News ways to innovate

Internet of things


This is the third of my blogs looking at the most popular in a series of Harvard Business Review reports published by The Enterprisers Project, an online community set up to discuss the evolving role of CIOs and how they can maximise their impact on the business.

While the first two reports — Driving Digital Transformation: New Skills for Leaders, New Role for the CIO, and Business Transformation and the CIO Role — were very much focussed on the role of the CIO in today’s ‘digitally disrupted’ environment, the report I want to look at this week, New Patterns of Innovation, has a much broader focus: How do companies innovate?

It lists three “Traditional, tested ways of framing the search for ideas”:
- How can we build on the capabilities and assets that already make us distinctive to enter new businesses and markets?
- What does a close study of customers’ behaviour tell us about their tacit, unmet needs?
- If we follow ‘megatrends’ or other shifts to their logical conclusion, what future business opportunities will become clear?

It then proposes a fourth approach that is closely linked to the phenomenon of digital disruption that the other reports I’ve mentioned looked at: “How can we create value for customers using data and analytic tools we own or could have access to?”

The authors then say: “Over the past five years, we’ve explored that question with a broad range of … clients. In the course of that work, we’ve seen advances in IT facilitate the hunt for new business value in five distinct— but often overlapping — patterns. Those patterns form the basis of our framework.”

I want to focus on just one, because I think it is the most important, and perhaps has the potential to produce more significant gains than some of the others. The report’s authors describe it as “Augmenting Products to Generate Data.” They say:

“Because of advances in sensors, wireless communications, and big data, it’s now feasible to gather and crunch enormous amounts of data in a variety of contexts—from wind turbines to kitchen appliances to intelligent scalpels. Those data can be used to improve the design, operation, maintenance, and repair of assets or to enhance how an activity is carried out. Such capabilities, in turn, can become the basis of new services or new business models.”

What they are talking about here, although they never use the term, is the Internet of Everything: the combination of the Internet of connected things and the systems to gather, analyse and extract value from the data they produce.

Here’s a couple of real world examples of how IoT can be exploited to create really innovative business models.

PooledEnergy is a new Sydney-based company that provides management of home swimming pools using sensors and controls for pumps, etc. These are linked to a cloud-based management system that optimises their operation, minimising power consumption and ensuring optimum water quality.

PooledEnergy claims their system does a much better job than the fairly crude stand-alone systems most pools use. Pools use lots of electricity so they have bundled the service with an electricity supply contract and offer considerable savings on the combination of pool maintenance and power bills. The business model grew, after considerable investment in R&D, from one that was simply trying to sell a superior pool filtration system.

Another Sydney company, Wirriga, wants to put air quality monitors all over Sydney, connected to the Internet. For example: you’d be able to check the air quality near your home, your kids’ school. Local authorities would be able to monitor air quality near major highways, by time of day. One possible revenue source: house buyers could check and compare air quality around various properties. (How much more would you pay for cleaner air?)

I would think that almost any business could find scope for innovation by exploiting the Internet of Things to gather, analyse and act upon information generated by how its customers are using its products or services, or by leveraging its existing relationship with them.

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