I don’t think anyone doubts that we are in an era of disruptive innovation or that truly disruptive innovations are unlikely to come from corporates. They tend to have “innovation antibodies” that are born from the very factors that have made them successful in the first place:
- Internal processes that mean results are repeatable and reliable across the whole organization, but can lead to inflexibility and a culture of #notinthebook
- Legacy systems that underspin operational success. A byproduct of having been around a long time, the cost of retrofitting legacy systems in a retail bank has been estimated at $400 million
- Regulatory compliance requirements which are born to a certain extent from mass adoption and therefore part of the price paid for success
So, the perennial question corporates ask themselves is: Do we buy or do we build? The right answer (in so far as there is one) is that you do both. You build in areas in which you have core competencies and you buy in frontier or adjacent markets that can significantly add value to your existing portfolio.
For a Cisco or an ARM, it may or may not make sense to work with IoT startups to extend their product offering, although it does makes sense to work with them as potentially scalable customers.
For industry, however, the opposite may be true. Although many firms, from travel to betting, across a wide array of industries are at their core technology firms (for example, Goldman Sachs has 30,000 employees, 10,000 of which are developers), their expertise is narrow and directed at a specific application. Partnering with startups can help revive old business models by providing market differentiation from competitors. For example, Aviva is basing its marketing campaign in the U.K. on an app that tracks driving habits and rewards good or risk-reducing behavior. Manufacturers can move from product-based models to recurring revenue models that exploit cyber-physical opportunities. This is the model being pursued, rather polemically, by John Deere. In any real sense, ownership of the tractor is being transferred from the farmers to the company.
But there is another pressing reason why corporates need to work with IoT startups: Security.
As Bruce Schneier has said, “We no longer have things with computers embedded in them. We have computers with things attached to them.” Corporates need to understand the possible ways in which their products or processes could be hacked. The IoT Reaper botnet is infecting over 10,000 devices a day, with millions of IoT devices being queued for infection, according to Qihoo’s 360.
One of the best ways corporates can begin to understand what can affect their reputation and their business is by working with IoT startups. It’s an ecosystem approach that will not only help startups better understand how to build in security and resilience, but also help corporates better understand the chain of vulnerabilities.
Context: The above comments are based on our experience of working with 132 IoT startups with founders from countries such as the Ukraine to the U.K. Our equity-free program, part of Startup Europe, aimed to get them market-ready and to establish solid foundations for growth. Overall, 78% were B2B or B2B2C startups, and part of the acceleration program involved supporting them in the process of getting to their first pilots and/or contracts with corporates.
All IoT Agenda network contributors are responsible for the content and accuracy of their posts. Opinions are of the writers and do not necessarily convey the thoughts of IoT Agenda.