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The Bright Future for IoT Startups

Thought Leaders

What would you do if you could infuse intelligence into the everyday objects around you? The day-dreams of children – not to mention science fiction movies – might now be the basis of the next multi-million-dollar business. So here’s the thing…

You’ve probably heard about a few recent technological developments that seem amazingly futuristic: controlling your house’s heating from your phone, recording your biometrics through your shirt while you jog, ordering groceries from a self-adhered button in your kitchen. What you might not know is that all these technologies fall under one term: Internet of Things (IoT). And trust me, IoT is going to be huge. Billions of everyday objects around the globe will become connected to the Internet in the coming years. This growth will have an enormous impact on our lives and on the relationship we currently have with the objects that surround us. From a business standpoint, it creates immense opportunities for anyone looking for the next big thing.

Almost every brand – big or small – seems to want a piece of the pie. A question might arise: Who will succeed and who will fail?  We don’t exactly have an answer to that, especially because the best solutions have yet to be invented. However, what the question does not make evident is who the ‘who’ really is. It probably isn’t the huge conglomerate you hear about every day. And it probably isn’t the multinational corporation that owns half the share in some sector. If we look at human history, we realize that whenever a major technology shift comes along, the most innovative concepts have not traditionally been invented by established brands. They have been invented in backyards; and though you might think of them as goliaths now, companies like Apple, Airbnb, Bosch, Disney, General Electric, Google, Hewlett Packard, IKEA, and Microsoft all started from when someone had an innovative idea.

If I were a gambling person, I would bet on this tradition repeating itself: innovative startups will use the Internet of Things to continue creating unprecedented value and groundbreaking technology. According to the global research firm Gartner, 50% of Internet of Things solutions will originate in startups that are less than 3 years old in 2017.

Why is this? Well, big companies tend to play it safe and embrace the status quo, while it is individuals who want to create things that change the future. On one side, incumbent players are busy evaluating different business cases for high-volume IoT solutions with a quick return on investment. On the other, individuals and small companies all over the world are utilizing the makers’ community and crowdsourcing efforts to develop IoT solutions to real-world, often niche problems. Another aspect is the ability to act quickly and enforce changes to existing ways of working. For example, IoT is used to build digital services on top of the traditional products, thus pushing the organization towards a more service-centric approach. But this transformation is often easier said than done, and requires many large corporations to rethink their entire business model – from organizational structures and processes to how they approach R&D, sales and customer service.  Consequently, it takes a lot of guts, a clear vision, and explicit buy-in from top management to succeed.

In the words of Pete Basiliere, Research VP at Gartner, “[Traditional] firms are slow-moving elephants that cannot react quickly to what is happening underneath their feet.” Does this suggest that the IoT race is already over for the big companies? Of course not. Many of world’s strongest brands preach loud and clear about their big bets on the Internet of Things. If you were at the International Consumer Electronics Show in Las Vegas this year, you would’ve seen IoT everywhere. Companies like Samsung spent their entire keynote speeches talking about how all their products will be connected to the Internet by 2020.

To breach this divide of big brand safety vs. individual innovation, an increasing number of large companies are turning to the fast-moving startup world for the latest ideas and the newest solutions. It’s where the action is.  The big brands, as well as investors and incubators, are pouring money into the startup community like it’s 1999. Simply recall Google’s $3.2bn acquisition of the four-year-old smart thermostat company Nest Labs last year.


Should we believe the hype, or is it the millennial tech bubble all over again? Based solely on what’s out on the market today, it’s no surprise that people are starting to talk about the Internet of Things as the next bubble to burst. Right now, it’s simply too much technology with too little user value. But Bill Gates put it well: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction”.

The first generation of IoT solutions we see today have all focused on making the technology work. Many of them might never go mainstream. And, important to note, many – if not most – were never even meant for a wider audience. They are basically the result of tech people playing around and creating products geared toward other tech people. But this next generation of smart products/services will be a significant leap forward. Now the focus will be on making the user experience and business model work to make people’s everyday lives more comfortable and efficient.

So, who will come up with the next killer app for IoT? I’m not sure. But don’t be surprised if it’s created by someone sitting in his or her garage, responding to an old problem with a brand new solution.