliver cost savings for companies and the end consumer, it will impact
employment, social exchanges, and spending habits.This may seriously impact the reception of the IoT.
The Opportunities for Service Providers
The “sweet spot” identified by most of the IoT service providers are based on the business-to-business
segment. Cisco, IBM, Microsoft, and GE have all delivered solutions to cities to manage some aspect of
their daily tasks or infrastructure. They all knew they had to do something big. Referring to the
Economic section of the PESTLE, the IoT is expected to increase productivity, decrease cost, and add to
the global GDP. The following is a sample of IoT implementations.
The company that will succeed in the market will be the one that allows for the most access and
functionality. Microsoft’s Windows operating system for PC is the global leader due to the amount of
programs written for the platform. Google’s Android operating system for mobile devices is the global
leader due to the amount of applications written for the platform. Since more and more work will be
done over the Internet, becoming the service of choice for the Internet of Things will be highly
dependent on if users can get the most usability. By partnering with developers, the association will
effortlessly increase the product’s value.
Cisco July 2014, Invests $30 Million in IoT center in Barcelona
Cisco and Intel
March 2015, Challenge Up, a joint Internet of Things (IoT) accelerator for start-ups from the Europe, Middle East and Africa (EMEA) region
IBM December 2010, Opened a Smart City Operation Center in Rio de Janeiro
IBM and AT&T February 2014, AT&T will manage sensors' communications and tracking happening over the cellular network and IBM will use its analytics platforms
Microsoft March 2015, Announced Azure IoT Suite that combine business intelligence capabilities (Power BI) using real-time data (Azure Stream Analytics) with Azure Machine Learning capabilities
Microsoft and Motorola Solutions
October 2014, Orleans Parish installed Azure to consolidate emergency services into one terminal to improve response time
Google March 2013, Kansas City becomes the test ground for Google Fiber, Gigabit speed Internet connectivity, moving Google into the Internet delivery market
Google and Nest October 2014, Google acquired Nest to stay ahead of competitors to control the next generation of smart devices, including appliances and household devices
The Market Opportunities for Many Smaller Developers
Similar to developers for mobile telephone operating systems, an entire industry is likely to sprout up
due to the opportunity to deliver applications. Literature and advertisements from IoT service providers
uses universal language about unbeatable security, improvement of efficiencies, extending asset life and
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versatility. Except for Google, what IoT service providers do not mention is the compatibility with any
device or the opportunity for 3rd party companies to write programs for the platform.
The list of activities represents large contracts that preside over a large physical area, but the service still
comes down to the individual user. The operator will want ease of use and functionality across the range
of their devices. With potentially dozens of devices to manage, if even one device is not compatible, or
uses a differently structured graphical user interface, the disruption could slow the user’s integration
into the operating system.
Based on mobile telephone experience
Apple and Google have strong following of their products. Google, with its search engine dominance, its
mobile OS dominance, and its move into the home with the acquisition of Nest, it is positioning itself to
be the choice of millions of consumers. Those same consumers work in local and national government
as decision makers who will be required to decide which company will be the backbone of their
network. Their Home market experience may influence expectations and choices for their company.
Woo the User
Although GE will connect devices that make the world work, is it addressing the market of the people
who do the work? Having a fundamental, underlying network connecting millions of people and product
is one thing; having a network that connects into people’s lives, brings them joy and satisfaction is
something else completely. Although the B2C market may not be the focus, creating informative market
messages will go a long way to inform people of the relevancy of GE, the Industrial Internet, and Predix.
Is the Home segment experience being over represented? No, in the sense of how users will interact
with the IoT: smart phones and tablets will be a common medium of utilizing IoT data. Although the
segment GE is pursuing is business-based, that does not mean the clients expectations of an interface
will be a dull, lifeless, and confining GUI. Also, the interface must be attractive with commonalities
across industries. The lessons to learn from the consumer are to listen to their feedback. Apple and
Google have created intuitive interfaces that require no instructions to become an intermediate user.
IoT Service Provider Activities – Supply Chain Analysis
Benefits if the IoT deliver value in three key areas: Pervasive Visibility, Proactive Replenishment, and
Predictive Maintenance (Mondazzi, 2014). The table from Opportunities for Service Providers
summarizes activities by those companies looking to get a foothold into the IoT market. Through these
activities, each of these companies addresses the key areas of the IoT’s supply chain benefit.
For example, IBM and Microsoft are delivering the capability of Pervasive Visibility and Predictive
Maintenance as authorities can better manage their municipalities. Google is delivering Proactive
Replenishment on the consumer level (Google Fiber), and this type of activity transferable to other
industries with which GE has dealings.
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Supply Chain Improvements for Manufacturing and HealthCare
Industrial companies are looking to add analytics to two major areas: assets and operations
optimization. Classic macroeconomics state, “a facility is operating at 100% utilization if 85% of the
machines are working.” This rationale is based on the need for repair and maintenance of equipment as
it breaks down since actual one-hundred percent utilization is possible only in short-terms before parts
fail. What a Smart Factory would able to achieve is a higher utilization rate through better forecasting
and sequential planning to minimize downtime, thus boosting equipment utilization.
Manufacturing Assets
Pervasive Visibility, Proactive Replenishment, and Predictive Maintenance will all be factors in managing
the operations of any kind of Smart Facility. Visibility into the workings of equipment could have a lot of
meaningful applications such as improving production time and costs. For example, unanticipated
downtime of equipment could have knock on effects reaching both horizontally and vertically in the
supply chain. The ability to manage the expectations of a production cycle and greatly improve the
quality of the product and extend the life of the equipment, saving on reinvestment costs.
Manufacturing Operations
Business works best with predictable variables. A steady stream of material is need for inputs to deliver
a consistent output. Consequences of fluctuations require extra energy. Visibility can deliver
consistency, optimizing performance.
Health Care Assets
The benefit to healthcare is not just patient care. Saving a life may be due to numerous reasons.
Certainly, the development and miniaturization of wearables will improve the patient experience, but
similar to the benefits to the manufacturing floor – equipment breaks down. Increased reliability
through the installment of sensors can prevent the malfunction of equipment at a critical moment.
In a report on the UK’s National Health Service, a 2014 report found 309 people had died due to
malfunctioning equipment, seriously injuring 5,000 more, with a total of 13,000 incidents (Steere, 2014).
In addition to the sheer altruistic value of lives not needlessly wasted, improving service would have a
massive impact on insurance costs, thus reducing malpractice lawsuits and overall costs in general. If the
average wrongful death settlement is $1.4M, the quantifiable savings could easily reach hundreds of
millions of dollars per year across an entire country (Murphy, 2013).
Health Care Operations
The wealth of Big Data derives from the ability to develop pattern recognition software. Although this is
a derivation of predictive tools from machinery maintenance, the same concept can be applied to
healthcare management and patient diagnosis. Ranging from managing patient flow time in order to
increase the speed of patient admittance can greatly improve the stratification of serious medical
conditions from lesser conditions. Additionally, and more importantly, predictive medicine could come
in the form of an algorithm that is connected to a patient’s monitoring devices and prevent an
emergency.
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Porter’s 5 Forces
The IoT is about to face a huge wave of growth. Declining prices of intelligent devices and components
will mean an increase in their presence. The industry is about to introduce newly affordable capabilities,
as well as foster new industry for developers. Considering these factors, all that has been said
concerning the companies involved and the market segments, the situation deserves to be summarized
simply. Using Porter’s 5 Forces model, a value has been assigned to each for with a weight of Low,
Moderate, or High. In order, the value rates the intensity of the force from light to contentious.
When considering the companies involved alone, it is possible to get an intuitive grasp of how
competitive the market will be. There are several large companies vying for market share; the only thing
lacking is incumbency. Since the market is still relatively new, no one company possesses a dominant
position in the industry, let alone in the Home, Business, or Industrial segments. This could signal a
volatile first generation of the IoT as the services expand and mature, and providers determine if the IoT
is worth the effort, or if they are capable of competing.
Competitive Rivalry:
High
Threat of New
Entrants: Moderate
Bargaining Power of Buyers:
High
r
Threat of Substitues: Moderate
Bargaining Power of Suppliers: Moderate
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Threat of New Entrants – A set field of many competitors
New entrants to the IoT market would face several large companies in the field that are already
developing services.
High start-up cost: Developing a differentiated service and marketing it to the segment.
Distribution of service: The challenge of delivering a service on any significant level would
require network planning, access to a client’s network, and robust security.
Hadoop software: At the core of the IoT is analytics. A meaningful aspect of using an IoT service
is optimization of a client’s business. The analytical possibilities that Big Data services provide
deliver information from sensors and transactions in areas such as logistics, customer service, or
farming. The software needs development, testing, and delivery.
Less competition, not more: With nearly 20 large companies vying for market share, it is likely
some of those companies will divest from the industry. This would entrench remaining
competitors.
Power of Buyers – Buyers will have service provideroptions, but not the option to do without service
Initially, customers will be able to pick and choose from the numerous service suppliers. Since the
market will be local, regional, national and global, no one customer will impact the market too much,
but there will be the option to switch services.
Dozens of suppliers: Nearly 20 large companies have been identified as service providers. This
does not include the medium and small companies, or the niche suppliers.
Standardization of protocols: If the language becomes standardized, suppliers will have to look
for incentives to keep customers or install “switching cost” provisions in contracts.
Service importance: The IoT will become the normal cost of doing business. IoT services will
become a necessity in how people and businesses will operate on a daily basis.
Availability of Substitutes – Alternative services will persist to be a threat to suppliers
The possibility of customers switching service will be a treat, especially if switching costs are low. This
may mean customer retention may face a huge churn rate as customers switch from provider to
provider.
Large number of buyers: Households, business, local/state/national government create a sum of
billions of customers. Even a small percentage of billions of customers could mean huge profits,
even if churn rates are high.
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Large scale purchases: Big business and government contracts will involve hundreds of
thousands of connected devices from printers to vehicles. Service purchases such as these will
involve network planning and likely long-term contracts.
Sales and service plans: GE’s diversified portfolio can be a “foot in the door” for IoT service
plans. The sale of machinery can come with a product warranty that can be monitored by its IoT
service.
Power of Suppliers – Prominent names in the field with considerable R&D
For the companies in the industry already, they have completed trial sites and are capable of deploying
network service. Swaying the customer to contract with their service becomes the issue.
Brand loyalty: Although the retail space comprises only 8.3% the IoT market (Newton, 2014),
Google’s name is very prominent in the field.
High fixed costs: Maintaining a data collecting network will limit the number of new entrants
into the field and eliminate some suppliers.
Buyer Incentives: Bundling IoT services with equipment sales.
Government restrictions or legislation: Could IoT services become a public utility or come under
some legislation that could alter the business environment.
Competitive Rivalry – Home, Business, and Industry segments each have their field experts
Of three segments mentioned, not one company is master, or viable competitor, in all of them. Home is
where Google is making its move; Business becomes a grey area that is mixed for all; Industry where GE,
IBM, and Cisco proclaim excellence.
Service differentiation (hardware): The main issue is the similarity of substitutes. GE’s
outstanding point will be able to offer service after its products.
Service differentiation (municipal): The main issue is the similarity of substitutes. GE, IBM,
Microsoft all have Smart City success stories. The municipal area may be much more
contentious.
Smart Buildings: Managing the resources of a building is just as important as city management,
but mostly belongs to private firms. Rudin Management has shown credible savings through the
development of their DI-BOSS software. Smart Buildings will be highly valuable and the middle
ground between Home service providers and Industry service providers.
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Conclusion and Recommendation
At present, General Electric needs to work through the current challenge of developing Predix and
establishing it as the industrial standard. The Internet of Things is a new field with much yet to be
defined, with territory it to be staked, with a lot for potential development. In terms of its life cycle, the
phase the IoT is in is the introductory/early adopter stage with its high investment costs and small
market size. At this early stage, there is a lot of room to develop the technology, the peripheries, the
partnerships, and the message.
Based on the positions companies are building, there are two ideologies to consider: Those that target
the fewer big customers that operate something large (B2B), or those that target the many smaller
customer that primarily look after themselves (B2C). A consideration GE will have to keep in mind is how
to address current B2B needs and prepares itself for the next steps and the challenges to come. It has to
assess the threat of current competitors that operate in its market segment and later address those
competitors that captured the personal space of consumers and consider if, how, and when the
consumer space it not enough and moves into the business space.
Companies that subscribe to either camp do so for historical reasons – how they historically approached
the market. In 2010, IBM installed an intelligent operations center in Rio de Janeiro that unites 30
municipal entities into one situation room. In 2015, GE installed its Intelligent Cities Platform in San
Diego to control over 3,000 city street lights. These examples demonstrate the perspective used to
target the fewer, larger customers in a B2B setting, based on their success of delivering solutions on a
large scale. A sample of segments where large companies should look to monopolize is the following: