IoT in the age of Intelligence and what Hong Kong needs to succeed with IoT

As Internet of things (IoT) starts to become almost a household name we see huge software and platform companies (e.g Alibaba, Microsoft, Google,.. ) to make the move towards adding more Hardware (HW) in their business. Although HW has been marginalized the last 10 years, with IoT which is all about systems and solutions HW is becoming again important in the near future. So what is IoT?

IoT is and will be a huge network of systems consisting of devices, connectivity, data and intelligent data analytics algorithms. To become successful it needs to offer value (efficiency, innovation, new business models, …. ) to the enterprise world and make life simpler, convenient or cheaper for consumers to adopt. As with social networking where billions of people are connected with IoT we will expand the connections to include various devices.

But what are key facts including benefits for IoT:

• Will grow from 10 billion devices in 2015 to 50 billion in 2020

• IoT aims to make business operations more efficient and make life simpler, convenient or cheaper for consumers to adopt.

• Enable faster Innovation cycles

• Drive cost reductions

• Supports the shift from products to services (e.g Wind Turbines)

• Enables new business models

• Rides on the power of cloud and mobile technologies

• It is enabled from Sensor, Security, Data Analytics and Artificial Intelligence technologies

• Expansion of markets: e g from Car to Mobility

What are the key markets for IoT?

Consumer/Retail (e.g control of various household devices through 1 app, location based advertisement in a store, Data Analytics based Customer Insights with superb experience e.g www.actimirror.com , …) has the highest monetization potential followed from Technology, Aerospace/Defense (monitor the quality of expensive equipment like  airplane turbines), Education, Transportation and Insurance (efficiency through optimizing routes , behaviour based insurance), Healthcare and fitness services(remote diagnostics , personal fitness data and recommendations and more  e.g www.innowear.hk ), Financial Services, Telecom, Manufacturing ( Automation), Agriculture.

As there are so many benefits why this industry does not grow faster? The issue is that there are a few enablers that are missing or in fact there are a few barriers for adoption. For stand alone systems it is already possible and here we talk about bigger networks.

What are the barriers for adoption of IoT?

• Technology Complexity

• Lack of Interoperability standards

• Security

• Low Power consumption to enable longevity (10- 20 years) otherwise the maintenance expenses make the ROI too low if not negative.

• Privacy and location of data is a new challenge

What does it mean for investors?

Investors that want to invest in IoT need to pay attention to a few key parameters:

1. Hardware with upgradeable firmware

2. Embraces various protocols to be able to communicate with other systems

3. Makes the interface through APIs easy for other developers and services

4. Solid security through a recognized partner

5. Ensure partnerships for scalability

6. Use AI to make intelligent recommendations from data

7. Solid Business Model options

8. Ensure longevity of the devices

What about Hong Kong as an IoT hub?

HK is a financial, supply chain and professional services center with a lot of trading culture and in the past manufacturing experience mainly from lower technology goods. The part of HK GDP related to technology business is less than 3 % and manufacturing competence has moved to China since more than 10 years.

What are the HK advantages:  Location, Low Tax, Fast, Economic Freedom, Open and Efficient, IT infrastructure, Legal system, Easy to open New Business, global mindset, number of start-up accelerators is growing and the same for angel & VC community the latter 2 only the last 3 years. HK Government is more supportive lately with the Innovation Fund and co-organizing massive events to grow the start up community.

What are the HK Challenges: Partly risk averse culture linked to education, short term opportunistic money culture as till now finance and property business was more lucrative, low technology culture, lack of qualified designers, developers (Data Analytics, AI, Coding, Engineering, Customer Experience, … ) and commercialization competences especially for global business, immigration needs to become more flexible and the same for banking .

Living in HK for 18 years and having managed more than 20 years Global Businesses as well as Start-ups I have some view about the local culture and potential for local start-us especially for IoT business as we talk about Systems (HW & Software) and Solutions which includes services. So what needs to be done in HK to succeed:

1. HK needs to attract more talent from abroad in disciplines explained above. Moreover as many mentioned during recent meetings in HK, HW is more complicated development process than SW and the most of the newcomers in the start-up scene are not HW savvy this needs special attention.

2. The HK education system needs to change from learning by heart to become more entrepreneurialand be adapted to the 21st century needs (Science, Engineering, Math, Coding, Collaboration, Communication and Sharing) as well as longer term thinking, innovative and game changing culture.

3. As the most of the IoT related technologies are exponentially growing the mindset should be how can we go for minimum 10X better/faster/cheaper/…. to be able to compete globally instead of incremental growth.

4. Big companies setting-up accelerators can support the growth of start-ups by focusing to dominate first specific applications/niches. Private accelerators are very beneficial as well provided they have the right experience people to support IoT start ups. At this moment many accelerators and incubators are lacking many competences especially in HW, systems and scaling experience to guide the start-ups to excel on global level.

5. As the HW competences of the most of the start-ups personnel in HK are relatively low they need to partner with China manufacturers structurally.

6. Starting with HW + app (which is what the most of the IoT start-ups in HK are doing at this moment) is not good enough and not what really IoT is and needs to be. HK needs to develop systems, platform and solutions competences which need not only technical competences but Customer Experience Design and Digital Marketing among others.

7. As the HK market is small and the local start-ups lack competences for scaling and globalization there is a need to find the right experience people to guide the going global and scale up process.

8. Although the last 3 years there are more angels and VCs in HK, funding especially for series A and beyond needs to grow and become more mature.

9. As a major value of IoT will be related to Data, Data Analytics competences and valuable Insights will be vital for many applications.

10. Last but not least as the IoT start-up ecosystem is very fresh in HK and we are still in the honey moon period there will be need for experienced mentors to guide start-up founders to the difficult times during product/market fit and later scaling.

As the subject is very broad I will stop here and welcome comments, additions and dialogue.

Do you miss anything major?

Do you agree?

Mike Mastroyiannis is Business, Management & Executive Coach and Management Consultant for among others Exponentially Disruptive Innovations. He has served as CEO of business units in Multinationals, founded or lead start-ups and serves in advisory boards. He can be reached through LinkedIn or email at mike@tenx2.com

FEBRUARY 17, 2016