What can a toothbrush teach us about IoT business models?

We recently published a report showing that e-commerce doubled in popularity as a business model for Internet of Things (see Commerce of Things report for details).

But what does an ecommerce business model really mean in the case of Internet of Things? Broadly speaking, a business model describes the rationale of how an organization creates, delivers, and captures value. We add to that the question of how an organization creates a sustainable competitive advantage (a barrier to entry that is difficult to replicate by competitors).

It’s simpler than it sounds. Let’s take Oral-B, a toothbrush maker, as an example. (This example works well in our strategy workshops.) A toothbrush maker creates value by improving dental health. The value is delivered through, well, a toothbrush. The value is captured by sales of toothbrushes through retail channels. Ability to put the product in front of as many shopper as possible is of paramount importance. Therefore, access to the retail shelf-space becomes the key competitive advantage.


Can we use technology to make a better toothbrush? Of course! Let’s make a Bluetooth-connected toothbrush that comes together with a smartphone app. Now the “smart” toothbrush helps Oral-B do a better job in maintaining dental health by “focusing, tracking, motivating and sensing” (whatever that may mean).

The toothbrush is smarter, but the business model isn’t. The connected product supposedly creates more value for consumers, but all the other elements of the business model remain the same. The value is still delivered through a toothbrush device, captured by the sales through retail channels, and access to the retail shelf-space is still the key competitive advantage. Not much business model innovation here.

Oral B
Source: Oral B

What’s next?… Well, let’s make an open toothbrush! Developers will use a Software Development Kit (SDK) of the open toothbrush to make apps that extend the product.

Sceptics, of course, will ask “who the heck needs developers to extend the toothbrush?” But mothers of young kids will see a sea of opportunity here: Someone can make a game rewarding kids for good job in teeth brushing and save the mom the need to “hover over their kids telling them that a couple of brushes is not good enough” (actual quote from a Slack conversation).

Now we are making progress with innovating on the business model, too. Not only do developers improve in value creation, but value is delivered through apps working in concert with the connected toothbrush. Plus, the developer ecosystem formed around our developer program creates competitive advantage that is difficult to replicate. However, we still have to make money by one-time sales of the “smart” toothbrush through retail channels.

(See “5 Ways Developers Can Extend Your Business Model” for deeper discussion on the role developers in business model innovation.)

Can we take the business model even further? Meet Beam Dental. The Ohio-based company offers a connected toothbrush that comes together with dental insurance and a subscription for the supply of floss, toothpaste, and brush heads—all delivered to your doorstep every 3 months. In fact, the offering is a recurring service that makes money outside the “toothbrush market” going beyond one-time product sales. The toothbrush itself is part of the customer acquisition costs for the much more lucrative dental insurance and dental consumables market.

Beam completely reimagines the business model of a “connected toothbrush”. The value creation is much more comprehensive and includes all aspects of the dental health. Value is delivered through insurance and re-supply service. Value is captured through making money in insurance and consumables businesses. The toothbrush and the app are “top of the funnel” consumer touch points allowing Beam to acquire new users and interact with their customers.

Notably, Beam doesn’t really compete with toothbrush makers like Oral-B. Instead, the company competes in the dental insurance market, where it has decisive competitive advantage in the form of consumer data collected by the toothbrush and the app. This data helps the company to optimise its insurance premiums and offer insurance at prices that are difficult to match for the traditional insurance companies.

Source: Beam.Dental

As simple as they may sound, the series of toothbrush examples shows that:

  • Technology (software, connectivity or data), when viewed as a feature of a product, is hardly a game changer for the product maker.
  • Opening the product to the external innovation by developers can create competitive advantage that is difficult to replicate.
  • E-commerce companies see devices not as source of profits, but as a part of the customer acquisition costs, serving as a vehicle for customer acquisition and engagement. (Amazon Echo or Xiaomi phones are not much different in this respect.)

You can replace the toothbrush with almost any everyday object to see how adding connectivity, developers and data can help reimagine its business model. (See this video on understanding developers.)

— Michael

70% of Smart Home developers are hobbyists

1.5 million developers are working on Smart Home solutions. And yet, the Smart Home market is struggling to move beyond early adopters into a mainstream market. Data from our new Smart Home Landscape 2015 report sheds light on this conundrum, and much more.


The Smart Home is on fire. At least, IoT developers think it is. [tweetable]A third of them (32%) are currently working on Smart Home projects, according to our Q2 2015 Developer Economics survey. That’s close to 1.5 million developers.[/tweetable]

Does this mean that the Smart Home market is going to take off, fueled by thousands of clever solutions? Maybe not.

The number of smart connected homes could hit up to 700 million homes by 2020, rising from somewhere between 100 million and 200 million homes now, according to Gartner. But others are not so sure. In fact, [tweetable]the Smart Home market is struggling to move beyond early adopters into a mainstream market[/tweetable]. Gartner itself hints at a “lack of a good business model or the immaturity of home IoT products”, which “has not stopped gateway makers from trying to develop the market”. Fortune magazine puts it this way: “Early adopters, venture capitalists, and entrepreneurs have bought into the idea of a smart home, but mainstream consumers haven’t.” And according to Argus Insights: “Early adopters have gotten what they need, and now products are not compelling typical consumers to create a connected home. Acquisitions by Google and Samsung have done little to spark consumer interest.”

It will be up to developers to lift the Smart Home into the mainstream. It’s up to them to experiment and discover new, better, use cases for the Smart Home. And therein lies the catch.

Hobbyists rule

While today’s Smart Home developers are plentiful, the vast majority of them are not pushing to develop the market.

Out of all Smart Home developers, 70% are involved in the Internet of Things as a hobby or a side project. Only 30% are doing IoT in a professional capacity. When we look at the goals and motivations of Smart Home developers, this picture becomes even clearer. More than a third of Smart Home developers (36%) are Hobbyists, primarily interested in building solutions for themselves. Another third (32%) are Explorers who are learning the ins and outs of IoT.

For Hobbyists in particular, Smart Home is an attractive choice: 57% of Hobbyists choose Smart Home, versus only 37% of non-Hobbyist IoT developers, a 20 percentage point (pp) difference. On the other hand, professional Guns for Hire working on commission (-10 pp), Gold Seekers hoping to strike VC money (-11 pp), Optimizers aiming for efficiency gains (-18pp) and Data Brokers selling repackaged data (-18 pp) seem to shun the Smart Home.

In short, [tweetable]7 in 10 developers, significantly more than in other IoT verticals, are building solutions for their own benefit first, not yours or mine[/tweetable].

Many of the solutions that they build are in a sense reinventing the wheel, reimplementing obvious use cases (e.g. access control, lighting controls) that don’t push the envelope. They’re certainly not building the comprehensive, ecosystem-driven systems that might make Smart Home technology worthwhile for the average consumer.


The next wave of Smart Home developer ecosystems

Several shifts need to happen for the Smart Home to reach mainstream. Smart Home Hobbyists and Explorers need to graduate into Smart Home entrepreneurs. Those innovators need to discover new, more compelling use cases. Thirdly, a new generation of Smart Home platforms must empower entrepreneurs to bring those solutions to market.

The good news is that these shifts are already in motion.

In our newly released Smart Home Landscape 2015 report, we investigate which platforms are best positioned to fuel the next wave of Smart Home solutions. We also investigate how developers can break free of devices, morph smart home tech to fit tomorrow’s smart office, and move beyond the Smart Home’s walls into Smart Life applications to create tomorrow’s killer apps.

The Commerce of Things

You might be forgiven for thinking that Internet of Things stands for adding apps to a watch, or connecting a thermostat to the internet.

This is where IoT stands today. More broadly, IoT is about adding computing capabilities to a physical object, and allowing it to interact with the world around it. But this is only the beginning. As we argued earlier, IoT is fast escaping both Internet and Things. And it’s about to change e-Commerce in ways we never expected.


An unconnected ‘thing’ is a missed business opportunity

Today, it’s well understood that adding computing and Internet to a car, a watch, a thermostat, or a chair can allow the manufacturer to capture value beyond the purchase of that object and into data-driven business models. Car makers can now offer post-sales services, like vehicle diagnostics that alert you when it’s time to have your car serviced by a dealer. Or smartwatch apps that alert you when you’ve forgotten to put your seatbelt on. Watchmakers can create stickiness as you can now use your watch to unlock your front door, or control your thermostat without leaving the couch. Thermostat makers can now expand into energy management. Office furniture makers can now extend their business into productivity management.

[tweetable]Makers of connected ‘things’ can subsidise them to make money from data-driven services[/tweetable]. We suspect that new norms will form in industry after industry, as goods manufacturers and services vendors experiment with these new business models. What is clear is that selling unconnected ‘things’ will increasingly look like a missed opportunity.

Amazon’s wake up call

But there is a much bigger revolution at play. We believe that [tweetable]IoT will fundamentally change the shape of e-Commerce[/tweetable].

With IoT, washing machine makers can now not just deliver detergent just in time by knowing when your supplies run out. They can also recommend the right detergent, based on your usage, type of clothes, on demand. Car makers can recommend where you buy your gas, by understanding your drive journey, availability of gas stations, pricing on-demand discounts, and gas station commission. Watchmakers can command a commission from health insurers, as they can monitor your heart rate, temperature, fitness habits and determine what risk zone you are in. In short, IoT makers can now afford a negative BOM (bill of materials) “a la Dell”, by subsidising the cost of hardware with the revenues from bundled e-commerce services.

Internet of Things will allow any connected “thing” to become an affiliate for e-Commerce goods that are consumed together with the “thing” – what in economics are termed complements. Any connected object could become a distribution surface and customer acquisition channel for e-Commerce goods and services of every kind and description. IoT extends e-Commerce affiliate and user acquisition schemes beyond websites, mobile and apps, into every physical object.

Amazon’s Dash offers an early glimpse of this model. Place a Tide button on your washing machine, a Huggies button next to your baby’s changing room, or a Gillette button in your bathroom and pronto, your supplies are at your door the following day. More importantly, Dash acts on your intention to buy before you change your mind and pop over to the 7 Eleven convenience store. Similarly, Amazon’s Echo, allows you to order anything from the comfort of your living room, and without lifting a finger. What’s interesting is that nor washing machine neither FMCG companies are directly involved in Amazon’s effort. Amazon’s moves should be a wake-up call for the white goods industry.


The Physical Affiliate

e-Commerce affiliate sales can happen in two ways: firstly, by pre-sales hardcoding of the e-Commerce service into the physical object. Think how Mozilla was able to make over $200M annually by preloading the Firefox browser bar with Google search, before moving to Yahoo. Affiliate sales can also be dynamic. Think how BMW can recommend a different brand of oil for the maintenance of the car based on price, oil efficiency observed on the car and many other similar cars, and the driver’ analyzed behavior on the road. Naturally, makers like BMW who can create value by tracking user behaviour will also be able to capture more value as an e-Commerce affiliate.

White goods manufacturers can now extend their business models across the product lifecycle. They can also own the device real-estate that offers e-commerce discovery and distribution, and act as a customer acquisition channel for e-commerce goods and services. More likely, this customer broker role will be seized by more agile e-Commerce players.

And all of this while adding value to the customer. Think: I’d like to buy a watch and improve my fitness at the same time, and get better health insurance cover. Or I’d like to buy a car and save money from fuel, every time. Or I ‘d like to buy a thermostat and have the peace of mind that I’m never spending more on energy bills than I need to. All these Jobs To Be Done are not for the few, the wealthy or the early adopters. In this smarter world, they are for the many.

Closing the attribution loop

More importantly, [tweetable]Internet of Things will allow e-Commerce to stretch across the breadth of the customer journey[/tweetable]. Consider how limited e-Commerce is today in understanding the customer journey: you search on Google for something to buy, click on what fits your purchase intent, including advertisement link, then lead to a purchase on the device being used. Along that path, Google receives a kickback (typically on a cost-per-click, CPC) from the advertiser on the assumption that a small percentage of those clicking the link will buy, making the business case for paying the CPC. There is no way for advertisers to know when a real purchase was made in a brick-and-mortar shop, let alone make someone with purchase intent visit that physical shop in the first place. This is the holy grail of advertising business, i.e. being able to track consumer behaviour from awareness to intent to purchase to purchase, and across web, mobile and increasingly number of physical connected touch points. By embedding the e-Commerce discovery and distribution surface on physical objects, and more connected touchpoints across the customer journey, you are now able to cross the last mile from awareness to purchase intent to purchase.

Put simply, connected devices will become the optimum point-of-sale for e-commerce, search boxes and app stores for services, at the ideal place and ideal context of a purchase intent.

The rise of programmatic e-Commerce

Moreover, consider billions of “things” doubling as e-Commerce points of sale (PoS). This will result in the unbundling and extension of PoS for e-commerce outside the web (think Amazon.com), app and product (think Kindle) silos controlled by e-commerce players. It will lead to programmatic auctions for e-Commerce Call To Action (CTAs), as the most market-efficient way for matching demand with supply. This will mean that the programmatic, real-time bidding (RTB) for ads today will carry over to e-commerce and into the real world.

More importantly, by retaining attribution across the customer journey and touchpoints, programmatic e-Commerce will be able to monetise by Cost-per-Action (CPA) in the physical world while providing enhanced value experience beyond what the comparable but unconnected appliance could ever bring. We can clearly expect a major reshuffle of the advertising industry and a further cycle of VC investment and consolidation that it will entail.

–Andreas Constantinou
As CEO and Founder, Andreas oversees the growth and strategy of VisionMobile. He has twelve years experience in mobile, having worked with the top brand names in the mobile industry including Telefonica, AT&T, Telenor, Vodafone, Deutsche Telekom, MTS, Nokia, Sony, RIM, HTC, Qualcomm, Ericsson and Microsoft. Over the last five years, Andreas has grown VisionMobile into the leading, most respected research firm on app economy and developer economics, with a client base and reputation that out rivals companies many times the size.
Andreas on LinkedIn

–Nicolas Sauvage
Nicolas Sauvage is a “Software guy”, since first programming at 8 years old, and forever passionate about Software contributing to a better Connected World. He joined the management team of NXP Software in Feb 2011, and took various responsibilities over time including leading the OEM Business Line, worldwide sales, product management, Head of Korea, Head of Greater China. He is an Alumni of TTPCom, OpenPlug, London Business School and INSEAD.
Nicolas Sauvage on LinkedIn

Everyone will be a developer

We continue with a fourth and final installment of insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for IoT. It’s clear that the Internet of Things will be a big opportunity. But how exactly will we find that killer app? Or rather, how can we build an engine that turns out one killer app after another?


Apps like Instagram, WeChat, Uber or even Angry Birds have created entirely new, multi-billion dollar markets that were not even imaginable before. We concluded in the previous trend that the consumer market is the bigger IoT opportunity because it similarly offers more opportunities to explore new and completely unexpected use cases: a crucial driver of demand for IoT products.

To find those opportunities, innovators need to be given free reign to experiment with unlikely ideas. They also need to get every opportunity to present their products to users, without having to get permission from a conservative gatekeeper. Only in this way can we collectively find the hidden gems.

Already we’re seeing IoT platforms emerge that consider developers as first-class ecosystem citizens. [tweetable]Developers are not your new customer, contractor or partner. They are your resellers[/tweetable]: they drive demand for your product.

Ford, for example, has attracted over 11,000 developers to its platform for car apps. Similarly, the advent of Apple’s CarPlay and Google’s Android Auto are awakening the desire to develop apps for cars in thousands of developers. This is a strong break with the current practice where only a handful of select partners can work with car makers on in-vehicle infotainment. Smart Watch platforms like Pebble, Razer, Android Wear or Apple’s WatchKit open up the wrist to new innovation. No longer do you need to develop the watch itself to provide the service. Already 25,000 developers flocked to the Pebble platform and created 6,000 apps. The same pattern emerges in the Smart Home, where platforms like SmartThings and Apple HomeKit enable developers to combine data from all the connected devices around the home into clever scenarios, which then attract more users.

And the winning platform is… (*drumroll*)

All these platforms enable developers to orchestrate data streams into valuable scenarios for users. Soon, this will become so easy that everyone can be a “developer”. Then, the true innovation potential of the Internet of Things will be unleashed.

Indeed, developer interest in the Internet of Things is picking up fast. Already, 53% of mobile developers are involved in IoT development. This data point from our Q1 2015 Developer Economics survey of 4,000+ IoT developers implies that there are well over 3 million IoT developers active today. All of those people are looking for new and interesting innovations. 45% of them are professionals, seeking to build or grow a business out of IoT.

The platform that succeeds best in empowering developers and connecting them with users will be more powerful than any single killer IoT app or product. That platform will have a solution for every need, and will therefore unlock consumer demand beyond its wildest dreams. Because every user and every developer will look at that platform first to find or market a solution – the much lauded network effects – it will be impossible for other platforms to compete. [tweetable]A winner-takes-all outcome – that’s what’s at stake in the Internet of Things[/tweetable].

We can get even more specific. We predict that by 2020, Apple, Google or both will have built a dominant IoT platform that makes head-on competition impossible.

Established technology companies like IBM, Cisco or GE, and incumbent IoT specialists like Jasper, PTC or Sierra understand the enterprise IoT market very well. But they are not specialists in connecting developers with users. Google and Apple on the other hand have built ecosystem empires with well over 5 million developers combined. Already both companies are active in every major IoT vertical. Our survey shows that their nascent platforms are the most popular and attractive to developers.

For Apple and Google, IoT is an extension of their current efforts, not the creation of an entirely new business. This puts them in pole position at the start of the IoT platform race.

Consumers outweigh the CIO in the Internet of Things

We continue with insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for the Internet of Things. In this post, we look at the potential of consumer and enterprise IoT markets. Enterprise IoT (industrial, large-scale applications) are currently the biggest market in terms of revenues, but will that remain so forever? Consumer applications like Wearables and Smart Home are hyped in tech media, but will that translate into a real business opportunity? History and data can provide some answers to these questions.


Flashback to 2007. “Five hundred dollars fully subsidized with a plan!” Steve Ballmer laughed as the journalist asked for his reaction to the iPhone launch. “That is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard. … Right now we’re selling millions and millions and millions of phones a year; Apple is selling zero phones a year. In six months, they’ll have the most expensive phone by far ever in the marketplace. … Let’s see how the competition goes.”

Who would buy an overpriced phone that doesn’t appeal to business customers, indeed! From a latecomer to the market with no experience in mobile telephony, nonetheless. Except for one small detail.

The demand for expensive iPhones (and later for Android) did not come from business users who wanted faster-better-cheaper. It came from consumers craving the millions of apps available on these devices. Not only was Windows Mobile overtaken by iPhone and Android, but these new products ultimately undermined the enterprise market that Microsoft and Blackberry owned. In 2014, iOS and Android accounted for 97% of new mobile device activations in enterprises, while the latter two were obliviated.

The new normal: consumers first

As it happens, the pattern we saw in smartphones is not the exception, but the rule for most recent computing technologies – Software-as-a-Service, social media, and even PCs. Likewise, IoT will find large-scale adoption in consumer markets first. After that, consumer technology will proceed to displace its supposedly superior enterprise equivalent. This might surprise you, as enterprise solutions comprise the bulk of the IoT market today.

Isn’t all the money in large enterprise projects then? [tweetable]Unlike in days past, the technology underlying the IoT is relatively cheap and ubiquitous[/tweetable]. It doesn’t require large government or enterprise budgets to fund so it is accessible to experiment and iterate with. Just like with mobile apps, innovators can take existing technology into countless needs and niches, most of them unimaginable today. (As opposed to inventing new technology to realize an existing vision.) The enterprise market caters to straight-forward, well-understood business needs and grows at a moderate pace. Meanwhile, for consumers without long procurement cycles, the plethora of use cases unlocks new demand – things we didn’t realize we needed – which grows the market at incredible speed. Finally, enterprise technology is overtaken: if I can have this fantastic, cheap, powerful consumer technology at home, why am I stuck with old, clunky tools at work?

It should come as no surprise then, that [tweetable]the most popular verticals in which IoT developers are active are the Smart Home and Wearables[/tweetable]: distinctly consumer-oriented sectors. The other verticals have a B2B orientation, requiring developers to sell their work to enterprises or partner with big companies to get their products to consumer markets. As a result, they are much less attractive to developers, and innovation will be slower there. The Connected Car market offers us an interesting view in what happens when a sector “consumerizes”. Up until now, developing car apps required partnering with car makers. Apple’s CarPlay and Android Auto enable – for the first time – a direct-to-consumer model for developers. Immediately we see an uptick in developer interest.


Market reset

IoT is a greenfield market. When new use cases lead to new demand, this new demand is fair game for everyone. The rules of the current market will not apply. New players can appear out of nowhere and overtake incumbents (as Apple and Google did in mobile). New business models can emerge, some of which disruptive to incumbents. Some newcomers might give for free (or at zero profit) what incumbents sell, in a model that boosts demand for their core product. History shows that it will be nigh impossible for incumbents to react effectively.

[tweetable]We predict that by 2020, new players with new business models will dominate IoT[/tweetable]. Most incumbents will be bankrupt, acquired or uncompetitive.

The currency of the Internet of Things is data

In last week’s blog post, we said that IoT is breaking free from Internet and Things. That is, Internet of Things is not about how to add a service to my product, but about turning the information generated by all those sensors, devices, things and services into knowledge about the environment and meaningful action. [tweetable]Making sense of data is the core value driver in the Internet of Things[/tweetable]. Let’s explore this idea a bit further. We continue with insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for IoT.


Adding connectivity and services to existing products and machines often leads to a “one device, one app” situation. This proliferation of apps quickly becomes unwieldy to manage. A basic improvement would be to combine multiple devices into one user experience. Most of the emerging Smart Home solutions (e.g. Ninja Sphere, ImperiHome) focus on the ability to control all your devices from one place.

But why stop there? Services that create knowledge and drive meaningful action by mashing up multiple data sources are on the rise. Not all those sources have to be sensors or devices.

A good example is the Nest Learning Thermostat. To intelligently adjust the temperature in your house, the thermostat uses a lot more info than just the current temperature. It detects your presence with sensors. It talks to other appliances from Nest itself (smoke detectors), Whirlpool (washers), August (locks), Automatic (car adapters), Hue (lights) and others. Nest even works together with electricity companies who pay users to automatically turn down cooling during peak times on the electricity grid. The possibilities to make Nest smarter by pulling in more outside data are endless.

Other good examples are health & fitness platforms like Apple HealthKit or Google Fit. They pull together data from all your wearables, smart scales, apps and more into a full picture of you. That data could also be shared with medical professionals – the birth of a new type of medicine?

It’s easy to see that using more sources of information creates more opportunities for innovation than just connecting a single device, or even than listing multiple devices in a single service. By combining devices in one service, you add up their functionalities. By mashing up data, you multiply possibilities.

However, combining data from different sources presents some tough engineering problems. It comes as no surprise to see the rise of data-centric platforms and tools that help developers to pull together and mash up information. Examples include Samsung’s SmartThings and Apple’s HomeKit in the Smart Home; Dash and Mojio in the car; Validic and Jawbone’s UP platform in health.

A single platform for the Internet of Things?

The insight that mashing up data provides more opportunities for innovation will help us to answer another question that’s on many people’s mind. [tweetable]The Internet of Things is not one market, but a collection of many diverse verticals[/tweetable]: from Smart Home and Wearables to Smart Cities and Industrial IoT. Will a single platform cater to all these verticals, or will sector-specific platforms win out?

At this moment, both types of platform exist. In our IoT Developer and Platform Landscape 2015 report, we list 50+ vertical platforms and a similar amount of general purpose ones. In these early days of the Internet of Things, vertical platforms probably have the advantage: it’s easier for them to create beachhead markets in specific verticals from which to expand. But will this focus hurt them in the long term?

If combining more sources of information leads to more opportunities, then limiting platforms to a single vertical is an unhelpful constraint, not a useful focus. If your car pings your thermostat when you’re about to leave from work, is that a Smart Car scenario, or a Smart Home scenario? Both, and neither. It’s a Smart Life scenario.

At some point, [tweetable]IoT platforms will have to cross vertical boundaries to reach their full potential[/tweetable]. Already, key players like Google, Apple and Samsung are active in all key verticals concurrently. We predict that the top IoT platforms in 2020 will be cross-vertical. Sector-specific platforms will be niche or in decline.

What the Internet of Things is NOT about

It seems that if your company doesn’t have an IoT strategy nowadays, you might as well quit. But not just any strategy will do. Let’s look at some of the hot topics in IoT today that are unlikely to make a dent in market adoption. Here are some insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for IoT.


Here’s what everyone knows about the Internet of Things. It’s going to be enormous. We’ll have tens of billions of devices by the end of the decade. This is a multi-trillion dollar opportunity over the next years. All the major players in consumer electronics, mobile, cloud, factory automation, enterprise IT and more will be fiercely competing for a piece of that pie. All this information shouts: [tweetable]if your company doesn’t have an IoT strategy you might as well quit[/tweetable].

Not just any strategy, of course. The history of technology is littered with great concepts and engineering feats that never became mainstream products. It’s worth looking at some of the hot topics in IoT today that are unlikely to make a dent in market adoption.

What IoT is not

A lot of the buzz in the media and on industry forums is about the Internet of Things technology itself. Standards. Security. Privacy. Whether to use Bluetooth, Wifi, cellular or mesh networks. If history is any guide, all of these important questions will get solved over time, but none are an actual roadblock to market adoption. iOS and Android didn’t depend on app standards to revolutionize the smartphone industry, for example.

Meanwhile, product designers have discovered IoT and are adding connectivity (internet) and services to their products with blazing speed. Washing machines, socks, ovens, shoes, cars, door locks, toothbrushes and even flower pots are becoming “smart”. The problem with this “product with an app” approach is that all those disconnected, individual apps will soon become impossible for users to manage.

The Internet of Things isn’t even so much about things. For example, companies like Google-owned Waze achieve better traffic intelligence by crowdsourcing smartphone data rather than through an extensive network of road sensors, typical for a Smart City project. True smart cities have taken note, and are starting to use Waze’s data. Waze literally never shipped a thing.

Breaking Free of Internet and Things

Here’s an uncontroversial, but often forgotten truth. [tweetable]The value of IoT products doesn’t come from the technology or the internet or the things[/tweetable]. Value is created in IoT by making sense of data, turning it into knowledge and meaningful action. It’s not the parking sensor that matters, but finding a free parking spot quickly and without frustration.

This perspective on the Internet of Things has some interesting implications. We predict that the most interesting IoT applications in 2020 will use data that already exists today, rather than new sensors.

Why? Value is created by making sense of data, and many data will have more than one possible source (like in the Waze vs traffic sensor example). New devices will be more expensive to build, install and maintain than solutions that mine existing sources of data. When a solution can be found that doesn’t require new sensors or hardware, it will prevail. Already, companies like Cellint use data from mobile network operators to monitor traffic jams in cities.

Internet of Things is not about how to add a service to my product, but about making my product work with every other service. It’s about how all those sensors, devices, things and services can be integrated into the user’s digital lifestyle. IoT is breaking free from Internet and Things.

IoT developers: The baby boomers of the smartphone wars?

Internet of Things comes to life thanks to wide availability of inexpensive and powerful hardware components. Chris Anderson, the former editor of Wired, calls this “the peace dividend of the smartphone war”:

“The components in a smartphone — the sensors, the GPS, the camera, the ARM core processors, the wireless, the memory, the battery — all that stuff, which is being driven by the incredible economies of scale and innovation machines at Apple, Google, and others, is available for a few dollars. They were essentially ‘unobtainium’ 10 years ago. This is stuff that used to be military industrial technology; you can buy it at RadioShack now,”


Before the smartphone industry started to give back its “peace dividend”, product ideas were years ahead of what companies could achieve with the state of the art hardware. For example, Apple’s vision of Knowledge Navigator saw the light of day 20 years before iPhone launch. Things are different today. Ben Evans writes in “The home and the mobile supply chain” blog:

“Today it sometimes seems like things are the other way around. Want to make a connected door lock? Camera collar for your dog? Intelligent scale? Eye tracker? The electronic components all there, more or less off the shelf. The challenge is in the vision for what the product should be, what people would do with it and how you would take it to market.”

In other words, hardware technology is abundant today. It’s no longer the bottleneck. IoT breakthroughs will happen not by making more powerful processors or larger memories, but by identifying new applications for the sensors, devices and connectivity. Numerous IoT startups and crowd-funded teams are now tackling problems across a wide spectrum of industries that previously required billions of dollars from large corporations or governments.

Much like demand for smartphones is fueled by apps, the [tweetable]demand for Internet of Things will be driven by developers tinkering with hardware, software and data[/tweetable], and discovering new applications for the abundant hardware technology. These developers will create countless apps, services and devices that no single company could ever imagine, let alone create on its own. This developer-driven demand will create Internet of Things markets that are several times bigger than the ones we could ever predict with a spreadsheet that extrapolates today’s market.

Many of these IoT developers will come from the mobile app market. Paraphrasing on Chris Anderson, if components are the peace dividend of the smartphone wars, IoT developers are the post-war baby boomers.

The data from our recent Developer Economics survey of 8,000+ mobile developers shows that [tweetable]53% of mobile developers are already involved in IoT either making products[/tweetable], as a side project or as a hobby.


Wearables attract highest developer interest – 78% of mobile developers that are interested in IoT are targeting or plan to target this vertical. Wearables are followed by smart home and connected car verticals with 74% and 52% respectively.


We believe that mobile developers will play a pivotal role in the evolution of IoT extending their innovation beyond mobile apps. Apple and Google already work hard to get mobile developers use their fledging IoT platforms, including wearables (Apple Watch, Android Wear), smart home (Apple HomeKit, Nest Developer Program) and connected car (Apple CarPlay and Android Auto).

As we are readying to publish our “IoT Developer 2015 Trends” report, we will be sharing more data and insights about IoT developers and Internet of Things evolution.

The kingmakers of the Internet of Things

[Communities of developers play a key role in shaping the future of Internet of Things. For the first time we have the data to understand who those IoT developers are, where to find them and how to reach them.]


It’s clear now that developers and makers are the true kingmakers of IoT. In the home, Google’s Nest is opening up its API, Apple has HomeKit and Samsung bought developer-focused startup SmartThings. Every wearable and their auntie has an API, and they are now joined by meta-APIs that aggregate data, spearheaded by Apple HealthKit and Google Fit. Recent new car SDKs include Dash’s Chassis API, Carvoyant’s and Vinli’s. ARM and Intel have both released new developer tools. Relayr got $2.3M in funding to build an Internet of Things app ecosystem, among other things. Popular developer tool Eclipse got in the game with an open IoT stack for Java.

When 17% of respondents in our survey of 10,000 developers said that they are involved in M2M or IoT, we were really excited. Communities of developers play a key role in shaping the future of Internet of Things. For the first time we have the data to understand who those IoT developers are, where to find them and how to reach them.

Let’s look at a few tip on how all those programs can reach out to developers.

How many are they?

First of all, people running IoT developer programs have millions of developers to work with. [tweetable]VisionMobile estimates the number of IoT developers at 3.2 million individuals[/tweetable]. One in eight of those are focused on IoT as their primary target, prioritising it over smartphones, tablets and other screens.

In fact, [tweetable]IoT and M2M attract 36% more developers than Smart TVs, set-top boxes, game consoles and e-readers combined![/tweetable] This is even more impressive when considering that IoT is in the early stages of market development, while game consoles and set-top boxes have dominated the living room for decades.

70% of IoT developers work in small teams, most of them in startups of under 50 people. Small, agile teams dominate the search for the next killer app. That should come as no surprise: it takes a lot of flexibility to venture out in the complete unknown. Indeed, a whopping 14% of IoT developers is unsure of whether they’ll serve enterprises or consumers.

Where are they?

IoT developers are everywhere – from Silicon Valley to Hanoi and Kuala Lumpur, from small towns to mega-cities. There is no single area that dominates IoT innovation in terms of developer population. This is good news for entrepreneurs all over the world. You don’t need to be in the right spot, because there isn’t any.

It is no surprise to see [tweetable]startup clusters in Silicon Valley and New York light up for the Internet of Things[/tweetable]. There are many developers in Europe too (most of them in Western Europe), but they are scattered and seem slow to move from mobile to IoT compared to other regions.

A key cluster can be found in Canada, particularly in Toronto. There seems to be a “Blackberry fallout” – a prime source for highly experienced hardware people. Like in Canada, Finland seems to know a “Nokia fallout” and is positioning itself as an electronics innovation center.

[tweetable]4 out of 10 IoT developers live in Asia[/tweetable] (a significantly bigger proportion than in mobile). The outsourcing and manufacturing center of the world seems to be fertile ground for IoT innovation. The leaders are India and China. In India, Bangalore and Mumbai lead the dance. In China we see clusters around the major coastal centers, but also the inner cities are surprisingly well represented. The outsourcing and manufacturing hubs offer fertile ground for IoT innovation.

How can they be reached?

In the survey we also asked developers where they get their information. When breaking down the data for IoT developers, some surprises emerge. Hackathons, for example, are often one of the first initiatives that a developer program adopts to attract developers. But [tweetable]only one in five developers uses hackathons to get info[/tweetable]; their reach is fairly limited. While publications in the tech media is a good way to get brand awareness, only 1 in 3 developers that have IoT as their primary target will look there for information.

So where do they look? As usual, [tweetable]community support is the most popular source of information (over 50% of developers)[/tweetable]. This said, online forums and tutorials are underdeveloped relative to mobile, as the IoT developer space is still in an early stage.

[tweetable]Committed IoT developers seek information, not discovery.[/tweetable] Workshops are a key outreach channel. In contrast, for those involved in IoT as a side project, conferences and other events are a good way to find out what’s going on. Is this for me?

Just the beginning

This is just the beginning. First, because we’re in the early days of IoT developer platforms. Even as we have millions of developers who are actively experimenting with IoT and at the same time a lot of IoT developer programs popping up, we have yet to see the emergence of a major platform similar to Android and iOS in mobile.

It’s also the beginning for VisionMobile’s research on IoT developers. Our 8th Developer Economics survey (launching next week) will give significant attention to IoT developers. What would you ask to thousands of IoT developers? Find more information here if you want to join the Developer Economics research in this space.

The 3 key Apple Watch features that nobody talks about. Yet.

[If Apple wants to create a new, large product category out of smart watches, they need to create mass-market demand for their new product. What are the 3 most important features that will define the future of the Apple Watch? The ones that enable developers to innovate on top of these devices and create demand for smart watches.]


“We believe this product will redefine what people expect from its category. … It is the next chapter in Apple’s story.” With these words, Tim Cook made it very clear that the Apple Watch is more than just an excellent product. As with the iPod, the iPhone and the iPad before it, the Apple Watch aims to shape the future of wearables and create a whole new market reality.

As it stands, the Apple Watch v1 is a nicely designed timepiece, an engineering wonder, but competition will be fierce. Since fashion is about self-expression, by definition, there will be no single winner.

If Apple wants to create something bigger than fashion accessories, the Watch needs to be a functional tool. If it’s a tool, [tweetable]Apple must answer a fundamental question: what is a smart watch for?[/tweetable]

Will notifications become the killer app for smart watches? Unlikely. Not only is it unclear that we really want more interruptions, but it’s a bit of a dead-end for innovation. There can only be so many improvements in notifications, and only so many companies making those improvements.

If Apple wants to create a new, large product category out of smart watches, they need to become something much more that a timepiece with notifications and sensors. Something that allows people to do things that were not possible before. How Apple can do this? By following the same path that worked so well for iPhone and iPad: Tap into the limitless innovation power of co-creators to discover new use cases and possibilities we cannot imagine today.

The most important features of the Apple Watch going forward are the ones that enable developers to innovate on top of these devices and create demand for Apple’s smart watches. What are these features?



The straightforward way to expand the functionality of the watch is the WatchKit SDK, which allows developers to create “watch apps”. Other smart watch players like Android Wear, Pebble and Razer have made similar capabilities for developers. Developers are already showing strong interest in smartwatches. For example, the developer program of Pebble boasts 20,000+ developers and thousands of apps,.


The Apple Watch has a strong emphasis on embedded sensors for fitness and wellness. On the launch event, the company dedicated an entire section on it. Tim Cook: “This is a very important area for me and a very important area for Apple.”

But a few sensors and apps do not make a platform. The real potential lies in the HealthKit SDK that Apple launched at its WWDC event earlier this year. While its not technically a feature of the watch itself, it is this SDK that can take the device’s functionality and expand it in a whole new way to monitor activity and other wellness data . Could it be that the category that Apple wants to redefine is not the watch, but wellness and healthcare (in the broadest sense of the word)?

Certainly several other companies seem to go after that opportunity. Among them Google (Google Fit), Validic, Samsung (SAMI), Human API and most recently Jawbone (Jawbone UP API).


Like the Nymi wristband, the Apple Watch has all the technology in it to identify you personally. Apple has already demonstrated how digital identity combined with the Apple Watch can be used to make payments or even open hotel doors. (The clever integration with the new Apple Pay can drive adoption for both.) However, the possibilities are much broader. Biometric identification can be the end of not only passwords, but other kinds of ID as well. Another product category for Apple to redefine and absorb into its iOS universe?

Digital identity is a key control point for many digital leaders, including the likes of Google, Facebook, Twitter, LinkedIn and Salesforce. They are all actively working to hold your identity information and build your online persona on their platform. For Apple, the importance of identity is also evident in their deepening integration between devices and in their introduction of fingerprint sensors in all new phones.

Users first

What is a smart watch useful for? Beyond fashion and self-expression, a new kind of health monitoring and identity are prime candidates for the title of killer use case. Apple is going at it with their proven recipe for launching digital ecosystems: users-first. Apple starts by releasing a well-designed device for hardcore fans with a lot of value built in by default. Once there is a critical mass of users, Apple connects them with developers, who create real mass-market demand for the product.

It will take the ingenuity of a community of developers to explore all the possibilities and create a category killer, and Apple knows it very well.