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The THING is Not the Commodity in the Internet of THINGs

  • 01.23.18
  • ::
  • By Matt Smith

The Cortet Blog | The Thing in IoT


(People Still Buy Great Products)

With growing excitement about the IoT and its many associated technologies (cloud, data analytics, artificial intelligence, etc.), it's getting easier to lose site of the fact that it's all of those "things" connected to the network that still contribute a significant amount of the value to any IoT solution.

After having worked in this industry for going on two decades, I'm more confident than ever that what end-users truly buy are high-quality products — all of those "things" we talk about being connected to the network.

Bottom line: If the "things" on the network don't deliver the real value to the user, it won't make any difference how good the control network is, or how amazing the data analysis engine is.

The Internet of Clouds

We don’t call it “The Internet of Clouds.” We also don’t call it “The Internet of Mobile Apps” or even “The Internet of Bluetooth Devices.”

Until it involves the “thing” you care about, it’s just a bunch of engineers getting excited over software talking to software.

Don’t get me wrong, I get that some “things” are virtual (e.g. airline tickets, sporting event tickets... well, just about any tickets these days).

But, it's still the case that most of those valuable virtual “things” lead to a real, physical “thing” (tickets for example), or at least to something that involves other people (e.g. game status, number of followers, etc.).

"Things" Are More Than Just Commodities

The saying goes that, “if you are a hammer, everything is a nail.” Thus, the cloud-focused companies think “the cloud” is the center of it all, that the cloud is the Big Brain (remember, "All the intelligence should be in the cloud!"), and all the rest of the stuff is the commodity.

It is a similar story for companies that focus on mobile apps, gateways, or devices. What the company focuses on and produces becomes the center of the system.

This isn’t surprising, or even new. You may have seen the original or a parody of this cover showing the view of the world from a New Yorker’s perspective.

It suggests that anything beyond the Hudson River is a bit of a blur, with only a handful of cities sandwiched between Canada and Mexico. New York itself looks detailed and busy, because it’s where the New Yorker lives. It’s his whole world. 

The Cloud Starts as Just a Database

Google Photos got the cloud right. Back in 2010, I had a phone that let me take so many more pictures than I could before, and at zero cost.

I now had a new set of problems that needed a solution. Some problems were easy to solve (how do I get these photos on to my computer, what happens when I need to change phones, etc.), and others were more difficult and drove the need for Google Photos (what happens when I run out of space for pictures, what happens when I lose my phone, etc.).

Now, Google Photos keeps ALL of my photos in order, backs them up for me, and makes my photos available anywhere I am (with an internet connection). This is just what I needed: a big, highly-available, always-on database. This is phase 1 of the cloud: just a database.

After a few years, Google Photos started doing some pretty amazing stuff around creating videos from my photos, reminding me where I was on “this” day in past years, and using facial recognition to search and organize my photos. This is phase 2 of the cloud, but it couldn’t be done until enough of my data (photos) were stored.

The Lighting Control System Example

Today, companies are looking for the valuable part of the Internet of Things. Like other markets, pieces of the IoT will become commodity — meaning low-margin stuff you can buy from any vendor that plays its role well and doesn’t cause problems.

Companies want to invest in the part that is NOT the commodity, that is valuable, and then they can make money charging the end customer more for this piece of the IoT.

So, what are the pieces of the system that are commodity, and what pieces are the (non-commodity) value parts? To answer this, let’s look at a Lighting Control System.

If the light fixtures in a building do not provide enough light, or do not provide the right kind of light, or do not look the way the customer wants, then the system won’t be installed.

So, that says the device is on the value side, or at least drives the sale. But wait. What about the fact that some states are mandating lighting control for energy reasons?

Now you must have a control system that meets certain advanced smart requirements. In this case, isn’t the light fixture the commodity and the control part the value?

The answer is not a simple one, and it changes based on what phase of the system we are in.

In Phase 1 of a lighting controls system, the light fixture drives the sale. As we enter Phase 2 (where a customer wants advanced “smart” control, or needs the advanced control for building code compliance) the value is provided by the smarts of the system, which is distributed among multiple components, but relies on, at minimum, the local control and intelligence of the gateway.

The Nest Example

Let’s now look at how this works for a connected thermostat, such as Nest.

Was cloud-connectivity the initial selling point for Nest? Maybe for some people who work as engineers. For most early adopters of Nest, though, in the first phase of the Nest thermostat, it was just a cool-looking thermostat that could be programmed easily and could be controlled from your mobile phone.

Phase 2 of the Nest thermostat is controlling it from the cloud. My Nest knows what I want the temperature at, so I don’t even need to use the cloud.

There is a Phase 3 that comes after the first two phases, which involves “data collection and analysis.”

Identifying Value Delivery in the Total Solution

So, what is expected of each component at each phase, and where is the value? See the table below.


The Cortet Blog | IoT Value Table


The short answer is that value starts with the device. It starts with a need and a problem and a device that supplies the solution.

After that, the solution moves into the “smart” phase (sometimes very quickly) where the gateway joins the device as the value-add.

Moving from phase 2 to phase 3 takes more time (and it hasn’t really been done well that often). Phase 3 is where the data analysis of the cloud joins the gateway and device as value.

For Next Time... Why the Cloud Isn't Really So New

Cloud services have revolutionized our way of life and doing business in the same way the internet did. Right?

Actually, I’m not so sure. A lot of what is considered “new” is just the terminology camouflaging technology ideas that have existed for decades.

In my next post, I will talk about what the cloud is and is not, and why it isn’t quite as revolutionary as we have all been led to believe.

Until then, be sure to subscribe to our email alerts and follow us on LinkedIn, Twitter and Facebook so you don't miss a thing.


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