Creating a Playbook to Exploit the Long Tail of IoT The four essentials for a winning strategy to unlock the potential of the Internet of Things

Global labor productivity growth has been in

decline for over a decade. Across Western Europe,

Canada, Japan, Korea, and the US, productivity

growth between 2004 and 2014 was lower than the

previous decade, according to the Organization for

Economic Cooperation and Development (OECD).

The slide has impacted both big and small compa-

nies in virtually all industries.1

Even in the midst of recent innovations delivered

by the likes of Facebook, Twitter and Uber, “it is

into meaningful changes in the economy’s largest

sectors, such as healthcare, manufacturing and

transportation,” according to David Rotman, Edi-

tor of MIT Technology Review.2

There are many hypotheses for the lackluster pro-

ductivity. Some pundits argue that the workplace

already been realized.3 Others suggest that social

technologies, such as collaboration tools, search,

and even email have yet to deliver on their full

potential. 4

The next game changer on the horizon is the Internet

of Things (IoT). It has been touted as perhaps the

most significant and transformative set of

technologies since the internet, with the potential

example, McKinsey & Co. estimated that IoT could

potentially generate up to $11.1 trillion a year in

economic value by 2025.5

While IoT’s potential is enormous, it has largely

remained just that: potential. The reason is that

a meaningful economic impact takes years to

materialize. The value IoT delivers will be meas-

ured in the aggregation of thousands of use cases

across many industries. The vast majority of these

use cases are to be found in relatively small, niche

markets—the “long tail” of IoT. (See Figure, Page 6)

the long tail of IoT are not afraid to experiment

with combinations of nascent technologies that

have the potential for high payback, even if they

are yet to be validated in the marketplace. By

focusing on rapid application development, these

companies learn quickly and design and launch

competitive products to keep pace with fast-evolving

technologies, business models and customer

expectations. They know what the long tail looks

like, and they are agile enough to seize the moment

to enter a market when the opportunity presents

itself.

The PlaybookIn the process, they are writing—and constantly

revising—the long-tail playbook. There are four

pages to the playbook that capture the fundamen-

tals for long-term success.

Creating a Playbook to Exploit the Long Tail of IoT

2

Unlocking the market potential of the Internet of Things requires business acumen and technological expertise coupled with the ability to learn fast and pivot quickly. The most lucrative oppor-tunities for companies that master these skills reside in the long tail of the IoT market.

IoT competitors will emerge from all directions and backgrounds. In virtuallyall markets, new entrants will bring unorthodox perspectives that challenge incumbents and transform markets. Being blindsided by a new competitor, or not taking them seriously, will result in lost market share or worse.

The same battles are taking place in every niche

market in the IoT long tail. The greatest opportu

nities for success by innovators in these markets

is to target opportunities where the potential for

Consider an Industrial Internet Consortium test-

bed project being developed by Bosch and Cisco

called Track & Trace. The testbed aims to manage

facilities used for drilling, welding, tightening and

other functions. Equipped with wireless connec-

tivity and indoor localization, the tools can capture

and share measurement data to be processed that

helps improve equipment efficiency and production

quality. In addition, programs can be deployed to a

tool located in a specific location in the plant so it

is equipped to perform a specific task.9

A Profound 01

3

The vehicle-to-vehicle (V2V) communications

market is a case in point. Competitors include

legacy players such as General Motors and

Toyota, and new entrants such as Google and

Tesla. The stakes are high, because the promise

of ubiquitous connectivity depends on near

universal adoption. GM has an edge, as its

2017 Cadillac CTS will be the first new vehicle

in the United States with onboard V2V capabil-

ity. Toyota is taking a slightly different tact,

and has recruited top robotics researches to

focus not on full autonomy but on applications

where drivers and cars cooperate. Meanwhile,

Google and Tesla are both developing fully

autonomous vehicles.

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7

6

CompetitiveLandscape

Knowledge Of The

It will be some time before the dust settles to reveal the technologies that will dominate in the IoT market. Until that happens - which may take years -companies need technology roadmaps that offer many possible avenues into the future. This will give them the foresight to quickly shift direction as competing technologies emerge and fade.

For example, cellular IoT is now a viable option

since the advent of Narrow Band IoT (NB-IoT).

Just a few years ago, it was private networks on

unlicensed spectrum that were all the rage. Yet

even as cellular IoT picks up, use cases for chipsets

that support the new standards are still years out

for deployment by service providers. The network

in the mobile sector is being totally re-architected

too, from the access to the datacenters. One emerging

technology paradigm is locating micro-services much

closer to the service invocation, be it the car, the home

or the user.

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02

4

Another battle is taking place in the silicon solutions for

artificial intelligence (AI) applications. Intel, for

example, recently introduced its next-generation Xeon

Phi coprocessor, which is designed for deep learning.

Meanwhile, Nvidia—one of Intel’s competitors—has

established a strong presence in AI by focusing on

deep-learning algorithms. Nvidia’s graphics processor

cores run algorithms more efficiently than a general-

purpose CPU. Such differences in approach is an

example of the age-old dilemma of choosing among

diverging strategies to address the present challenge.

Embrace Extreme Volatility

IoT revenue models and profit-sharingstrategies are in their infancy and will evolve as companies gain experience.In general, successful innovation ecosystems typically have a diverse set of partners that share both the risk and the reward of their collaborations. They evolve complementary capabilities to develop new products and services that benefit all. At the same time, power shifts within the ecosystem are occuringall the time, which can impact businessmodels.

For instance, you would think the semiconductor

-

lions of connected devices. Instead, the traditional

business models of the 20th century have simply

been upended. Chipmakers are facing intense

pricing pressures on integrated circuits, modules

and chipsets. Margins on sensors, for instance,

are razor thin and getting thinner, which means

ever-larger sales volumes are necessary to turn a 11

Similarly, AT&T is spearheading the software-de-

-

ization (NFV) initiative called Domain 2.0.12 It

has the potential to upend the network equipment

supply chain much like Facebook upended the

datacenter market. Facebook, meanwhile, has

released hardware specs for the Open Compute

Project and is driving a very large ecosystem that

includes silicon vendors, original design manufac-

turers (ODMs) and the open-source community.13

Accept Commer- cial Uncertainty03

5

Figure 1. Predicted number of units installed 2020, Source: Gartner Prediction Report 2016

The right business model and the right technolo -gy are worthless without a culture that embraces speed and flexibility. Companies need to run fast and conduct a lot of experiments. They need to focus development resources on applications where the potential for significant upside is high and the potential for harm is low. Every trial, whether it succeeds or fails, provides valuable insight and may uncover new long-tail market opportunities. Companies should formalize the learning process, as well as systematically utilize the insights gleaned during development of future product iterations.

In 2010, Intel co-founder Andy Grove wrote:

“Equally important is what comes after that myth-

ical moment of creation in the garage, as technol-

ogy goes from prototype to mass production.”14

That observation holds true for companies today,

particularly for startups that are scaling up. These

-

pline that limits their ability to innovate.

Nest is one example. The break-out smart devices

company has successfully combined software and

hardware to transform an experience as simple

as changing the temperature in a room. The lack

of new product categories to embrace this inno-

vation, however, has resulted in stagnate growth,

increased competition and an inability to scale.15

04

6

Be Fast, Agile And Flexible

But the company is not standing still. It is looking

over the horizon to prepare for the next generation

of disruptive technologies. Specifically, it is revising

its product roadmap to have a solution ready as

NB-IoT picks up steam and carriers start deploying

the new standard. Timing this pivot to take full

advantage of the new technology solutions requires

experimenting with emerging technology options

and being prepared to navigate the many scenarios

that may unfold as market opportunities occur. It

also means answering a few specific questions,

including:

01 — Where and when should we deploy NB-IoT

modem modules?

02 — If we add NB-IoT as a connection option, do

we build out an NB-IoT network or will our

utility customers?

03 — What is the viability of low-power, wide-area

(LPWA) technologies such as SIGFOX and

LoRa?

Case Studies in Exploiting IoT’s Long Tail

77

A U.S.-based industrial electronics company markets and sells to municipalities and utilities the meters and modules used to sense leaks and, if need be, shut off gas, water and electricity.It has the latest connectivity technologies, including ZigBee mesh and GPRS/HDSPA/LTE/

EVDO backhaul. It utilizes home- and neighbor -

hood-area networks (HAN/NAN)—the state-of-the-art topology for smart metering—and it supports the automatic reading of gas and water meter modules using the proprietary encoder receiver transmitter (ERT) (@900 MHz) protocol.

Preparing for Transformation in TheSmart Meter Market

Virtually every industry is in some stage of rein-

vention as a consequence of IoT developments.

They are all looking to take full advantage of sen-

sors, machine intelligence and new business mod-

els. While early movers have a leg up, choosing

the use cases to maximize revenue and margins

requires iteration, adaptability and patience. Here

are three examples of companies that are using the

playbook to position themselves to capitalize on

long-tail opportunities:

Finding Wiggle Room In The Wearables Market

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Consider the challenges of a semicon-ductor company seeking to scale in the wearables market by focusing on long-tail opportunities. Its target is to create a wrist-watch communications device for young children, aged 3 to 6 years old, that is a quality, cost-effective platform through which parents monitor their children. Service options will include geo-fencing and sensors to track location, as well as interactive games. Of the products currently on the market, many have significant flaws: units that are too large for a child’s wrist, functions that are not intuitive, lack of carrier certifications and poor overall device quality.

The company understands there is no crystal ball

to reveal customers’ optimal set of attributes. It

also knows there is little chance of quickly

capturing a dominant share in the already

crowded market. As such, the company’s focus is

on developing an agile platform in collaboration

with its partners, which include an ODM, leading

silicon vendors, hardware and software companies,

and service providers. The IoT platform’s design

will address a variety of use cases and scale not

only service offerings but also domain-specific IP

and capabilities across multiple vendors.

Such an agile platform, coupled with a rapid

product deployment cycle, enables the company to

gather valuable market feedback from iterative

product releases, learn from the insights that

feedback uncovers, and then quickly test and

launch the next use case. A key factor used to

determine the success of each iteration of the

product is fast “time to joy” for the consumer—

both parent and child. The company’s strategy also

sets it up to pivot quickly to exploit long-tail

opportunities in tangential markets it uncovers.

A software vendor that develops and sells over-the-air (OTA) software to the industrial and consumer electronics sectors is now developing applications for the automotive sector. Its focus is to offer carmakers and their tier-one suppliers intelligence gleaned from the enormous amount of data vehicles generate, which totals more than 5 terabytes a day, according to the compa-ny. Although carmakers are eager to make use of this data to improve vehicle performance and reduce costs, they do not have the internal resources to collect and analyze it efficiently.

By working closely with its partners—an ODM,

automakers and suppliers—the vendor adapted

its OTA platform to meet the exacting require-

ments of vehicle applications. Among them are the

OTA firmware and software updates that are

critical to patch and update products. With the

OTA software, the time to complete these tasks is

measured in hours versus the weeks or months

older technology requires. Such quick turnaround

also helps meet customer expectations. OTA up-

dates are now part of the vendor’s tailored DevOps

capability for connected devices and services that

streamlines software product quality and asset

management, as well as accelerates release cycles.

Because the vendor adapted its business model at

the same time, it is able to generate revenue from

a combination of gateway sales and a data analyt-

ics service component. This also ensures revenue

growth as its customer base grows.

These examples capture how companies are

adapting their business models and technology

platforms to take full advantage of business op-

portunities in new, narrowly targeted IoT market

segments. The set of capabilities needed to pivot

quickly and create sustainable value from long-

tail opportunities impacts all functions within the

company. It includes resetting business priorities

and changing product development processes.

The four pages of the long-tail IoT playbook pro-

vide a foundation for developing and launching

and technologies evolve, the solutions must evolve

in step. Flexibility, adaptability and speed are

paramount.

Pivoting To ExpandThe Business Value

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References

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Contacts

Walid Negm is Aricent’s chief technology officer and is based in Washington DC.

Email: walid.negm@aricent.com Twitter: @walidnegm

About AricentAricent is a global design and engineering company innovating for the digital

era. With more than 12,000 design and engineering talent and over 25 years of

experience, we help the world’s leading companies solve their most important

business and technology innovation challenges - from Customer to Chip.

© 2016 Aricent. All rights reserved.

All Aricent brand and product names are service marks, trademarks, or registered marks of Aricent in the United States and other countries.

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Contacts

Scott Runner is VP of IoT Business. He is based in Redwood City, CA, USA.

Email: scott.runner@aricent.com

Giri KK is VP and Practice Leader for IoT & Embedded Systems. He is based in Bangalore, India

Email: giri.raju@aricent.com