Artificial Intelligence, Smarter Home Ecosystems Power IoT in 2016


The Internet of Things (IoT) is quickly emerging as a significant agent of transformation as it blends the physical and digital worlds. In the latest Ericsson Mobility Report, 28 billion connected devices are forecasted by the year 2021, more than half of which will be machine to machine (M2M) and IoT connections.

Numerous studies have identified the potential and value of IoT to society, with smart cities and connected homes, including consumer devices, making up as much that value. But that broad vision will take a series of concerted steps to realize, and for consumers and businesses alike, a few immediate significant trends are underpinning future growth and development for now.

For Businesses, IoT Empowers the Workforce

On the enterprise front, Accenture has identified a handful technology trends that are essential to business success in the IoT-based digital economy. These include intelligent automation, liquid workforce, platform economy, predictable disruption and digital trust.

And above all, companies must have an understanding that people can’t be lost in the transition to IoT.

“Digital means people too, and a cornerstone of this year’s [report] is people first,” said Paul Daugherty, Accenture’s CTO. “Companies that embrace digital can empower their workforce to continuously learn new skills to do more with technology and generate bigger and better business results.”

Most interestingly, the firm postulates that automation powered by artificial intelligence (AI), robotics and augmented reality are poised to fundamentally change the way businesses operate. This will drive a new, more productive relationship between people and machines. Significant investments are well underway with 70 percent of survey respondents acknowledging increased AI-related technology investments compared to two years ago, and 55 percent revealing that they plan on using machine learning and embedded AI solutions like IPsoft Amelia extensively.

By exploiting this kind of technology to enable workforce transformation, leading companies will create highly adaptable and change-ready environments that are able to meet today’s dynamic digital demands, the report argues.

The competitive advantage offered by a liquid workforce is apparent, as survey respondents indicated that “deep expertise for the specialized task at hand” was only the fifth-most-important characteristic they required for employees to perform well in a digital work environment. Other qualities such as ‘the ability to quickly learn’ or ‘the ability to shift gears’ were ranked higher.

Industry leaders are unleashing the power of technology by developing platform-based business models to capture new growth opportunities, driving the most profound change in the global macroeconomic environment since the Industrial Revolution. This is reinforced by 81 percent of the survey respondents, who agree that platform-based business models will become part of their organization’s core growth strategy within three years.

This in turn will lead to fast-emerging digital ecosystems that will create the foundation for the next wave of disruption by straddling markets and blurring industry boundaries.

“Forward-thinking leaders can proactively predict these ecosystem trajectories to gain a competitive advantage,” Accenture noted.

Companies are already significantly or moderately experiencing ecosystem disruption, with 81 percent of survey respondents indicating that they are seeing this in their industry.

Against all of this as a backdrop, the report also found that trust is a cornerstone of the digital economy, according to 83 percent of survey respondents.

“To gain the trust of individuals, ecosystems and regulators in this new landscape, businesses must focus on digital ethics as a core strategy; better security alone won’t be enough,” Accenture added.

IoT: A Rapidly Changing Set of Technologies

Meanwhile, for individuals, the Ericsson ConsumerLab report shows that the adoption of IoT and networked technologies is moving faster than ever. In turn, the mass-market use of innovative offerings is becoming the norm quicker, and the time period when early adopters influence others is now shorter than before.

This has led to an improved outlook for heretofore futuristic-sounding technologies. The study for instance shows that consumers believe artificial intelligence (AI) will soon enable interaction with objects without the need for a smartphone screen. In fact, half of all smartphone users expect their pocket devices to become things of the past within the next five years. And, consumers want virtual technology for everyday activities such as watching sports and making video calls. Forty-four percent even want to print their own food.

The report also found that the internal sensors that measure well-being in our bodies may become the new wearables. Eight out of 10 consumers in the report would like to use technology to enhance sensory perceptions and cognitive abilities such as vision, memory and hearing.

"Some of these trends may seem futuristic,” said Michael Björn, head of research at Ericsson ConsumerLab. “But consumer interest in new interaction paradigms such as AI and virtual reality (VR), as well as in embedding the internet in the walls of homes or even in our bodies, is quite strong. This means we could soon see new consumer product categories appearing - and whole industries transforming - to accommodate this development."

Room for Improvement in the Smart Home

Even as IoT indicators seem overwhelmingly positive, the space still faces challenges. Consider the smart-home ecosystem, which comprises both hardware devices and software apps.

Smart homes are the vanguard of the burgeoning IoT movement for consumers. However, the space is experiencing some growing pains. A report from Argus Insights shows that consumers are frustrated with the applications that go along with smart-home gear.

These are the apps that dictate, schedule and manage each device; and according to data compiled from nearly 50,000 smart home device and app reviews from August 2015 to the present, the problem is that the software and the actual gear don’t always work well in concert. More specifically, app functionality is a major consumer pain point, with frequent complaints of slow video streaming, long load times and the video blacking out.

“Once consumers have installed and connected their device, the app becomes the primary touch point for their new smart home,” explained John Feland, CEO and founder, Argus Insights. “Unfortunately, our analysis shows a looming lag in app experience which are a blemish on an otherwise improving end-to-end user experience.”

Indeed, the report found that The delight factor for smart home apps as a category is far below delight for the devices, as evidenced by Philips. Philips devices receive a higher delight score than Honeywell devices, but Honeywell’s apps are the most delightful according to the research, while Philips apps are the least liked.

These results represent a market trend of devices that are far more delightful than their apps, creating a dangerous gap in the overall customer experience.

“Companies like Philips must mind the gap between the devices and the experience of using the app,” said Feland.

Overall, incumbent home security companies like ADT, Comcast and AT&T are failing to delight consumers with their apps, while the more innovative and newer smart home-focused companies like Vivint and Honeywell appear to be cultivating a more synchronized hardware and software ecosystem, and are doing better among consumers.

“Companies that have aligned their entire ecosystem to delight consumers will outperform the rest of the market in the long term,” said Feland. “Look how Honeywell came from behind to beat Nest with an overall better experience.”

The Ericsson report also found that 55 percent of smartphone owners believe bricks used to build homes could include sensors that monitor mold, leakage and electricity issues within the next five years. As a result, the concept of smart homes may need to be rethought from the ground up.

Monetization Challenges

Apart from the development of the technologies themselves, and a focus on the user experience/adoption of IoT offerings, it’s important to remember that the business model has yet to be made for many of the use cases. However, a change in thinking about how to value these advances can lead to plentiful monetization opportunities.

Brendan O’Brien, co-founder at San Francisco-based Aria Systems and a pioneer in cloud billing, said that the IoT group of technologies is probably the most hyped in his lifetime.

"The huge upside has yet to materialize," he said via e-mail. "While many companies are driving customer service, operational and supply-chain improvements using IoT, most companies are still working in the margins when it comes to monetizing IoT.”

He noted that in an IoT-based world, all revenue will become recurring revenue.

“Think of the variety of consumption and subscription-based business models,” he said. “Perhaps not in the next 12 months, but the mandate is clear: customers increasingly want what they want, when they want it and how they want it.”

Already, 47 percent of U.S. businesses according to Aria research have adopted or are considering adopting a recurring revenue model to be able to respond rapidly to customer demands, and the number is steadily rising.

“Billing as we know it is broken,” he said. “The $8.9 trillion dollar IoT opportunity requires new approaches to billing and monetization. Without agile billing engines behind recurring revenue models, IoT offerings will fail to fully launch.”

Also, he noted that usage will be the key driver for IoT monetization, particularly when it comes to using analytics as a profit center: “There is a gold mine in the data collected from IoT devices, sensors, etc., and a greenfield opportunity for companies to determine how to provide value to customers from that data,” he said.

But of even greater value will be the role usage plays in customer retention. For customers to buy offerings on an active and repeating basis over time, companies will need to know them very well - to anticipate their needs, maximize their satisfaction and present them with cross-sell and upsell opportunities they love.

“Understanding how customers consume products and services provides insights into their habits, behaviors and patterns that can’t be seen otherwise,” O’Brien said. “The vendors who succeed at getting close to their customers will win the IoT market. One major industry already benefiting from usage and consumption-based models is healthcare but others abound.”

Edited by Kyle Piscioniere
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Contributing Writer

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