Despite the promise of the Internet of Things to redefine how we interact with the things around us, the reality may be closer to many competing Intranets of Things — each with its own network of users and products.
Within the last few years, the emerging Internet of Things (IoT) has entered the mainstream vernacular. The IoT consists of “real” things increasingly connected to each other virtually in an Internet-like structure. More profoundly, we can think of the IoT as a responsive digital network that will encapsulate almost everything within the human ecosystem. It will be laden with smart sensors and interconnected devices that hold the promise of smarter, more efficient, more automated and more proactive decision making. Engineers are developing disruptive future applications of this technology in the consumer market (the “smart,” connected home), healthcare, transportation and infrastructure.
In 2014, approximately 2 billion “connected” devices were shipped worldwide; that figure is projected to grow by 300 percent to around8 billion devices by 2020. Meanwhile, global revenue opportunities from the IoT are projected to grow at more than a 450 percent clip to over$1 trillion US by 2020.
For the IoT—along with the Industrial Internet, which connects complex machines at an industrial scale—to fulfill its promise of redefining how we interact with the things around us, one defining feature will be interoperability, as Paul Kominers of Democracy Works has argued. Devices will need to be able to send and receive signals from one another and to understand what those signals mean.
But perhaps the future IoT will not be seamlessly connected, open and universal. Rather, we may see a near future of many separate intranets of things and general anti-interoperability between the systems that form the architecture for this technology. This is a world of Platformia.
Platform Economics at Work
Today’s tech landscape is largely characterized by the network effect, or the notion that when more and more people adopt something, the more valuable it becomes to all of them. Now that more objects are wired into networks, there are opportunities for new, powerful platforms to emerge. Platform economics help explain why companies like Uber, Apple, and Amazon are so successful, according to Marshall Van Alstyne, a business professor at Boston University; they have created, like Apple’s iOS operating system, something that produces value outside their own firm,
Business platforms often facilitate connectivity between two or more parties. However, platforms have to go beyond connectivity and provide reasons for other people to add value. That often means allowing recombination of features in ways that the original developer does not plan for…such as the explosion of iPhone apps.
Ultimately, the future IoT may morph into a virtual “battleground” between powerful platform companies — not dissimilar to the battles waged within telecomm, mobile, computing operating systems and social media — that will cleave the IoT into multiple, distinct and separate Intranets.
Anti-Interoperability: Competitive Forces
Green Mountain Coffee helped pioneer single-serving coffee pods. But it is not keen on others eating into that business, so its new coffee makers have technology that prevents people from using pods from other companies. More than just limiting brand choice, efforts like these are harbingers of the kind of closed system that could hamper the true interoperability and ubiquity promises of the IoT. For now, coffee makers are not Internet-connected devices — but they likely soon will be. And Green Mountain is far from alone in this kind of brand protectionism.
That strategy suggests makers of IoT hardware might not view interoperability as a positive. In many cases, companies will want to preserve their market share. But in many other cases, the main issue will be preservation of intellectual property in an environment likely to be rife with cybersecurity concerns. Ultimately, Kominers argues, the obstacles to a wide-open IoT are more likely to be organizational than technological.
The Compatibility Principle
One key tool for ensuring interoperability in the IoT is the application programming interface (API), a tool that allow developers to make one piece of software talk to another piece of software. The reason why some of today’s largest platform players have succeeded is because they leverage the power of open APIs, allowing others to add value to the platform.
Currently, there are several APIs that make integrating various objects into the fledgling IoT easier. For example, Walgreens allows developers to access its photo printing services through APIs, leading to the creation of applications that let users print photos from social media. Johnnie Walker built a platform that connects 100,000 of their whiskey bottles to the Internet. With innovations in smart labeling, the brand allowed anyone to create a personalized film tribute. And Ford is investing in new business models and partnerships that include ridesharing and on-demand services. Its AppLink platform allows users to connect to apps through voice recognition.
While many other brands will likely follow suit, there will be just as many that dig their heels in and take a stance similar to Green Mountain’s — use our products on our approved network, or you won’t be able to use them at all. Currently, some products can be retrofit with sensors that allow them to integrate into existing IoT technology. But, in the future, more products will likely be manufactured to integrate into the network — and they may be manufactured to integrate into only one network platform, just like your mobile can only function using one operating system. In the near future, we can expect that compatibility principle to be blown out even further.
`Hackability’ of the IoT
The U.S. State Department recently deployed a team of hackers, activists and developers to develop a “mesh” network. The mesh allows users in a local area to create a network that is physically distinct from the Internet.
But this type of security model will not be limited to the existing Internet itself. What will stop hackers from hacking a connected home? Because of hacking and related privacy concerns, it may become a necessity for the IoT to operate more as a series of “closed” networks — or intranets — versus one open, interoperable network.
Welcome to Platformia
As IoT platform companies of the near future become incredibly powerful, what will the regulatory burden be for controlling this competitive environment? Surely, in absence of one completely interoperable ecosystem, we will not see a true monopoly. But, we could see something close to the duopoly that has long dominated computer operating systems, or the oligopoly we see in mobile.
Based on how these platforms will have to integrate with product design, we can expect that first-to-market may trump best-to-market, and a few powerhouse firms will dominate this new frontier of IoT Platformia.
(Top image: Courtesy of Thinkstock)
Jared Weiner is Executive Vice President & Chief Strategy Officer of The Future Hunters.