Makers and startups, not tech providers, consumer goods companies or enterprises, will drive acceptance, use and growth in the Internet of Things (IoT) through the creation of a multitude of niche applications.
Gartner predicts that by 2017, 50 percent of IoT solutions (typically a product combined with a service) will originate in startups that are less than three years old.
Defining makers" as inventors, tinkerers and entrepreneurs who create and manufacture products using traditional tools and new digital design and rapid prototyping and manufacturing technologies, the analyst firm categorises “startups" as fledgling businesses that are often technology-focused and have the potential for high growth.
"Conventional wisdom is that the growth of the Internet of Things is driven by large enterprises,” says Pete Basiliere, research vice president, Gartner.
“As is always the case, there is an element of truth in conventional wisdom and major consumer goods companies, utilities, manufacturers and other large enterprises are, indeed, developing IoT product offerings.
"However Gartner's Maverick research finds that it is the makers and the startups who are the ones shaping the IoT. Individuals and small companies that span the globe are developing IoT solutions to real-world, often niche problems.
“They are taking advantage of low-cost electronics, traditional manufacturing and 3D printing tools, and open- and closed-source hardware and software to create IoT devices that improve processes and lives."
Basiliere believes managers often assume the IoT is about business-to-business and business-to-consumer opportunities, relying on technologists within their enterprises to develop the necessary systems and connected items.
However, Basiliere claims these firms are slow-moving elephants that cannot react quickly to what is happening underneath their feet.Read more: CIOs must ‘flip’ their leadership styles to succeed in the digital economy
“Product development processes within most large enterprises are too ponderous and ROI-driven to produce anything but high-volume, lowest-common-denominator IoT objects,” he adds.
“The result is the development of a low number of IoT uses that garner high amounts of revenue, while makers, startups and crowdsourcing efforts result in high numbers of low-revenue niche IoT applications."
For this reason, Basiliere states senior management and emerging technology strategists within large enterprises must transform their product discovery processes.
Whether at consumer goods companies or in the healthcare, utilities, wireless, manufacturing or other vertical markets, managers must encourage makers within their organisations to develop IoT concepts.
As a result, Basiliere says they must closely examine the output from these makers and check the feasibility of transferring the underlying ideas into their own organisations.
"Innovation is necessary for an organisation to sustain value over time and create competitive advantage,” Basiliere adds.
“Yet in many organisations, the corporate culture and processes stagnate and harden, discouraging innovation as a result.
“In the meantime, makers and startups worldwide are charging ahead with identifying numerous, often niche problems and innovating solutions using IoT concepts.Read more: 3 scenarios for ‘reinventing’ your business for the digital age
“They will drive not only consumer and enterprise acceptance of the IoT, but also the creative solutions that enterprises could not possibly discern, resulting in an "Internet of Very Different Things."
Basiliere cited the example of entrepreneurs and individuals who are leveraging the low-cost Arduino open-source electronics platform, entry-level 3D printers, and traditional woodworking and machine tools to build their own IoT devices.
Gartner has found that these grassroots projects focus on managing and controlling devices in the home and are more focused on providing convenience (such as turning on the heat before you arrive home) than cost savings (the focus of enterprise-sector and public-sector IoT).
Similar to other technology advances historically, the growth promise associated with the early stages of IoT will lead to the creation and funding of a large number of startup organisations that will maneuver to capture what they perceive to be early opportunities or overlooked product niches.
This will lead to creative solutions and a wide range of products, many of which will fail in the market. Nevertheless, the process will lead to growth as the successful solutions are often consolidated by larger suppliers, and the overall market expands.
As a result, makers enable people in underserved and niche markets worldwide — people who would not otherwise encounter the IoT offerings of large enterprises — to experience and benefit from connected device.
"It won't all be smooth sailing,” Basiliere adds. “Certainly there is no small number of factors working against makers and startups, whether they have an IoT offering or a more traditional product or service.
"Most small businesses fail within five years, and many of the 'successful' ones will be lifestyle companies that barely generate enough revenue to support an individual or family."