How to develop an internet of things strategy

By Thor Olavsrud Feb 23rd 2017
How to develop an internet of things strategy
Former Amazon executive John Rossman shares his checklist for developing an internet of things strategy for your organization.

The internet of things (IoT) may present the biggest opportunity to enterprises since the dawn of the internet age, and perhaps it will be bigger. Research firm Gartner predicts there will be nearly 20 billion devices on the IoT by 2020, and IoT product and service suppliers will generate $300 billion+ in revenue.

Successfully leveraging that opportunity — bringing together sensors, connectivity, cloud storage, processing, analytics and machine learning to transform business models and processes — requires a plan.

"In the course of my career, I've estimated and planned hundreds of projects," John Rossman, who spent four years launching and then running Amazon's Marketplace business (which represents more than 50 percent of all Amazon units sold today), writes in his new book, The Amazon Way on IoT: 10 Principles for Every Leader from the World's Leading Internet of Things Strategies. "I've learned that, even before you start seeking answers, it's imperative to understand the questions. Guiding a team to a successful outcome on a complex project requires understanding of the steps and deliverables, necessary resources, and roles and every inherent risk and dependency."

Before you start the hardware and software design, and before you figure out how to engage developers, he says, you need to start with a better set of questions.

Rossman says there are three key phases to building a successful IoT strategy. While he presents the steps sequentially, he notes that many steps are actually taken concurrently in practice and can be approached in many different ways.

Part 1. Develop and articulate your strategy

First and foremost, Rossman says, you must narrow and prioritize your options. IoT presents a broad swathe of opportunities. Success depends upon understanding your market, evaluating the opportunities with deliberation and attacking in the right place.

Landscape analysis

It all begins with a landscape analysis. You need to thoroughly understand your industry and competitors — strengths, weaknesses, opportunities and threats (SWOT). This will help you see the megatrends and forces at play in your market.

"Creating a landscape analysis and value chain of your industry is a very important thing to do," Rossman tells CIO.com. "Studying the market: What are they saying about IoT in your industry? Truly understanding what is your worst customer moment: Where do customers get frustrated? What data or what event improves that customer experience? What's the sensor or IoT opportunity that provides that data?"

Value-chain analysis and profit-pool analysis

The next step, Rossman says, is to create a value-chain analysis and profit-pool analysis of your industry. It should be a broad view of the industry, don't give in to tunnel-vision with a narrow view of your current business. In some cases, this may involve launching a business in one part of the value chain as a way to gain perspective on the rest of the value chain and to identify other business opportunities.

Partner, competitor and vendor analysis

Create a map of other solutions providers in your space to develop a clear understanding of what exactly each one does, who their key clients are and what their IoT use cases are. Rossman says you should even pick a few to interview. Use this process to understand the needs of customers, the smart way those needs are already being met and where the gaps are.

Customer needs

The next step, Rossman says, is to document specific unmet customer needs and identify the key friction points your future customers are currently experiencing.

"Following the path from start to your desired outcome can help you identify details and priorities that might otherwise be dealt with at too high a level or skipped over entirely," he writes.

Rossman warns that crafting strong customer personas and journeys is hard work, and you may need to start over several times to get it right.

"The biggest mistake you can make on these is to build them for show rather than for work," he writes. "Don't worry about the beauty of these deliverables until things are getting baked (if at all). Do worry about getting at insights, talking to customers and validating your findings with others who can bring insights and challenges to your work."

Evaluation framework and scoring

Design ways to assess the success of your work.

"This includes understanding a project's feasibility and transition points and how it will tie into other corporate strategies at your company," Rossman writes. "Sometimes, especially if your organization is new to the field of connected devices, the success of your project should be measured in terms of what you can learn from the project rather than whether or not it can be classically considered a success."

You might undertake some early IoT initiatives purely to gain experience, with no expected ROI, he says.

Strategy articulation

Once you have all these analyses under your belt, you need share what you've learned with the rest of your team. Rossman says he's had the most success articulating these learnings by building a flywheel model of business systems and by developing a business model.

Part 2. Build your IoT roadmap

Once you've explained your big idea and why your organization should pursue it, you need an IoT roadmap that helps you plan and communicate to others what the journey will be like, what is being built and how it will work.

"In creating your roadmap, embrace on of Amazon's favorite strategies — think big, but bet small," Rossman writes.

In other words, you need a big vision, but you don't want to "bet big." Make small bets to test your thinking. This can involve creating a prototype, a minimally viable product or jointly developing a project with existing customers and partners.

Rossman suggests four methods that can help you articulate your roadmap:

  • The future press release. Develop a simple but specific product announcement. This forces you to clarify your vision, Rossman says.
  • A FAQ for your IoT plan. Forecast some of the questions you're likely to get about your product and create a frequently asked questions (FAQ) document to answer them.
  • A user manual. Develop a preliminary user manual for your IoT device. It should address the end user. If the product includes an API, you should also build a user manual for the developer.
  • A project charter. Write a project charter. This is a written project overview that outlines the key facets of the project. It should help you understand the resources you need to undertake the project, what the key milestones are and the schedule.

Part 3. Identify and map your IoT requirements

The last step is to identify and map your IoT requirements — the technical capabilities you need to make your solution a success.

"Companies use many different types of approaches, such as use cases, user stories, process flows, personas, architecture specifications and so on to document their requirements," Rossman writes.

Regardless of the requirements methodology you settle on, Rossman says it's important to answer questions around insights (data and events), analytics and recommendations, performance and environment and operating costs.

For example, under 'insights,' it's important to answer questions like these:

  • What problem, event or insight is the end user solving for?
  • What insights would be valuable to the customer?
  • What recommendation or optimization using the data would be valuable to a customer?
  • What data needs to be collected?

Analytics and recommendations questions might include the following:

  • How responsive will "adjustments" or optimizations need to be (specify in time range)?
  • How complex will the "math" be? Write the math equation or pseudologic code if you can.
  • Will notifications, logic, "math," or algorithms be consistent and fixed, or will they need to be configurable, updated and managed?

Performance questions might include these:

  • Estimate the amount of data transmitted over a period of time (hour, day).
  • What are the consequences of data not being collected?
  • What are the consequences of data being collected but not transmitted?

Environment and operating requirements questions might include these:

  • What operating conditions will the device and sensor be in? Temperature, moisture, pressure, access and vibration are example conditions.
  • What device physical security needs or risks are there?
  • Will the IoT device or sensors be embedded within another device, or will they be independent and a primary physical device themselves?

Costs questions might include these:

  • What is the cost per device target range?
  • What is the cost per device for connectivity target range?
  • What is the additional operating cost range the business can support for ongoing operating infrastructure?

"As you build your plans, remember that though IoT can provide key pieces to the puzzle, it's no golden ticket," Rossman writes. "Simply creating an IoT solution will not bring you success. However, if you focus on providing strong value to your customers through new or updated products and services, improving company operations or creating new or more-efficient business models, you'll be much more likely to find success."

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