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When An IoT Solution Does Not Fit

We pride ourselves in being at the leading edge of IoT solutions in connected product development. From our vantage point, we can see the formulas that seem to be working for internet connected products, and, as importantly, those that are not. Seeing so many corporate brands attaching themselves to IoT, one would think IoT solutions are a can’t-fail, slam dunk play. However, it’s important to recognize the enduring principals that lead to long-term, successful products and it’s just as important to understand when those principals do not apply.

Sometimes IoT doesn’t make sense and here are some of our insights into key considerations when evaluating the potential of an IoT solution for your product:

Is The Value Proposition Not There?

Consider the example of an IoT solution around a coffee mug that senses how much coffee is left in the mug and the temperature. The mug can also be location-aware via GPS. This data can then be wirelessly communicated to a cloud system connected to other web- and server-based data sources. For this exercise, let’s think of the mug as connected through a low data rate cellular link. At the server, the location and mug status (volume, temperature) can be combined with other GPS data to now link the mug to the nearest available service provider to deliver coffee. This would trigger a concierge to get a message on his smartphone app telling him to come to the mug and refill with fresh hot coffee. It is the “Uber Coffee Mug.”

Ridiculous premise, right? Of course. One can create the Uber Coffee Mug; it is technically achievable. However, it is unlikely this creates sufficient value to warrant development of an IoT coffee mug. There are many cases where investments are being made and a product is being developed for very dubious user value.

Is Cost/Benefit Trade-off Compelling Enough?

There is no way around it. An IoT-enabled device (and service) will cost more than a “dumb” device. While costs for the hardware elements are dropping, they still represent an increase in bill-of-materials cost. In addition, the cost and time required to create an IoT solution is significant and is often underestimated. To be successful, an IoT solution requires hardware technology and integration as well as considerable software development and data analytics expertise.

If a company is going to make this investment and incorporate the increased product development expense, is there enough value to the user to warrant the price increase? Is there sufficient margin in the product for the company to balance the cost and time required to create it? Is the risk/reward high enough to justify the exposure? These are tough questions requiring a thorough understanding of the opportunity and the value proposition to all constituents. In the mug example, the benefit is increased sales of coffee. The question is: Can you move enough incremental coffee to warrant the development and support of such an IoT delivery model? It takes a lot of coffee.

Is The Company Ready To Embrace And Capitalize On A New Business Model?

Using the Uber Coffee Mug example, one can imagine the local deli delivering coffee theoretically could find a value proposition in delivering coffee by the mug. The way to capitalize on the value might be to have users subscribe to the service. For a simple, monthly fee of $20, the deli will deliver you coffee any time during business hours, five days per week. But is the deli ready to accept a new business model? Are they ready to hire concierge delivery people? Will the company adopt a model where coffee is not sold by the cup but by monthly subscription? The same sorts of questions apply to any sort of IoT solution — the company has to be willing to adopt an alternative revenue recognition model.

Is There Sufficient Funding To Go The Distance?

Many companies are not cognizant of the full cost related to realizing lofty IoT solution goals. Certainly, a small startup of a few people may be able to put in sweat equity for some amount of time, but may not be able to do it for a year, 18 months or two years. The team may also not have all the skills necessary to realize the complete technology and may not have the resources to bring in development partners to help fill the gaps.

Is Your Understanding Of Development Cost And Time Realistic? 

Boards like the Arduino and Raspberry Pi are ubiquitous. They are great for hacking together a quick prototype that “sort of” functions like a real product. Getting a mockup together can be done quickly using such development kits. But a mockup or rough prototype based on such technology is far from a real product. The demo feels like a major milestone, but getting a demo running is 20% of the project. The other 80% is designing it to be small, reliable and cheap enough to be a real product. It also has to be scalable and manufacturable – a couple of big considerations. Too many startups have moved down the path thinking that if the demo was finished in a couple of months, the product would be ready to launch in just a few more months. Your project budget for a full, end-to-end IoT solution involving hardware and software should be counted in months (or more).

As with Olympic ice skating, a well executed, elegant IoT solution makes it look easy. However, new product development is messy. The more elements in the IoT solution the more things can go wrong. This costs money and takes time.

There is much to consider in heading down an IoT-enablement path. Certainly, there are many new product categories and value-added products which can be created using this capability. Careful consideration of the factors involved in successful IoT solution product development is warranted. The cost of a mistake can be very high, but so, too are the potential rewards.

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