Look out business owners! Along with technologies, business as you know it is changing. The way consumers operate and approach purchases is changing. In turn, the way businesses operate to meet these consumer needs is changing as well. Consumers no longer have to spend a large sum of money to purchase something when they can potentially gain use from someone else’s purchase. If you live in San Francisco, you no longer have to make the decision to either pay 20 grand for a car or get ripped off by a cab company in order to make your 2-3 needed trips a week. You can now pay a very reasonable price by ordering an Uber or a Lyft to have someone use their own purchased car to take you where you need to go. We are entering an era where millennials are not constantly looking to acquire assets, but are more so looking to be as resourceful as they can with the assets available to them. The logic here is simple, in order to accumulate all the assets you need to live a good life: own a house, buy a car, stay at hotels when traveling, hire a personal trainer to stay healthy; you would need to dedicate your life and free time to becoming wealthy enough to accumulate all these assets. This means more time working a day job that you may or may not like because you need to make the money to purchase these assets. However, if you take an approach of being resourceful in finding ways to use the assets available to you by other owners, you can reduce costs and free up time to be able to do more things important to you rather than focusing your entire life on your paycheck. The Millennial generation is decreasingly concerned with accumulating assets and wealth, but more concerned with utilizing the tools available so they can spend more of their life focusing on their goals instead of living to earn.
The millennial mindset has fueled the sharing economy. Consumers are beginning to find avenues to team up to reach mutual benefit. If person A needs to go somewhere but does not have a car, and person B has a car and free time, you have yourself an Uber match. If person A has a vacant room in their house for 2 weeks and person B needs a roof over their head for a few days, you have yourself an Airbnb match. Even if a woman purchased an expensive dress for an important event, she can recover back some of the cost by lending it to a young woman who wants a fancy dress for one night for the big date using Rent the Runway. The point is people prefer to use sharing on demand services over paying a big business for the same services. The reasons are aplenty. Firstly, people like the idea that their money is going to another individual who needs that money to pay the bills rather than a big corporation. Another reason is sharing services are typically much cheaper than renting from a business, due to the lack of overhead, and the increased use of Big Data analytics leads to more accurate supply and demand price points. Also, when sharing with another person via an app you can execute the deal much quicker with the click of a button. People are learning to invest in what is important to them, and leverage other peers’ investments to help them get to where they want to be. Jeremy Rifkin states in his book, The Zero Marginal Cost Society, that we are experiencing a large economic shift from capitalism to what is called the collaborative commons. He believes that the IoT industry will be key to this economic shift. Capitalism is known for accumulation, but the ever expanding sharing economy will be known for its resourcefulness.
This leads to the big question: how can businesses learn from what has unfolded in the consumer sharing market and apply to their business model? The answer is, through partnerships. Just like with consumers, businesses in our capitalistic society have thrived over the past several decades by accumulating assets. IBM for example has acquired thousands of companies over the past century. If any smaller company is a threat or has some assets IBM could use, they would simply buy up the company and use the acquired technology as their own. Most of these acquired companies were all hardware or software computing solutions that operate in the same market as IBM. IBM knows its niche, and ensures they have the entire market in their respective space under their control. That has been big business as we know it, and that has been good business as we know it. Like I said, change is upon us. With machine learning and machine to machine communication arising in the wonderful Internet of Things, it will be near impossible for one company to own every aspect of their finalized product. Garage door openers will talk to thermostats, refrigerators will talk to food delivery companies, and as is already happening, drones will talk to industrial farming equipment.
As we enter the next industrial revolution, it will not be easy for a company to own every hardware and software component of a machine to machine interaction. If businesses want to achieve their goals and create innovative solutions to real world problems while keeping costs reasonable, they will have to learn how to be resourceful. Each business, just like the consumer today, will have to take a deep look at what assets they have to offer, and what of another company’s assets they will need in order to bring their vision to a reality. When you have two companies with the same vision and complementing products, that is when you will have a perfect IoT solution.
Corporate partnerships are already beginning to spike because the Internet of Things amongst larger businesses. IBM, Cisco, John Deere, GE, Intel , Salesforce, Microsoft and other tech and utility giants are joining forces to come up with joint solutions to expand the IoT universe. In September, Salesforce reached agreements with Microsoft and Cisco to utilize the Salesforce IoT Cloud engine to determine how Office 365 data should be used via its Azure Events Hub, and to monitor Cisco’s network to detect problems before they arise. The data points received are then connected to and analyzed by the Salesforce Marketing Cloud. Infosys has also recently partnered with GE to develop new IoT solutions to help manufacturers and industrial enterprises create efficiencies and more intelligent design, production and field testing, by analyzing the massive amounts of data generated through connected devices. Even Google has partnered with Levi’s to create clothing that links to your phone that allows you to ignore a call or change a song by swiping your jeans.
The IoT revolution is coming. Large tech companies like IBM and Cisco who are deep into machine learning understand this, and are building out large innovation programs to become leaders in the industry. These big companies also understand that collaboration is required at a very early stage in product development of IoT products, just like collaboration has become a large part of consumerism via the On Demand industry. IoT industry leaders also understand that the only way to achieve the end product they desire via collaboration is through partnerships with companies that are leaders in a complementing product vertical that they desire to get into. You will see more and more hardware companies partnering with software companies. More importantly with the rise of machine to machine interactions, you will see more hardware companies partnering with other complementing hardware companies. If IoT is the next revolution in technology, strategic partnerships are the next revolution in business. Large industry leaders are already recognizing this, and it’s time that startups start thinking the same way. Let’s talk about that another day.