“Hype or reality”, this is what’s on the top of the minds of most C-level executives when it comes to M2M/IoT. C-level executives are questioning the validity of M2M/IoT because they have not seen a ROI that justifies the investment. Before we dig deeper, we need to investigate the cause of this hype. The size and growth rates that analyst firms and companies that have a stake in the M2M/IoT market throw out defy logic. These large numbers have no historical precedent or real basis. Furthermore, it omits input from potential customers that dominate their respective vertical market. In several instances, the voice of the customer tells the real story, if there truly is real market potential but this often gets lost in the hype machine.

In the case of M2M/IoT, we know there is an opportunity; however, revenues will not be realized until the key market participants address the market differently. The key challenge facing some companies is that they do not have the core competency in a particular vertical market to be successful. For example, we know wireless carriers are very strong in the telematics/connected car industry and other consumer markets. When it comes to markets such as oil/gas, healthcare and other industrial markets that have high ARPU connections they struggle. Part of the problem is that each vertical market operates differently and the ecosystem varies from market to market and the set of companies that hold influence change. In some of these markets, the end customer does not care who the wireless provider is. Furthermore, several of these industries require solution selling that solves complex business issues.Oftentimes, we see business units developing a hypothesis for their executive team to justify the current leadership team. Even worse, we see analyst firms throwing large numbers out there to generate report sales. This is a travesty because companies make investments based on the data presented. It is not uncommon to hear stories of companies that made bad investments based on faulty information. A successful business leader once stated, “To gain credibility I have to see what they predicted in the past and if it came true”. This is the Litmus test for C-levels executives when it comes to gauging the source of market numbers and projections, what is the track record of the analyst firm and the management team presenting them. Once the rhetoric is eliminated, the task of developing a market can commence, or be put on hold if potential customers are not planning to invest 10 years out.

If we examine companies that have been successful in some of the vertical markets mentioned above such as Siemens, GE, Rockwell Automation (News - Alert), Emerson Process and Honeywell, what these companies do very well is address each vertical market as a unique industry with experts that cater to the segment. They are also entrenched in the vertical markets and work throughout the ecosystem. These companies are very involved in the design and construction process of a facility or retrofit. Software companies like IBM, Oracle (News - Alert) and SAP have great vertical market expertise and they have the pulse of their end-users business process, which is helping them in the M2M/IoT market.

To be successful in some of these markets it will require companies to break free from silos. Some in the wireless sector will have to realize the transaction will not be a quick mobile device sale or a platform that manages SIM’s. It will require a company to understand the business challenges and regulatory issues facing several markets. Customers want solutions to their business challenges and access to data that will help them make informed business and operational decisions. It will also require companies to work with firms they are not accustomed to working with. In most cases, wireless carriers have the solution that will enable change from legacy systems and platforms but they still struggle with truly understanding the market they are trying to service from an operations, regulatory and profitability standpoint.

Industry participants get overly excited about trials. Unfortunately, what it means is that there is some interest. The problem arises when companies project internally that the trials taking place are huge market opportunities. Remember the days of RFID when trials were constantly taking place? If we examine all of the trials that have taken place over the past 2-3 years, how many have developed into this huge market opportunity?  

If we examine usage-based insurance, where there is long-term potential, how will this disrupt the business model for the insurance industry? Outside of Progressive, what are the real thoughts behind closed doors when it comes to it? What do consumers think, what about privacy concerns? These are just a few of the issues that insurance companies are exploring. We also have to keep in mind that technology is also relatively new to these firms and their adoption may be slower than originally projected. This would be a great example where M2M companies can discuss the benefits to the business model and how it affects the 80/20 rule in insurance. At the end of the day, that is where the value lies with insurance companies.

In markets that cater to the public sector, understanding how projects are financed is critical. You hear of companies investing heavily in a public sector because a few municipalities are running trials or only a few that have purchased a solution only to find out that other local, state and federal government bodies do not have the funding. On the other hand, in some markets, the political landscape is toxic, smart meters are one example. A simple PEST analysis will uncover these issues.

Several C-level executives are coming to the realization they may not have the internal capabilities to truly capitalize on the M2M/IoT market. In some instances, internal politics is slowing the development of market opportunities. Developing a joint venture with other leading companies that have a stake in the market is an option. This idea is gaining momentum because it will leverage the best practices of several disciplines that will help the market grow and avoid the internal politics that stifle growth. As it stands, the M2M/IoT market is too fragmented and various participants are pushing their own agenda, which is not resonating with customers.

A prime example is several industry events that center on the topic of M2M/IoT. Depending on which event you go to, it will have either a wireless carrier slant or one that focuses primarily on telematics. The problem is when a participant from a vertical outside of transportation attends they find it lacking and the same is true with the value proposition when pitching M2M/IoT to the industry. What we are seeing is industry specific events that are holding tracks and sessions dedicated to the topic. This is being influenced by the ecosystem and customers of the vertical. This is where the groundswell is starting to take place, “customer driven”, not vendor driven. The reality is these markets speak a different language and their requirements are different by segment and it is not a horizontal sale.

Getting back to hype or reality, there needs to be accountability. If there is a huge market opportunity, the following questions must be asked of teams running these groups. What do customers really want? Who are going to be our specific customers (not trials)? How much will we make, will it be profitable and when? Without concrete answers that deliver actual results, maybe it’s just hype. An in-depth self-assessment is vital in this market because the stakes are high. Stay tuned as Compass (News - Alert) Intelligence delivers more insights that companies can use for growth in this emerging market.