Capturing value with Internet of Things
For the 3rd edition of the Connected Event, which took place at EPFL on the 16th of November, the topic of Internet of Things (IoT) was addressed. 300 persons from various industries gathered to learn and exchange about the opportunity that IoT can bring to their business or more broadly to our economy.
In this article, I would like to focus on one key aspect that was presented and share my insights about it :
how to capture value with IoT ?
I would like to illustrate this question by focusing on three areas :
- Connected waste management
- Connected home for elderly people
- Connected watch
Becoming a global player
Connected waste management
Let’s start with a didactic use case that was presented during the conference by Professor Edouard Bugnion : garbage collection.
Internet of Things can clearly generate significant savings in that field. The company BH Technologies achieved the following results with their IoT solution:
- Garbage collection time reduced by 40%
- Driving distance of the truck fleet down by 20%
- Garbage container lifetime extended by 1/3
These numbers were calculated in a French metropole with about 400’000 inhabitants, where 2’400 sensors were installed in garbage bins.
The question now remains, how you can best capture value: on one side, you have a sensor that costs 50 Euro and on the other side you generate a significant savings to your customer. There is a mismatch between the sensor price and the value being created. A shift of business model is required which is illustrated below by Prof. Bugnion:
In the new model at the bottom, you focus on building a platform which stores and analyzes the data generated by the sensors. The core competence of your company shift from a sensor producer to a developer of the best in class algorithm for garbage collection optimization. You develop a global business and you seek partnership with truck companies to run the operation in the field for the physical job, which are still performed locally.
Connected home for elderly people
Now, let’s explore what it would mean for a start-up addressing the health challenges related to population ageing.
EPFL based start-up DomoSafety delivers distant medical detection and monitoring services. They started by installing all kind of sensors in home for elderly people: refrigerator door opening count, bed movement monitor, chair usage, etc.
The collection of all these data enables the company to detect abnormal behavior. Therefore, as in my first example, the way to scale-up is about building a platform running novel algorithms. Their positioning is to become the leading provider of behavior-based and medical data analytics.
Looking at a concrete illustration, DomoSafety is able to detect a chronic disease like Alzheimer : on the right side of the picture below, you can see the random behavior of a patient, very different from the pattern of a healthy person on the left side. Doctor can access this information, monitor the situation and adapt the medical treatment.
Enabling asymmetric business model
Finally, another industry in (r)evolution is the watch industry. Switzerland has a vast knowledge and know-how in the micro engineering field, building precise and complex watch movements. However, connected watches are a growing business and certainly threaten the traditional watch industry. What about evolving our capability to make attractive mechanical watches that are connected ? That’s the opportunity that SOPROD is looking after. It is developing connected quartz movements and uses the watch hands as antenna.
Who are their customers ? With the exception of one traditional watchmaker, most of the companies interested in SOPROD products are new players. If you are a company building activity tracking solutions, entering the luxury watch space might sound attractive: the war for being on your wrist is just starting.
Such watches of course enable new services for the customers but they also enable watch companies to acquire a new source of data. As a result, the value chain is going to shift as watch makers become platform players : The data collected and the algorithms to extract information from the data, might have more value than the watch itself. You could even imaging selling a beautiful mechanical watch at a low price in exchange of getting the right to use your customer’s data.
Software is eating the world
To conclude, with the availability of low cost sensors and the deployment of low power networks such as LoRa, Sigfox, Narrowband IoT, you will be able to collect a massive amount of information that can be used to develop and train algorithms. With the above new business model in mind, IoT is representing a fantastic opportunity for entrepreneurs.
Internet of Things is changing the value creation model and it is already happening. A smartphone is a connected sensor that you have in your pocket: It changes the transportation industry thanks to Uber and Lyft…developing car traffic route optimization algorithms.
Link: Presentation of the Connected Event, 16th of November 2016, Rolex Learning Center, EPFL. Co-organised by InnoVaud, CVCI, EPFL and Swisscom.