The IoT’s deadly enemy is the product owner – TechCrunch

Editor’s Note: Lisa Jackson is Executive Director of Strategy at frog.

We understand that the Internet of Things is going to be huge. As employees and consumers, we will be able to make decisions based on more accurate data. As managers, we will have new tools that will reduce waste and inefficiencies in the workplace.

But if this long-awaited future is to happen, we must explore how financial rationalization, strategic partnerships, and platform complexity influence IoT’s deadly enemy: the product owner.

Financial rationalization

Historically, products have been launched through phased product development, in which ROI and margin calculations have been the guiding rails for decisions. Through this traditional lens, IoT devices just don’t look attractive compared to other potential investments. The costs of IoT devices are skyrocketing, and not just because of the built-in sensors. Existing products will often require new industrial designs and updated production lines to meet power and connectivity requirements.

For example, Hot tub estimates that adding intelligence to a dishwasher could add $ 5 to the cost of the unit. Add in software development – both an operating expense and a capital expense – and you’ve got a CFO who’s never seen such periods of payback.

In his Harvard Business Review article “The Capitalist’s Dilemma,” Clay Christensen indicates that current financial ratios used as measures of success can discourage investment in growth. In IoT, leaders should instead use an ecosystem lens to identify opportunities for value creation.

When the Philips company created its Hue lighting system, that probably did not justify the investment required with the sales margin alone. Most likely, he anticipated the community of committed developers, which to date has launched 190 apps on the Hue platform.

The flow of goods, services, dollars and data must be valued over the long term, and the projected returns must be broadened to encompass all potential opportunities in the ecosystem. Through these techniques, the true business value of investing in IoT can be recognized, realized and measured over time.

Strategic partnerships

Direct revenue from IoT devices is minimal and often subsidized, while partnership opportunities tend to deliver higher revenue based on lead generation and data monetization. It takes an entrepreneurial mindset to build the right partnerships. Nest is strategically entering the market with Mercedes-Benz, Jawbone and Whirlpool. This type of business development requires knocking on doors and serious negotiations. Typical product owners lack the time and expertise to develop these B2B partnerships, but that’s no excuse.

Product owners need to re-energize the role of business development and leverage the same ecosystem focus used for identifying opportunities to build key partnerships. They should hire employees from startups who know how to be creative when developing relationships. They have to risk transparency and open the factory doors to work on products with marketing partners that increase their ability to capture value. Product Owners need to get out of their comfort zone.

Platform complexity

IoT devices require software and cloud platforms. For hardware manufacturers who fear the word “software,” the enormity of this development task and the organizational challenges that come with it are daunting. Companies that originally operated without basic software skills (such as telecom operators and consumer electronics manufacturers) have had to completely restructure in order to bring connected devices to market. For a company like Honeywell, which has separate business units that manufacture thermostats and security systems, bringing to market with a seamless smart home solution has required both a reorganization and a consolidation of the roadmap of products.

The future of connected objects requires a new, forward-looking value measurement mechanism.

To tackle the platform barrier, product owners need to learn from other industries. They should investigate successful case studies, such as Medtronic’s CareLink platform, a system that allows doctors to verify patients’ medical devices over the Internet. Successful companies outsource wherever possible, invest strategically in organizational design, and are quick to acquire. Agile startups have moved quickly in this space and offer valuable resources; Samsung’s recent acquisition of SmartThings is one example.

Product owners face these IoT hurdles – financial rationale, strategic partnership, and platform complexity – across industries. We have seen digital groups needing to justify the difference between their product margins and those provided by the core business. We’ve seen retailers launch individual connected products without scalable platforms due to organizational issues. On the other hand, utility companies have the capital available, but they lack business development skills, so they keep IoT projects small and experimental.

Take Medela, the manufacturer of the breast pump. Many geek moms dream of a day when a breast pump will have built-in sensors and a built-in app that can provide volume details, notifications, and tips. MIT laboratories conducted a hackathon breast pump recently on this concept. But other than market rumors, we haven’t seen any innovative progress from Medela. Why? Perhaps because Medela has a profitable business model, strong market share, and partnerships focused primarily on distribution. The incentive is lacking and the obstacles are high.

Owners of IoT products, we sympathize, but we do not forgive you. The future of connected objects requires a new, forward-looking value measurement mechanism. By observing your business through the lens of the ecosystem, you can explore the true potential of IoT. Through strategic partnerships and thoughtful investments in complex platforms, you can realize this potential.

For the network of connected objects to reach critical mass, Product Owners must rise to the challenge and become the heroes of the future that we all anticipate.

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