Usage-based Insurance: Preview of Radical Industry Change Through IoT

Posted on 22nd August 2013 in automotive, Internet of Things, M2M, management, marketing, strategy, transportation

Holy Clayton Christensen! Another wave of “disruptive innovation” is on its way, and this time the Internet of Things is responsible!

I’m confident that the IoT is going to bring about radical change throughout a wide range (if not all…) of vertical markets in the near future, through new realities such as giving everyone who needs it access to real-time information or by making preventive maintenance simple through real-time data from products such as jet turbines (General Electric is, again, a leader…).

However, for concrete evidence of how the IoT will change things, perhaps the best industry to look at is auto insurance, where the IoT is facilitating a fundamental shift in marketing, from the prior practice of basing premiums on proxy indicators such as a student’s grades or a person’s credit rating (leading to the heinous — and expensive — crime of “driving while poor,” LOL).

Progressive Snapshot

Progressive Snapshot

Instead, what is emerging worldwide (especially in Europe) is “usage-based insurance” (UBI), where the rates are based not on guestimates, but the driver’s actual behavior!

Insurance & Technology reports that the transition will only accelerate in the future.

“‘In five or ten years, all insurers will have dynamic driving data, so all will be able to offer discounts,’ says George Ayres, vice president of global sales for Verizon Telematics. ‘There will be no more asymmetry in terms of what they know about customers, so price alone won’t be as effective [for acquiring and retaining customers]. …The insurers who are out front on this idea are realizing [that soon] all will [have to] start to provide much wider breadth of services to keep those captured through price.’

“These services can be as simple as sending additional driving data to the driver’s smartphone, or as complex as auto insurance bundled with a customer relationship solution that sends alerts for scheduled maintenance.”

What a transformation!

Smart business leaders will start paying close attention to the features of the Internet of Things, and begin planning now on how to get ahead of the curve on making certain they are the beneficiaries of disruptive innovation — not the victims!

 

 

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More evidence U.S. lags dangerously behind EU on IoT privacy

Posted on 26th July 2013 in China, EU, government, Internet of Things, management, privacy, security, US government

There’s new confirmation that the U.S. remains dangerously behind the European Union on the twin issues of Internet of Things privacy and security. As I’ve warned before, especially in the context of the continued outrage over the NSA surveillance, if these issues aren’t solved collaboratively by the private sector and government, they threaten to derail the IoT express.

In her Stanford Masters thesis, I believe Mailyn (sic) Fidler accurately summarizes the US’s stance:

“The IoT in the United States is characterized by late but strong entry of companies to the market and by recent, but minimal, interest from the federal government. Specifically, the federal government views the IoT largely as part of the ongoing privacy and security discussion in Washington, D.C. Complicating analysis of the IoT in the United States is that the “Internet of Things” is not a generally recognized term. In the U.S., the IoT is viewed as a natural evolution of American innovation rather than as a unique field.”

http://m3.licdn.com/mpr/mpr/shrink_80_80/p/2/000/0dc/3bd/392d2fe.jpgFidler contrasts this lack of concern by the government to the EU, which, while also

Mailyn Fidler

viewing IoT privacy in the broader context of general privacy policy, has made IoT personal privacy and security a priority — more about that in a future post about the “Butler Project” report):

“The IoT has been a political priority for the European Union. Even with the recent recession, interest and funding in IoT enterprises has not slowed, and the EU has invested 70 million Euros in at least 50 research projects since 2008. In addition to the EU’s hopes that the IoT will bring economic benefits, particularly to small businesses and public institutions, the EU’s interest in the IoT reflects its concerns about who controls emerging technologies. Indeed, EU officials have stated an ambition to build an IoT ‘that will bring about clear advantages for Europe.’

However, despite the EU’s investments, a lack of legislative clarity, slow technical progress, and pressure from international strategic interactions threaten to slow EU efforts to develop a globally competitive, European-centric IoT.

The EU considers privacy a societal priority and has a history of regulating technologies to prevent privacy risks, as its Data Protection Directive indicates. The IoT is no different. The privacy risks the IoT presents, however, are discussed in the context of ongoing data protection reform in the EU. EU officials are debating how to author broad, technology-neutral guidance while, at the same time, many officials seem convinced that technology-specific guidance will be necessary. The EU’s political prioritization of the IoT fuels attempts at lobbying for IoT-specific regulation, as the myriad, overlapping attempts at IoT guidance demonstrate. The IoT’s advancement, then, is mired in this larger debate about the future of technology policy.”

Even with this greater focus, Fidler says the EU hasn’t made as much progress as might be hoped. Only 1 of the 33 2010 Cluster of European Research Projects on IoT explicitly investigated security, and, in a study the same year of IoT standards, only 2 or 175 explicityly investigated security — and none have addressed IoT cybersecurity.

In other words, they ain’t great, but we’re worse (in fact, among US agencies, only the FTC seems to give a fig about the IoT). Pathetic.

Fidler’s report also covers China. You can bet that privacy and security aren’t high on their priority list, LOL.

The EU, while perhaps lagging behind on IoT technology, may get the last laugh on the privacy and security issues. As we’ve seen with successful suits against Microsoft and Google on other Internet issues, the EU has prevailed in the past on questions of privacy and security, and, according to Fidler, it may happen again:

“The EU, faced with the IoT approaches of the United States and China—arguably the leading centers of technological innovation—may stand behind its social parameters and emphasis on new international governance mechanisms as a way of asserting alternative power. With such laws and institutions, economic activities involving the EU and the IoT would have to conform to EU-based standards. The EU, thus, compensates for technological disadvantages in innovation through social and governance parameters. Similarly, the United States and China are seeking to maintain or create their technical edge in new cyber technologies by encouraging unique standards regimes or more aggressive development environments.”

If so, I say bully for them! Someone has to stand up for the individual in this brave new world, and it looks as if the Obama Administration isn’t taking the challenge. Shame!

Fidler concludes that the geopolitical competition among the U.S., E.U., and China may have negative effects on the IoT’s overall growth if it results in incompatible standards:

“This geopolitical competition at such an early stage of the IoT’s development could create international interoperability problems, with negative political, economic, and social consequences. How governments and societies navigate the technological and political aspects of the emergence of the IoT will determine if the IoT’s benefits will be ubiquitously available or if the Internet’s foray into the realm of things will be interrupted.”

FADE TO Youngbloods singing “Get Together”…..

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Fewer, faster, finer: good values for #IoT innovators!

Posted on 18th July 2013 in Internet of Things, management, manufacturing, marketing, strategy

Just had a great conversation with a brilliant consultant, Michael Woody, the president and founder of International Marketing Advantages, Inc (he and I have the same wonderful literary agent, Michael Snell).

Woody helps small, innovative companies successfully compete with China, using a simple formula: fewer, faster, finer.

  • Fewer: think of China’s Foxcom, and its huge factory complexes and huge production runs. By contast, “American Dragon” companies ” lower minimum order sizes; the lower a minimum order size, the better. If a product can be customized, even better still.”

  • Faster: think about how far away China is, and how long it takes to ship products: “In today’s business environment of tighter margins, it is likely that your U.S. customers currently buying from China favor low inventory levels and just in time delivery. Given these conditions, short production lead times and physical proximity of supply chain partners becomes more critical.”
  • Finer: “…means not only that your product is of the highest quality, but also that it is safe. Overseas manufacturers, particularly those in China, have little to no understanding of the product safety regulations in the United States. Even large multi-national corporations, some based in the U.S, who have outsourced manufacturing to China are learning that lesson the hard way. These tougher regulations are your friend, so use them to your advantage.”

Check out the American Dragon site, and think hard on how to apply these principles in conjunction with your innovative Internet of Things product design, and I think you’ve got the formula for manufacturing success!

 

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Shodan: maybe this will get people to take IoT privacy/security seriously!

Posted on 11th July 2013 in government, Homeland Security, Internet of Things, M2M, management, manufacturing, privacy, security

Wired has an article this week about Shodan, the “IoT search engine,” which I hope scares the bejesus out of enough companies and government officials that they’ll finally realize how absolutely critical it is that we make security and privacy THE top public policy/corporate management priorities regarding the IoT.

Shodan’s homepage proudly proclaims that it will let you “EXPOSE ONLINE

Shodan

DEVICES: webcams, routers, power plants, iPhones, wind turbines, refrigerators (there’s that meme again!), VoIP phones.” Anyone out there who isn’t covered by that list? If so, stay in your cave!

As for everyone else, maybe you’d be more properly attracted by the CNN story about Shodan several months ago: “Shodan: the scariest search engine on the Internet.” Got your attention yet?

Here’s what Shodan can do, according to CNN:

“It’s stunning what can be found with a simple search on Shodan. Countless traffic lights,security cameras, home automation devices and heating systems are connected to the Internet and easy to spot.

Shodan searchers have found control systems for a water park, a gas station, a hotel wine cooler and a crematorium. Cybersecurity researchers have even located command and control systems for nuclear power plants and a particle-accelerating cyclotron by using Shodan.”

Command and control systems for nuclear power plants? Sheesh!

Reminds me that while the Obama Administration remains abysmally ignorant of the IoT (and, remember, I’m a fan of them in general …) one official who was all in was former CIA Director David Petraeus:

“‘Transformational’ is an overused word, but I do believe it properly applies to these technologies,’ Petraeus enthused, ‘particularly to their effect on clandestine tradecraft.’

All those new online devices are a treasure trove of data if you’re a ‘person of interest’ to the spy community. Once upon a time, spies had to place a bug in your chandelier to hear your conversation. With the rise of the ‘smart home,’ you’d be sending tagged, geolocated data that a spy agency can intercept in real time when you use the lighting app on your phone to adjust your living room’s ambiance.

‘Items of interest will be located, identified, monitored, and remotely controlled through technologies such as radio-frequency identification, sensor networks, tiny embedded servers, and energy harvesters — all connected to the next-generation internet using abundant, low-cost, and high-power computing,’Petraeus said, ‘the latter now going to cloud computing, in many areas greater and greater supercomputing, and, ultimately, heading to quantum computing.’

Petraeus allowed that these household spy devices ‘change our notions of secrecy’ and prompt a rethink of’ ‘our notions of identity and secrecy.’ All of which is true — if convenient for a CIA director.”

Sufficiently alarmed yet?

Let me be clear: I am convinced that security and privacy are the two issues that have the greatest potential to stop the Internet of Things dead in its tracks — and I felt that way even before Edward Snowden was a household name.

Snowden, ooops, Shodan, has revealed shocking indifference to security on the part of countless organizations (and, BTW, don’t forget that 85% of the U.S.’s critical infrastructure — power plants, pipelines, chemical factories, etc., is in private hands):

“A quick search for ‘default password‘ reveals countless printers, servers and system control devices that use  ‘admin’ as their user name and ‘1234’ as their password. Many more connected systems require no credentials at all — all you need is a Web browser to connect to them.

In a talk given at last year’s Defcon cybersecurity conference, independent security penetration tester Dan Tentler demonstrated how he used Shodan to find control systems for evaporative coolers, pressurized water heaters, and garage doors.

He found a car wash that could be turned on and off and a hockey rink in Denmark that could be defrosted with a click of a button. A city’s entire traffic control system was connected to the Internet and could be put into ‘test mode’ with a single command entry. And he also found a control system for a hydroelectric plant in France with two turbines generating 3 megawatts each.

This is as scary as the Vanity Fair article last year about how a miscreant could use an iPhone to kill you!

The 85% of critical infrastructure in private hands number should be a stark reminder: the only way we can possibly address IoT privacy and security is through collaborative government/private sector action — with strong involvement by you and me.

If you are involved in the IoT in any way, you simply can’t duck this issue!

 

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Essential Truth of the IoT: empowering individuals!

Posted on 19th June 2013 in Essential Truths, human communication, Internet of Things, M2M, management, manufacturing, marketing, strategy

I am still euphoric after last night’s IoT Meetup in Providence (such a meeting of the minds!) and it inspired me to write another of my posts about what I see as “Essential Truths” of the IoT!

In fact, I dare say this is the most profound — and perhaps least understood — way in which the IoT will bring about fundamental transformation of our lives.

When we talk about IoT components such as automated Machine-to-Machine (M2M) communication, it tends to obscure the human aspect of the IoT.

I think that’s going to be a HUGE component of the change, and one that we won’t be able to fully appreciate or exploit until the IoT is an omni-present part of our daily lives.

That’s because we have labored under such fundamental restrictions on communicating about data in the past that we can’t really visualize what things will be like when those restrictions are removed and data flows freely.

Here’s where something truly magical comes in!

It is no knock on even the most creative organization or its staff to say that it doesn’t have a strangle-hold on the truth: there’s simply no way that any organization or any individual can think of all the ways that certain data could create value. But when you make that information readily available, someone who has a particular interest (OK, maybe we’re talking about obsession!) or feels particular pain about that thing can come forward with a creative new product or service to capitalize on that information. I can visualize mutually beneficial partnerships that we can’t conceive of today between major corporations and tiny startups (i.e., GE/Quirky/Electric Imp  — or perhaps even individuals  (that’s the kind of thing that Innocentive has successfully pioneered with its challenges, where many of the profitable solutions have come from rank amateurs who may have no professional credentials but personal zeal and insights).

I realize that senior managers may be uncomfortable talking about the role “magic” can play in development of profitable new goods and services, but I humbly suggest that with the birth of the IoT it’s something they should add to their vocabulary.

What a future!

 

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My presentation tonight on human communication and the IoT

Posted on 18th June 2013 in human communication, Internet of Things, M2M, management, manufacturing

I just uploaded my presentation to tonight’s Boston/New England IoT Meetup, which will be held in Providence beginning at 5:30.

I’ll be speaking about what’s often overlooked in the introduction of exciting new technologies — and the IoT is no exception: the human communication possibilities and challenges that it introduces.

In the case of the IoT, all of the attention on automatic, non-human mediated  machine-to-machine communication obscures the fact that the IoT will have profound implications for human communications as well.

More than anything, it’s the fact that, for the first time, we’ll be able to share critical data on a real-time basis among co-workers, our supply chains, our distribution networks, and our customers. IMHO, that changes everything: workers will be able to do their jobs better because they’ll know exactly what’s happening at the time, and we’ll be able to make better decisions because everyone with a valuable perspective will be able to chime in at the same time: reducing the chance that some critical aspect of the issue will go ignored. That’s going to be amazing!

I’ll also talk about Chris Rezendes’ concept of “ground truth,” i.e., that one of the things we’ll be able to share in making those better decisions is “device intelligence,” real-time data from “smart things.” Hopefully this will lead to fact-based decision making (OK, maybe I’m a Pollyanna!) .

I conclude with my argument that, to fully take advantage of this real-time data flow, we need new management styles, including a “Buckyball Management” organizational chart in which every member of the organization is an important, value-creating “node” and every member can communicate with every other member when its relevant.

Hope you can make it tonight!

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Essential Truth: Gathering “Ground Truth” through IoT

Posted on 14th June 2013 in defense, Homeland Security, Internet of Things, M2M, management, manufacturing

This is the second in my occasional series of “Essential Truths” — key principles and questions about the Internet of Things.

On Tuesday, when I speak to our next Boston/New England IoT Meetup on the issue of “human communications and the IoT” one of the concepts I’ll be focusing on is what Chris Rezendes of INEX Advisors calls “ground truth,” a concept he was exposed to through his work with clients in the defense industry.

This is the idea that when devices become “smart,” they give off “digital exhaust” (in the same way as our searches do, which Google analyzes, allowing improvement in search results) which creates “device intelligence” that we can analyze and act upon. That is ground truth: accurate data about real-world conditions that we can share in real-time to improve operating performance and analysis.

According to Chris,

“You will have data, objective facts, about that tree or tidal pool, that machine or that vehicle, that room or that field, that patient or that criminal. The data in that ground truth will complement certain aspects of our perceptions about those things; and displace our misperceptions. And that ground truth will help us all make better decisions about how to manage our time on earth.”
— “Internet of Things: Grandest Opportunity, Most Stubborn Challenges“

It seems to me that this is one of the IoT’s most important potential benefits: improving decision-making by being able to base it on factual, timely information.

Think, for example, about the contentious issue of global warming. Cisco’s  “Planetary Skin,” and HP’s  “central nervous system for the planet” projects will deploy unprecedented numbers of remote sensors planet-wide, yielding real-time data about how global warming is affecting your community. It may not win over the hard-core global warming deniers (they’ll never listen to reason, IMHO!) but it should provide the objective evidence that rational people can agree on as the basis for action.

Even better, we can also improve this decision making because of my first “Essential Truth,” learning to ask “who else can use this data?”  Think of it: within limits, of course, the more perspectives that are brought into decision making the more likely we are to make sound decisions, because the likelihood of leaving out some important perspective and not analyzing all the possible ramifications is reduced. In the past, we could never do that, because we didn’t have the real-time data, and we couldn’t involve all of those people on a real-time basis.

I suspect that this will be a major issue for management theorists to bat around in coming years, and that our decision-making processes will be fundamentally altered for the better. IMHO, it is this change in decision making, not advances such as automatic regulation of assembly lines or building in feedback loops between manufacturers and customers, is perhaps the most important thing that the IoT will allow. It will have profound impact!

Thanks for the concept, Chris!

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Hallelujah! The Internet of People launches

Posted on 13th June 2013 in environmental, government, health, Homeland Security, human communication, Internet of Things, M2M, management, manufacturing, marketing, mobile, privacy, security, transportation

Most readers of this blog probably already know Rob van Kranenburg, arguably THE leading European Internet of Things theorist. What you may not  know is that, for the past year, he and a core group of IoT leaders have been planning creation of a UK-based global IoT consultancy, “The Internet of People.”

Unfortunately, one of the victims of that effort was a planned collaborationinternet_of_people_small
between Rob and me on an article about the IoT for the Harvard Business Review, but now I’ve got Dave Evans of Cisco as a writing partner, so I ain’t complainin’!

At any rate, there’s glorious news today: The Internet of People has officially launched, and there are more than 100 of us consultants who are already in the fold!

This is going to be an all-star team, so if you’re in need of IoT strategy and other consulting services, I hope you’ll contact us!

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Automated factories: that’s not the IoT’s potential!

Posted on 7th June 2013 in automotive, Internet of Things, M2M, maintenance, management, manufacturing

It’s easy to see why some people make the assumption that one of the results of the Internet of Things will be fully-automated factories.

After all, if automatic, real-time machine-2-machine data sharing would allow self-starting and self-regulating machinery, wouldn’t that allow us a utopian vision of completely autonomous manufacturing?

Instead, I think Bosch’s Volkmar Denner nailed it with this blog entry. He says that rather than complete automation:

“Instead, it’s about finding ways to increase agility. Putting that into figures, optimizing resource allocation within a more flexible production process can result in a jump in productivity of as much as 30 percent. Our goal is to be able to customize even the smallest unit volumes while retaining optimum productivity, and ultimately leading to achieve optimized multi-variant series production.”

I agree totally that what’s going to happen is an end to centralized management and top-down control of information (see my last post, on “Buckyball Management”!, with decentralized, self-management emerging that could threaten old industry leaders who don’t get it (see my posts about how GE does get it!) :

“… And I’m convinced that this shift will provide opportunities for established companies to offer new business models. But they too need to watch out: the IoTS is shaking up what until now has been very much a closed market, opening it up for entirely new players such as IT companies. Here, the IoTS is not just about connecting objects, machines, and systems. On the contrary, it’s also about how to use the data that this connectivity generates. And instead of using this information only within the plant itself, now everyone along the manufacturing chain can be given access to the data over the internet. Once again, the knowledge gained from these data can be applied to generate new business models.”

Denner says that one of the #IoT services that Bosch — the leading supplier of automotive sensors and one of the leaders in industrial sensors — is developing is predictive maintenance, which innovators such as GE (with its jet turbines) and the railroads (I’ve never traced my ancestry on my father’s side, but I harbor the possibility that I’m descended from the Stephensons, pere et fils, who invented the locomotive, so I have a warm spot in my heart for that industry…) are already doing.  As Denner says, “Having such a solution in place allows organizations to offer their customers new and improved levels of service, including a guarantee of reduced downtimes.”

So don’t count out the human element in manufacturing once the IoT is commonplace: in fact, it will be more important, and more valuable, than ever!

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I’ll speak on human communication aspect of IoT on 18th

Posted on 7th June 2013 in human communication, Internet of Things, management, manufacturing

Chris Rezendes of INEX Advisors continues to push me to create some thought capital around the issue of human communication and the Internet of Things.

He’s asked me to speak at the next  IoT Boston/New England Meetup, on June 18th, when we’ll move south to Providence (at the offices of Betaspring, 95 Chestnut Street, 3rd floor).

I’ll talk about a number of communication issues that I think will have a major impact on whether we really take full advantage of the IoT:

  • my 1st “Essential Truth,” that we must begin to ask “who else could use this data.” 
  • let’s not use the IoT as an excuse to fully-automate processes and procedures (the subject of my next blog post): instead, let’s use it as the means to fine-tuning and customizing.
  • turning monologues into dialogues: I think that’s going to be particularly vital in medicine, where the potential for two-way communication on a real-time basis between doctor and patient should empower the patient.
  • improving discussions of operations and strategy by basing them on what Chris Rezendes calls “ground truth.”
  • the need for a whole new management style that’s based on empowering every employee, every supplier, every distributor and every customer.

The later point harkens back to a long piece I wrote in 1995 for Network World (sorry, it’s no longer available online. When I get a chance I’ll add abuckyball-1-small section to this blog that will include access to my speeches and articles going back to 1990…) that I think is even more relevant today: that we need to scrap hierarchical, linear management styles and instead substitute what I call “Buckyball Management,” in which conventional organizational charts are replaced by spherical ones in which every person is an important node in the organization and there is no longer any up or down: anyone can reach out to anyone else. THAT, my friends, will be a real revolution!

Hope you can make it to The State of Rhode Island and Providence Plantations (The longest official state name is a great trivia question … ) on the 18th!

.

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