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21.02.2020

IOT awaits

Modern technologies are a paradoxical thing. Everyone uses them, but few are able to distinguish coding from the design of digital microcircuits. Roughly speaking, what’s the difference which microscope to use to hammer in nails with when the goal is to have them hammered. This approach is justified from the point of view of an average user, who does not care which cow the milk is taken from (many do not even know that an animal is involved here). However from the point of view of business and investment, it is very useful to know the whole perspective.

IOT awaits

The world of high technologies has its own hierarchy. China is leading in the development of artificial intelligence, the United States is ahead of the rest of the world in many areas, Russia, which is nice to acknowledge, leads the financial and banking sectors … The established niches are usually highly competitive, with built up powerful funding. In breakthrough areas (biotechnology, alternative energy, space, etc.) there is also a queue of investors who want to snatch their piece of the pie. Is there a crack somewhere that you can still squeeze into?

The most curious thing is that there is not just a crack, but a potentially huge sphere known as IoT (Internet of Things). Many people are used to associating it with the concept of a smart home. All these sensors, counters, automation … In fact, the functionality of the IoT is much wider, it is almost limitless. It is a network that connects objects of the real and digital worlds. Insurance business, banks, oil and gas sector, mining, retail and service – wherever it is necessary to count something, track something and take some action in this regard, IoT technologies work. This also includes the sphere of Smart City, which provides the automated operation of many city systems at the know-how level.

IoT is not the same as process automation – the differences lie in a qualitatively different level of performance and inherent capabilities. For example, how would you like a small wireless device that you can attach to any shelf in a store? It will count the number of purchases, product returns to the shelf, signal about its shortage, recognize the assortment and nomenclature, and issue a report broken down by any requested parameters. There only remains a question of the cost of such a service and its practical necessity as the merchandiser is still doing an excellent job with all this.

Perhaps he/she will cope in the future. Let me give you an example with a videophone. Its first concept appeared in an American magazine at the end of the 19th century. Practical development took almost a hundred years, the first users appeared in the United States in 1976 and there were very few of them, due to the high cost of the service ($90 per month). The grandiose future of video telephony was possible on the account of the reduction in the cost of technology. But in the end, it turned out that not so many people were eager to see their interlocutor at a distance. The service works, but not on the scale as intended.

IOT awaits

This is where the concerns of investors lie. Firstly, investors are likely to be reluctant to enter unchartered territories that have not yet shown commercial attractiveness. It is much easier and safer to invest in the chicken that has already laid golden eggs many times. Secondly, current IoT start-ups often lack a clear business model, a calculated outcome, thereby increasing the potential risk of investment.

For example, in 2013, in Nice, a seemingly win-win project to organize access for drivers to available on-street parking failed miserably. Why? Purely technical problems were also present, but, mainly due to the blurred, uncertain business goals at the initial stage of the project. Providing residents and city guests with a service for finding parking spaces is a noble business, but the monetization of this process has remained behind the scenes. As a result, financial scandals, tens of millions of euros have sunk into the sand, and a general fiasco.

Does this mean that all such undertakings are doomed to failure? Of course not. Yes, most present IoT start-ups are at the pre-seed stage, but the history of the development of technology shows that sooner or later talented engineers find contact with equally talented marketers and businessmen. Blurred business expectations are transformed into SMART goals and objectives, and clear routes to making a profit are identified.

One way or another, the world will become a place now shown in science fiction films. Or almost the same. The economy, the expediency of certain innovations, their relevance, payback and the ability to generate profits will make its own changes. The real world will merge with the virtual one under certain conditions, and IoT technologies will play a decisive role in this. The only question that remains is who will be the first to see this perspective? The IoT is waiting for its own Zuckerbergs, Bezos and Musks.