While companies such as Amazon, GE and Microsoft are well-launched on their Internet of Things journey, says John Rossman, they represent “just the tip of the iceberg.”
“Below the water line is the biggest segment of businesses and leaders who haven’t figured out how IoT will impact their industry or how to take advantage of it,” he adds.
Indeed, while the technology and architecture of IoT is complex, Rossman writes in his new book, The Amazon Way on IoT (Clyde Hill Publishing, 2016, 168 pages, $12.99) “most of the challenges you’ll face in IoT will lie in building the organizational capabilities, culture and leadership that take advantage of these opportunities.”
For example, an OEM may sell its products through distributors and provide service through third parties. But as IoT is implemented and those products have more of a “digital pulse,” says Rossman, that company may want to greatly expand its service offerings. Now it is faced with changes in its channel relationships, service arrangements and revenue model. In each of those cases, he points out, “a lot of people are vested in the status quo.”
“But as we have seen throughout history, if it is better for the customer, if it offers huge advantages, innovation will win,” he explains. “You have to decide, am I going to be someone who forces the topic and is a leader in this, be a fast forward? Or am I going to potentially suffer the consequences of hanging on to the legacy traditions?”
The Amazon Way
Rossman spent four years launching and then running Amazon’s Marketplace business and then ran the Amazon Enterprise Services business. He uses that experience and his subsequent consulting work to lay out 10 principles that he says have helped Amazon become a leader in capitalizing on the IoT’s immense promise. He warns that no one approach to implementing IoT will work for every company.
Amazon sees itself “first and foremost” as a technology company, Rossman says, that is always trying to do three things – reinvent the customer experience, improve operational effectiveness and develop new business models. “You see Amazon executing on all three of those and IoT is key to those initiatives,” says Rossman. “That is what I call the triple threat of IoT.”
But while Amazon has grand ambitions, Rossman continues, its approach to IoT is often to start very small.
“They do little incremental things, small batch in a very agile way. Some things you never hear about. Some things never scale,” he observes.
Companies should start their IoT journey with awareness, Rossman recommends. Even if they decide not to jump into IoT at this time, they should be well-informed about what is going on in their industry, in other industries and where investment money is going.
As with Amazon, Rossman suggests thinking about how your company can experiment with IoT. “How do I do little bets so that even if now is not the time, I am building my experience base?” That experience includes developing not just new technology capabilities but also working, for example, with partners on new business models.
Some of the best IoT ventures, in Rossman’s view, involve multiple organizations working together to deliver a new customer experience. One example is the partnership between Amazon, DHL and Audi to develop a way to deliver packages to a car. Managing a partnership such as this, he notes, involves strategy and business skills that many companies don’t have and need to develop.
Avoid the Pitfalls
Rossman emphasizes that IoT is not solely a technology project but many companies treat it that way. They assign it to IT rather than create a cross-functional team that includes input from legal, security and others from the start.
Companies can also fail to distinguish between an investment, which should have a well-articulated business case and expected ROI, and a bet. Treating a bet as if it will have an assured outcome puts undue pressure on teams and hampers innovation.
“That is probably the most essential aspect of innovation that gets lost on many executives and boards,” says Rossman. “It is a game of failure. You have to play the odds and have a big portfolio of innovation bets in order to hit the home run.”