The Year of the Ecosystem

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Looking back a year or two at the smart home market, in 2013 it was state-of-the-art to merely make connected products, especially if you could make this fairly simple and low cost for the consumer.

In 2015, the landscape has changed. Now connected product leaders are building IoT ecosystems to maximize value to their customers and find new ways to expand market reach. The promise is in finding new monetization streams through these new cloud-to-cloud connections. This should not be too surprising as networks increase exponentially in value as the number of connections increases (Metcalfe’s Law), and ecosystem builders are finding more and more useful and profitable ways to partner from the information channels that IoT provides.

Take a look at some of the possible collaborations in the diagram below.  The ecosystem side shows many of the possible ecosystem partnership categories, where the data and usage patterns can be used to better understand the customer’s preferences and the products functioning, health, status, and key state. This data can enable various service offerings such as reordering consumables (think filters) or maintenance services, etc.  The ecosystem can also offer opportunities for combining third-party functionality of multiple home products to work in concert or be controlled by “harmonizing” apps.  Third party data can be imported (weather, energy prices) and analyzed data offers key insights to better understand customers, how they interact with products,  or how they can save money through energy efficient operation.

Ecosystem Blog

All of these partnering opportunities can add value for both the customer and the top/bottom line of the business.  A partnership may bring value through direct revenue or revenue sharing, for example, an appliance manufacturer can detect a problem with a product and send error codes to a network service partner who will pay a commission to the manufacturer for the referral.  The referral is particularly valuable because of the machine information provided that accurately identifies the error code so that the technician can bring the right repair part with only one truck roll to the customer (instead of one roll to diagnose and one to return with the part).

Another benefit of partnerships are the increases in pull-through as your partners help extend your marketing footprint, or simply because the customer is realizing the increased value and spreading the word (telling friends, giving 5-star reviews, etc.).

So, how are you going to enable these third-parties to connect-in and share the relevant customer data?  Your alternatives are to either try to build your own cloud infrastructure and ecosystem (difficult, expensive, time-consuming), join an existing ecosystem (you lose control/ownership), or choose an experienced IoT platform provider, like Arrayent.  The right platform will let you choose your partners and will have all the right ecosystem-building features ready to go.

There are also concerns over what data can and should be shared, from customer privacy protection to business strategy reasons.  To maintain maximum control of your ecosystem and how you share the data you will need to have your own cloud with the right interfaces. At Arrayent we are making it easier and easier with every new cloud release to safely interact with ecosystem partners by removing technology hurdles that allow our customers to accelerate development of robust ecosystems.

Two ideas to consider for realizing the potential of ecosystems:  First, rethink the role of your Product Manager as Ecosystem Manager who must now also have strong business development skills. Second, evaluate your product’s cost and value through an ecosystem lens (not traditional product ROI calculations) to be able to accelerate adoption and success of your program.

So this is what the future looks like. Successful IoT programs will be cloud-to-cloud connected to five to ten ecosystems. Your product, your business development team, and your IoT cloud platform have to be ready to do this reliably at scale.

By Shane Dyer,  President