For years predictive maintenance has been touted as the killer app of IoT; that IoT and predictive analytics is the cure for inefficient machine maintenance and unplanned downtime; that we need industrial IoT to deliver zero-downtime (“ZDT”) and so on.

All that is true. However, new technologies enable us to do more than one simple thing. IoT can be used to:

1. Improve existing business operations
2. Create new offerings and new business models

Predictive maintenance falls in the first category. I will discuss the second category here, on how new business models can be constructed with IoT.

Business models require thinking through the consumption side of your offer (demand side — how it is bought and used) and the production side of the offer (supply-side — how it is created and delivered). We will look at both.

Changing the Consumption Model

We have evolved from buying a physical book to buying a digital book, to buying a subscription to read books, and finally getting that book read to us. All via a progression of Amazon →Kindle →Echo →Audible offerings. That progression took years of evolution.

How can we do the same in our industrial world? To do that, we need to think of the offer from the consumer’s lens (buyer, user, and operator).

Let us compare how we sell a robot product vs. how a robot is offered as a service. We can then generalize the building blocks of the consumption model for any product.

In scenario A, the customer owns the product outright, pays for maintenance to vendor yearly. In addition, they perform their own operations with their personnel.

In scenario B, robot is consumed as a service at a price per year for fixed subscription fee. (The numbers use a weighted average cost of capital, WACC, of 12% to arrive at the equivalent subscription price. The WACC varies by company.)

Thanks to IoT, we can measure the utilization of the robot and charge by utilization, going beyond a simple term subscription. E.g. We can charge by shiftfor a robot used for site-security.

We could have offered better maintenance for scenario A using IoT. That would not have leveraged the power of cloud-connected robots and wouldn’t have charged based on asset utilization. Nor would it have delivered flexible consumption models to customers.

IoT enables us to take a consumption-centric approach to creating new offerings because we can measure consumption.

Can we do this for any product? What are the mechanics of doing this?

Decoding the Dimensions of Consumption

To reimagine your offerings for a connected world, think about dimensions of consumption for your offer, any offer. All from the lens of those who consume the offer.

This picture illustrates the four dimensions:

The dimensions convey the following:

• Mode: How the end consumer or user gets your product: does it come in a package; does it come as a service on-demand; does it come digitally; is it delivered as audio etc. Recall how Kindle and Echo changed the way books are consumed or how cloud changed consumption of computing.
• Ownership: Whether customers chose to own your product or buy rights to use when needed. e.g. buy vs. lease or buy vs. as-a-service.
• Operations: Whether customers operated it themselves (“do-it-yourself”) or they get it done using some other party (“chauffer-driven”, vendor-managed, or partner-managed)
• Payment: Did they pay to use each time or subscribe to it for a term?

The simple variations of the M-O-O-P dimensions are as follows:

We can mix and match the red-blue tiles above and see how existing offerings in the market leverage these dimensions:

• Leased Car: Mode 1 (Packaged), Ownership 2 (leased for term), Operations 1 (you are driving it), Payment 2 (periodic payments over term). i.e. M1-O2-O1-P2 consumption pattern.
• Connected Robot (for predictive maintenance): M1-O1-O1-P1 pattern. Assumed capex spend and managed by the enterprise owner. As traditional a business model as you can get. Just like car you buy and drive around, it is a product purchase with self-maintenance.
• Lyft: M2-O2-O2-P1 consumption pattern. Service available on-demand. Consumers are charged per ride. At this level of abstraction, not that different from traditional taxi.
• Cloud computing: M2-O2-O2-P1 pattern. Assuming it’s pay-as-you-use pricing for Infrastructure-as-a-service (IaaS). A typical offering from AWS.
• Robot as a service: M2-O2-O2-P2 pattern. Robot on-demand, available as a subscription, priced by year just like a SaaS offer from Salesforce.

…and so on and so forth for any product you analyze. This pattern of transformation is an easy key to re-vector your offer to become consumption-friendly.

Flipping tiles above from red to blue changes the demand-side of your business.

We can drill down below each of the eight tiles above and create variations depending on your product or service. e.g. on-demand could mean consumption on-tap, by voice, click, or an API; transaction pricing could be per activity, per device, per API and so on.

Having looked at the demand side of the business model, let’s discuss the supply-side (production-side) of your business, to complete the business model picture.

Changing the Production-Model

How do you take a $100 robot that costs $20 per year to operate and turn it in to a $45 per year service for five years? There are two ways to deliver this offer to the customer:

1. The robot maker does the entire tile-flipping exercise from traditional product sale to creating the as-a-service offer, price, and delivery model. OR
2. GTM partners do some of the offer transformation across the M-O-O-P dimensions. e.g. a managed services partner can perform the operations, not the robot maker. (See this article on IoT GTM for details on channel strategy for IoT)

If you, as a maker, decide to deliver the whole offer or components of the offer you will need to configure your development and delivery. Several choices exist across:

1. Hardware development: Contract manufacturing to ODM (original design manufacturing) to white labelling choices.
2. Software development and operations (Dev through Ops): How much do you build inside vs. have partners build and operate for you?
3. Service delivery: What SLAs to offer? How to configure service delivery optimally across tiers of services?

All this can be done using a combination of resources inside your company and inbound ecosystem partners such as your OEM partners or outsourcing partners. Your cost structure and profitability depend on effective supply-side orchestration.

Summary: Killer Business Models, Not Killer Apps

Last week I came across a robotics startup that offers a site-security solution based on robots (like a monthly subscription to ADT or Brinks for home security in the US). It was a reminder that it is not killer apps that are coming, but killer business models and killer solutions.

IoT enables us to rethink our offers and business models, not just improve existing business operations. Time to go beyond predictive maintenance and reimagine our offerings with IoT. Time to flip some tiles!

Originally published at iotforall.com

The post How IoT Transforms Business Models appeared first on Hari Harikrishnan.

The convergence of IT and OT dramatically alters investing activities in corporate development.

We wake up routinely to the news of one acquisition or another. Most stories repeat the refrain, “Big fish bought little fish”. We hit snooze and move on. However, lately the world of technology acquisitions have become more interesting due to IoT.

Applying IT to OT (“operational technology”, loosely referring to industrial products and services sectors) in industries to modernize their offerings and operations has brought forth a new breed of big fish to the buyers’ table.

In Part I of this series, we focused on product strategy and how products need to be modernized for the digital age. In Part II, we looked at go-to-market strategy, how IoT products are sold and bought.

In Part III of this series on IoT = IT + OT, we will look at how players from the world of IT and the world of OT are fishing in the sea of acquisitions, ventures, and alliances and how that changes the corporate development outlook in companies.

This new dynamic has implications for you as a corporate development leader in IT or OT firms, as an entrepreneur, or even as an investment banker.

The Simple World of IT Acquisitions

First, let us look at the historical simple world of IT ventures and acquisitions.

We see acquisitions like the ones below often — a small software or hardware firm getting snapped up by an established IT player.

Examples above are API companies or other software companies acquired by Oracle, IBM, and Microsoft. Countless examples of this play out across all parts of the IT stack, from network-server-storage areas to middleware to apps, analytics, AI, and security. We all expect this: startups building horizontal (industry-agnostic) technology being acquired by large IT players.

Emergence of OT Ventures and Investors

Against the above historical backdrop, we’ve been seeing a new type of acquisition by large, vertical-specific OT players acquiring ventures focused on vertical industries.

A very small sampling of them below.

Unlike the IT startups, the shoal of fish on the left is focused on applying IT to specific vertical industry or operational domain problems. e.g. wise.io for service tickets, SAIPS on AI for vision, ThingWorx for industrial IoT etc.

Five years ago these ventures would have been acquired very predictably by traditional IT players. Now there is competition for investments and acquisitions from the OT players.

The New World

The graphic below shows both the historic IT and new OT dynamic together. Investors and acquirers from quadrants 1, in addition to 2 are scouring the venture landscape, establishing outposts in Silicon Valley and other startup hubs, influencing startup direction and deal flow early, and sometimes competing with VC firms for influence.

While the classic IT consumption by verticals from the traditional IT players continues (blue arrow), tech products all of a sudden find a new way to reach buyers directly through quadrant 1 vs. indirectly via quadrant 2.

Small Fish and Big Fish in IT and OT

Below is a generalization of the investment and acquisition patterns and players by quadrant.

1. Big OT: Players not in high-tech sector (e.g. industrial manufacturing, services etc.) or big ISVs that are part of their ecosystem
2. Big IT: Traditional tech players. Note: Excludes Google, Amazon etc. who don’t fit in a particular quadrant above, but span quadrants 1 and 2.
3. Small IT: Focuses on horizontal hardware/software problems that are not industry specific
4. Small OT: Small tech players focused on industry problems. (e.g. AI for health or autonomous cars). Their technology focus could be IT or OT, but their problem domain is industry-specific (e.g. SAIPS for navigational AI, Airware in drone technology)

Implications: The Calculus of It All

Whether you are an entrepreneur, VC, corporate development leader, or investment banker, the interplay across the players in these quadrants has become a key dynamic to watch in your day-job. For instance:

• Just as the supply of small technology firms have increased due to cloud, the potential investors for startups have increased as well. Mature buyers from the OT world are investing in and acquiring from small OT and small IT quadrants.
• Vertical integration across IT and OT is a threat for incumbent OT players (e.g. Google in transportation and robotics, Amazon in health services) and IT players.
• Innovators dilemma problems galore in the big IT quadrant 2. Collectively, they aren’t providing or are unable to provide verticalized solutions while busy trying to stave off cloud competitors. That’s a battle on two fronts simultaneously for big IT!

Note: Apple’s acquisition of Lattice Data is another wrinkle in this whole landscape, given the way a corporate acquisition bypassed traditional VC route altogether. Lattice could have exited to quadrant 1 or 2.

Summary — M&A and Venture Strategy

The new digital trajectory of OT affects the strategic investment considerations of a corporate development leader in OT or IT and the strategy of an entrepreneur as follows:

• Should you acquire for tech, talent, or new business?: This continues to be a perennial question that reverberates in the hallways. While the question itself has not changed, the actions from the answer is changing.
• Target Scouting and Classification: e.g. Is the target an artificial intelligence software provider or an AI software provider for health?
• Internal Alignment: How do you align the new target’s investments with internal business unit’s goals? Is the new technology enabling multiple internal businesses? How should it be structured and measured internally if acquired?
• Strategic Alliances: As a big IT player, how do I build alliances with OT players, especially those that acquire or create new IT components? Caution: Frenemies abound!
• Product and GTM Focus: As an entrepreneur, do I build a horizontal technology product or vertical industry solution? Is my GTM through an IT behemoth? Which channel partners do I need?

There you have it. The simplified view of the foraging and predatory habits of the various fish and its implications on corporate development.

It is an exciting marine world out there!

See other articles from this series on IoT = IT + OT:

• Part I: Product Strategy
• Part II: GTM Strategy

Originally published at iot-for-all.com

The post M&A and Venture Strategy: IoT = IT + OT appeared first on Hari Harikrishnan.

We can build the best camel there is.

But can we transport the camel to the right buyer? Do you have the right pallet for it? The right go-to-market (GTM) strategy is needed to ensure you have product-pallet fit to reach your buyers.

How your GTM adapts for a connected world is as important as reimagining your product strategy, as I covered in Part I of this series on IoT=IT+OT.

In this Part II, we’ll look at how these IoT offerings are sold and bought. We will start by looking at channel partner structure in IT and OT worlds and then show them side-by-side to see the almost bewildering impact on GTM strategy when IT meets OT.

GTM Partner Types

Regardless of whether your company plays in IT or OT, it’s important to take a look at the players in any GTM partner ecosystem before we complicate the discussion with IT+OT combo issues in GTM.

While the cloud has challenged traditional models for GTM, knowing the basic taxonomy and partner types is essential before you adapt them for IoT-Cloud. So, let’s look at that first. (If you are a purist, note that I’ll be using the words channel and partner interchangeably in this article to refer to GTM partners.)

For any product maker, whether IT or OT, the GTM ecosystem looks like this:

Key points to note from this value chain view:

• Maker to Buyer: Left to right is the commercial and operational pathway for products to get to the right customers.
• Direct, Indirect, Tier-1, Tier-2: GTM channel is split into direct vs. indirect and tier-1 vs. tier-2; Indirect splits into tier 1 or tier 2 if an intermediary like a distributor is involved.
• Other Makers: Makers may sell to other makers. This is an OEM/ISV channel (also referred to as technology partner). Know that each OEM/ISV has its own GTM ecosystem facing buyers and it mimics the original maker’s GTM channel structure.
• ISVs: As your offer becomes cloud-delivered and accessible programmatically (via APIs), you will need to foster a software vendor ecosystem that needs to either run on your products or use your products to integrate with other solutions.
• Service Partners: The players in green are service partners who provide consulting (business and technology), resale, integration, and operational support and management (e.g. Managed Service Providers, MSPs). A given player might have multiple services practices that comprise their overall business (e.g. integration and managed service).

You will see different firms use different ways to describe and categorize these partner types. For example, Amazon Web Services simply clubs all the service partners under “consulting partners” umbrella. Some others might call them solution providers and so on.

So be sure-footed when you develop your strategy and normalize the taxonomy for your business’s needs.

GTM for IT + OT

Having mapped out the generic ecosystem layout, let us now simply put the ecosystems for IT and OT makers side-by-side, for example, by pitting KUKA, the robot maker and Dell, the IT maker together.

For simplicity, I have collapsed the different GTM players inside the grey boxes rather than show every role from the prior graphic.

The picture suggests that IT Maker sells to IT buyer and OT Maker sells to OT buyer and the twain meets when IT and OT collides inside an organization to make the IT+OT solution work!

Intuitive? Perhaps. Sounds like a terrible idea? Of course, it is.

Such an approach will never get adopted or scaled for many reason:

1. It’s inefficient with so many B2B hand-off’s in the value-chain.
2. The onus to get the solution right falls on customer’s OT ops and IT ops.
3. Will you find enough KUKA-Dell talented people to make it all work?

Here lies the entire reason to rethink GTM strategy. You have to foster solution-thinking further upstream in the value chain. Not at the staging site of the customer. AND you have to foster collaboration across the value chain.

Selling scalable IoT solutions require collaboration across the value chain as well as up-front integration of the solution, long before it reaches the buyer.

The resulting picture looks like this:

It shows industry-level collaboration to create the right IoT solutions and take it to market.

Let’s be realistic too. It isn’t going to be all harmony all the way. While collaboration is essential, it will be forced on players in the value chain who are currently competitors, causing the dynamic that I call Frenemies and Knotted Value Chains. But eventually customer success will drive the right behavior.

Summary

I have barely scratched the surface of GTM strategy in the IoT world. We saw the complexity involved.

As we saw in Part I of this series, the product is changing to become consumption-centric. The offer evolution is pulling traditional channel deliverables like support, management, and integration to the cloud, towards the maker, as part of the consumption-friendly delivery of the product.

Consumption-centric offer evolution creates a horizontal pull of deliverables towards the maker and necessitates vertical skill integration between OT and IT partners.

We can see why most organizations struggle to navigate this transition to consumption-friendly IoT and orchestrating the IT+OT ecosystem. It requires changes on multiple fronts at the same time:

1. Consumption-centric offer
2. Subscription financial models
3. Channel orchestration
4. And direct and indirect channel incentives, just to name the top challenges.

Who said life is easy when IT meets OT? It’s simply is exciting.

In Part III of this series, we’ll look at how M&A and venture investing strategies change in a connected world.

Originally published at iot-for-all.com

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Many years ago, I used the phrase IoT = IT + OT as shorthand for how information and communication technologies (ICT) need to be integrated with operational technologies (OT), and how IT organizations and business operations teams need to work collaboratively in order to realize value from IoT.

It was a convenient oversimplification that summarized numerous aspects of our businesses that are impacted by IoT: how we build products, how we take them to market, how our business operations are run, and our M&A strategies for inorganic growth.

In this series, we’ll look at how the IoT equation (IT + OT = IoT)influences the following aspects of businesses:

1. Product Strategy
2. GTM Strategy
3. M&A Strategy

Part I of this series, this article, focuses on how products need to evolve to maximize the leverage from IoT and to be modernized for the digital age.

Core Attributes of Product Strategy

In the past, product strategies dealt with how we built products by integrating multiple technologies, both IT and industrial technologies.

Product design ideas spanned the spectrum of compute-embedded sensors in equipment, communications technologies integrated with equipment for remote management, integration of mechanical and medical devices with electronics, etc. However, a fundamental shift is afoot with IoT in how we conceive and build products for the future.

To innovate in a connected world, product strategy must be consumption-centric, not technology-centric.

Let me illustrate this shift using a technology-consumption framework below that shows different ways of buying and using products.

The picture categorizes various offerings as IT and non-IT products (top and bottom) and then as products or services (left to right) based on how they are consumed. For example:

• In the IT world, cloud changed the way we consume technology. Instead of buying technology products from quadrant 3, we buy cloud services from quadrant 2. This prefabrication of IT makes for easier consumption of technology.
• Elsewhere in the business world, we used to buy phones and computers to run our call centers (quadrant 4). Later we outsourced call centers to BPO firms. We shifted our consumption to quadrant 1 instead of consuming products from quadrant 4. Similar consumption change is occurring in other industries where products like a medical device or a robot can be offered as a service. This change in consumption mirrors the change in consumption preference (and associated delivery model needed) in the IT world.

Collectively, IoT and the Cloud are accelerating our ability to build new offerings that cater to different consumption preferences. In order to become consumption-centric rather than technology-centric in our product strategy, we need to rethink three aspects of our products:

• The mode of consuming the product
• The ownership and operations of the product
• The payment for consuming the product

Let’s look at each aspect of consumption in detail.

1. Mode of Product Consumption

An extreme example of a product that’s undergoing a consumption model transformation is the book. The paper-based book went from a physically shipped item to being delivered via a connected product either visually (on Kindle or smartphone) or via audio (Audible service and Amazon Echo). Advances in ICT allows new ways to deliver your product to your customers and change its form-factor while you’re at it.

While your connected industrial product or service may not all go through such an extreme changes in form-factor, it’s imperative to keep these possibilities in mind as you reimagine your products.

Product changes are not limited to adding a sensor here, a computer there, and providing an uplink to the cloud.

As we can see, connecting your existing product using IoT is a mere stepping stone in a progression. A progression that involves improving your operations, changing your business models, or delivering new offerings that use your existing products as a conduit, as illustrated by Amazon Echo.

2. Ownership and Operations

We have many choices on how to own and operate (manage) what we consume. For ownership, our choices are to own outright or buy rights-to-use. Then we get to decide if we want the asset to be managed by us (Do-It-Yourself) or managed by someone else (Get-It-Done).

This leaves us with four options shown below, using industrial equipment as an example.

Option 3 is a typical own and operate model. Option 1 is an “as-a-service” model for consuming industrial equipment like IaaS (Infrastructure-as-a-service) or SaaS (software-as-a-service).

IoT enables us to more readily offer equipment-as-a-service by incorporating remote management and always-on telemetry.

3. Payment for Product Consumption

How we pay for the things we consume hasn’t changed over the years. All of our monetization models for products or services can be mapped into these two types below — transactional or subscription based.

While the payment types have not changed, combining these payment types with new modes of operations and ownership, and new modes of delivery changes your business model.

Summary

Internet of Things is partly about value creation, using the ability to communicate and control things over connections and automating how we get work done. Products with embedded intelligence talking to the cloud bring the power of remote control to everyday things, much like the iPhone and iCloud has done.

All this requires information technology (IT) to be embedded in our business systems that let us operate our businesses. In other words, it is operational technologies (OT) with IT inside. Ergo, IT + OT = IoT in a technological sense.

However, when we consider the three attributes of product strategy — mode, operations, and payment for consumption — we aren’t just making our product a simple integration of IT and OT, but we are transforming our business model by becoming consumption-centric. That is the true power of the IoT Equation, IT + OT = IoT.

In Part II of this series, we’ll look at how Go-to-Market strategies change in a connected world.

Originally published at iot-for-all.com

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For years we have been hearing about the virtues of IoT and specifically how Industrial IoT (IIoT) is the cure for inefficient machine maintenance and unplanned downtime. While all that is true, if zero-downtime (“ZDT”) was such a pain, why aren’t we all rushing to get connected and drive maintenance costs down and uptime up? Granted, quite a few of us have been doing it. But really, is that all we can come up with when we connect industrial machines pervasively and do fabulous data processing from cloud to edge and everywhere in between? Plain-old maintenance?

If connectivity to improve existing business operations is the sole purpose of IIoT, aren’t we quietly suffocating inside the dilemma-filled innovator’s basement? Can we reimagine the killer app or the killer product? Luckily, we can. All we need to do is take a consumption-centric view of product strategy.

IoT enables us to take a consumption-centric view to creating new offerings

Consumption-centric Product Strategy

Historically we built products with a technology-centric view. For example, in the IoT world it amounted to thinking about how to integrate sensors and computers in our largely electromechanical products; how to connect them with the plethora of communication mechanisms available to us (3G, LoRa…); how data was exchanged etc. All that is needed. But that is still thinking of the offer from a technology-centric lens, not a consumption-centric lens. Kindle did it.

IoT Killer App and Kindle

Kindle didn’t subject us to worrying about connectivity, subscription to a wireless plan, or maintenance. Buy a digital book, read it, or buy a subscription and keep reading. Simple enough, but how shall we do it in our industrial world?

There are two ways to reimagine your connected products in a consumption-centric manner: 1) Change the consumption model of your existing product OR 2) Offer a new product or service via your connected product

The former is like offering a robot-as-a-service instead of selling a robot outright. The latter is like selling site-security for a warehouse and using robots to deliver it, or like delivering a book over a Kindle. Kindle isn’t the IoT product. It is a mere delivery mechanism.

Reimagining Offers: Dimensions of Consumption

To reimagine your offerings for a connected world, think about these dimensions of consumption for your offer, any offer. The following graphic illustrates this:

The dimensions convey the following:

• Mode: How the end consumer or user gets your product: it comes in a package, comes as a service on-demand, comes digitally, delivered as audio etc.
• Ownership: Whether they chose to own your product or buy rights to use when needed. e.g. lease vs. buy
• Operations: Whether they operated it themselves (“self-driven”) or had someone else operate it for them (“chauffer-driven” or vendor-managed vs. self-managed)
• Payment: Did they pay to use each time or subscribe to it?

The simple variations under M-O-O-P dimensions are shown below:

Let’s mix and match the above and see how existing offerings in the market use these dimensions:

• Leased Car: Mode 1 (Packaged), Ownership 2 (leased for term), Operations 1 (you are driving it), Payment 2 (periodic payments over term). i.e. M1-O2-O1-P2 consumption pattern.
• Lyft (since it is politically incorrect to use Uber as example these days): M2-O2-O2-P1 consumption pattern.
• Connected Robot for Zero Down Time: M1-O1-O1-P1 pattern. Assumed capex spend and managed by the enterprise owner. As ho-hum as you can get. No killer app here! (I suppose the robot can’t be a killer app, lest it violates the laws of robotics.)
• Cloud computing: M2-O2-O2-P1 pattern. Assuming it’s pay-as-you-use pricing for Infrastructure-as-a-service (IaaS).

…and so on and so forth for any product you analyze. This pattern of transformation is an easy key to re-vector your business model.

Killer Business Models, Not Killer Apps

Last week I came across a robotics startup that offers a site-security solution based on robots (like a monthly subscription to ADT or Brinks for home security in the US). So it’s not killer apps that are coming, but killer business models and killer solutions.

Shouldn’t we at least march towards making our products more consumption-centric, if not start delivering new services on top of our existing products? Isn’t it time to get beyond the predictive-analytics-for-maintenance cliché and reimagine our offerings before someone else beats us to it? Thoughts?

— —

Visit TheCerebrus.com for more discussion on IoT and Digitization where we provide nuggets from our think tank. © The Cerebrus Group. All Rights Reserved.

Originally published at The Cerebrus Group.

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We wake up routinely to the news of one acquisition or another. Most stories repeat the refrain, “Big fish bought little fish”. We hit snooze and move on. Lately though, the world of IT acquisitions have gotten more interesting, in part due to digitization. Applying information technology by industries to modernize their offerings and operations has brought forth a new breed of big fish to the buyers’ table.

Here is a look at how players from the world of IT and the world of OT (“operational technology”, loosely referring to industrial products and services sectors) are fishing in the venture landscape for investments and acquisitions. This has implications for you whether you are an entrepreneur, a venture investor, a corporate venture / M&A leader, or an investment banker.

The Simple World of IT acquisitions

We see acquisitions like the ones below often — a small software or hardware firm getting snapped up by an established IT player.

Countless examples of this play out across all parts of the IT stack, from network-server-storage areas to middleware to apps, data, and security. We all expect this: startups building horizontal (industry-agnostic) technology being acquired by large IT players.

Emergence of New Acquirers

Against the above historical backdrop, we’ve been seeing this new type of acquisitions by vertical-specific large and mega players. A very small sampling of them below.

The school of fish on the left is focused on applying IT to specific vertical industry or operational domain problems. e.g. wise.io for service tickets, SAIPS on AI for vision, ThingWorx for industrial IoT etc. Five years ago these ventures would still have been acquired by traditional IT players. Now there is competition for acquisitions from the industrial sectors.

The New World

The graphic below shows both the historic and new dynamic in perspective. Acquirers from quadrants 1, in addition to 2 are scouring the venture landscape, establishing outposts in Silicon Valley and other startup hubs, influencing startup direction and deal flow early, and competing with VC firms for control.

While the classic IT consumption by verticals from the traditional IT players continues (blue arrow), tech products all of a sudden find a new way to reach buyers directly through quadrant 1 vs. indirectly via quadrant 2.

Taxonomy: Small Fish and the Big Fish

Below is a generalization of the acquisition patterns and players by quadrant.

1. Big OT: Players not in high-tech sector (e.g. industrial manufacturing, services etc.) or part of their ecosystem
2. Big IT: Traditional tech players. Excludes Google, Amazon etc. who don’t fit in a particular quadrant here, but span quadrants 1 and 2.
3. Small IT: Focuses on horizontal hardware/software problems that are not industry specific
4. Small OT: Small tech players focused on industry problems. (e.g. AI for health or autonomous cars). Their technology focus could be IT or OT, but their problem domain is industry-specific (e.g. SAIPS for navigational AI, Airware in drone technology)

The Calculus of It All

Whether you are an entrepreneur, VC, corporate venture portfolio manager, or investment banker, the interplay across the players in these quadrants has become a key consideration in your day-job. For instance:

• Just as the supply of small technology firms have increased due to cloud, the potential suitors for startups have increased as well. Mature buyers from the OT world are investing in and acquiring from small OT and small IT quadrants.
• Vertical integration across IT and OT is a threat for incumbent OT players (e.g. Google in transportation and robotics, Amazon in health services) and IT players.
• Innovators dilemma problems galore in the big IT quadrant 2. Collectively, they aren’t providing or are unable to provide verticalized solutions while busy trying to stave off cloud competitors. That’s a battle on two fronts simultaneously!

Note: Apple’s acquisition of Lattice Data is another wrinkle in this whole landscape, given the way a corporate acquisition bypassed traditional VC route altogether. Lattice could have exited in quadrant 1 or 2.

The new digital trajectory of venture funding and acquisitions affects many aspects of a venture world such as:

• Product positioning: Are you simply an artificial intelligence software provider or an AI software provider for health?
• GTM: Who exactly is your buyer or channel to the end customer? Is your channel partner a vertical-specific solution provider or an IT solutions provider?
• Funding sources: Can you raise capital from traditional VC firms, corporate ventures in OT, corporate ventures in IT, or even Government?
• Potential exits: Are your suitors in the OT or IT world?

There you have it. The simplified view of the foraging and predatory habits of the various fish and its implications. It’s an exciting marine world out there!

Originally published at The Cerebrus Group.

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You are at 30,000 feet and cruising. You are comfortably seated and enjoying your movie and a drink. You are not breaking sweat over the autopilot navigating your plane. Later, you are on the ground. You are driving. The car’s autopilot grabs control. You feel a loss of control. Elsewhere in our digital world, control is shifting in many different ways. Sometimes we welcome it. Sometimes it upsets us. In all cases it shifts power. Whether you like it or not, this shift in power could upstage your businesses if you don’t manage it carefully.

Here are the five ways technology is enabling the shifting of control, in their order of complexity:

1. Ground to Cloud
2. Distributed to Centralized
3. Cloud to Edge
4. Companies to Ecosystems
5. Human to Machine

I’ll go through each one. The first four build on the previous and hence a superset of the prior case.

Control Shift: Ground to Cloud

Nearly forgotten are our Garmin and Magellan GPSs with their friendly (or annoying) voices directing our movement. Since those days, we have delegated control to a more intelligent voice from the cloud. The poor car GPS businesses have bitten the dust. Control shifted as a result of technology and it could happen to your business.

Axiom: If something can be controlled from the cloud, it will be and it should be.

Control Shift: Distributed to Centralized

This shift is similar to the previous, but is not limited to the cloud. In the telecom and networking world, control has been shifting for decades. It had been couched as “software-defined”. Distributed network decisions got centralized. In the networking and telecom world, they say, “control plane is separated from the data plane”. Once separated, the control can be on the ground or in the cloud. Meraki Networks that Cisco acquired is a good example of this shift and demonstrates the threat this poses to incumbents in any industry. More on this topic here (SDN and Biology).

If control shift happens to complex telephone networks and the internet, it will happen to your robots business or your land mower business.

If you think this happens only in some geeky telecom space, think again. The Meraki founders are repeating their cloud-controlled magic. This time in industrial IoT. Take a look at their new venture Samsara.

Control Shift: Cloud to Edge

In the world of industrial automation, control is shifting. No longer is your robot or drone some standalone endpoint. It is connected. It is getting connected to a central place, likely in the cloud. From the cloud you can orchestrate drones and droids to get work done, like surveillance and security. This is shown below on the left. But there is more…

When the volume of such endpoints grow or you deploy them to mission-critical needs, you will need to shift control to the edges of your business as shown on the right and as described here (Proximity Computing: Edgy, Edgier, Edgiest). This has huge technology and business implications for you, threats and opportunities to innovate.

Control-Shift: Company to Ecosystem

This is the Mother of All Control Shifts (MOACS?). It encompasses all the previous scenarios in to one macro shift of control. You digitized the human dispatcher. You orchestrated the ecosystem and then you are snipping away at the remaining humans with automation. More on this digital transition here (Uber and the Digitization of Louis De Palma).

Mock this MOACS (Mother of All Control Shifts) at your peril. If you do, you might find yourself dis-intermediated by the digital value chain.

Control-Shift: Human to Machine

This is the most sensitive topic all around this decade. While this is just a microcosm of the prior scenarios, it hits close to home. It features in broader socio-economic policy conversations and hence complex. However, scenarios to worry about for your business won’t be this “Look Ma, No Hands” microscopic scenario, but the ones above. This shift will be subsumed by the prior four scenarios of shifting control.

Control shifts enabled by technology will result in profound power shifts across the value chain regardless of industry or technology. Control shifts go hand-in-hand with considerations of autonomy. How you adapt to it and leverage it in your business will determine your success. If you don’t, your control over your business will be fleeting! (Yes, pun intended.)

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In a world where multiple service providers manage us — the live, mobile, active, end point — historical notions of truck rolls and demarcation lines are no longer valid.

Truck Rolls in Digital Health Care

One of the key considerations in a utility service is avoidance of truck rolls. Imagine your cable provider sending technicians out at the whiff of a set-top box problem without doing remote troubleshooting. That’d be enormously expensive. Over decades, much effort was spent to reduce truck rolls. Similarly, doctors making house calls became a rarity over the last thirty years (even though it is making a come back due to aging population).

By the same logic, patients driving to hospitals for avoidable visits or re-admissions is a huge cost on the healthcare system, not to mention all that avoidable driving. Remote monitoring of the patient can reduce this “reverse truck roll” to cut down the cost of care.

In short, truck roll reduction, whether to the customer premise or to the service provider, is a cost to be minimized — whether you are remotely managing a device or a human.

Shifting Demarcation Line: Close to Heart

I get notices from my water utility periodically, advising me that if the water line breaks past the distribution point to my home, I am responsible for repairs. My phone company used to charge for “inside wiring maintenance”. My electricity provider simply assumes I’ll get an electrician to fix an issue inside the home. Historically, the demarcation line between the provider and the consumer has been a spoken or sometimes unspoken line of control. The line established who was responsible for repairs and maintenance beyond a set boundary.

We know that a smartphone changed that demarcation. Demarcation is virtual and inside the phone, with separate management of partitioned portions of the phone’s functionality. The same is true for remote patient management. The service provider who monitors our heart is not the one who monitors our hip in recovery, or the one who monitors our general health and nutrition.

The demarcation line for a managed human is virtually inside us.

Digitizing health care delivery fundamentally changes the way a managed service or a utility service is offered. The common service attributes such as number of providers managing a device, truck rolls, and demarcation lines exist, but the boundaries of each attribute is pushed beyond what a utility service used to have when water was distributed to homes. That is a sea change. Lessons from managing a smartphone will surely come handy as providers and device makers wrestle with this change.

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Have you been in meetings where someone lets out phrases such as, “we need to cater to new consumption models”, or “we need to evolve our business model”? I am sure you have. So have I. Absent business context, the word consumption evokes a sense of dread if one knew that in the early 20th century, it referred to Tuberculosis and a person’s health wasting away!

Over the years, here’s how I have come to terms with consumption models, breaking down the consumption model in to Mode-Ownership-Payment:

Consumption model can be broken down into three parts: mode of consumption, ownership and operation of what is consumed, and payment method for what is consumed.

M: Mode of Consumption

Mode relates to the precise mechanics of how we consume anything. As technologies have evolved, the means to create and distribute products have evolved as well. As a result, mode is the most important part of the consumption model. Ownership and payment follow the consumption mode and haven’t fundamentally changed as we’ll see below.

Here is how consumption of water and books have evolved.

Water went from “Dig It Yourself” (DIY) to packaged to on-tap. Books went from physical to digital-readable to digital-audible in form-factor and delivery. Clearly these are dramatic changes in the mode of consuming the same thing.

O: Ownership and Operations of the Consumable

We have many choices on how to own and operate (manage) what we consume. For ownership, our choices are to own outright (“asset-heavy”) or buy rights-to-use (“asset-light”). Then we get to decide if we want the asset to be managed by us (Do-It-Yourself) or someone else (Get-It-Done). This leaves us with four options shown below using transportation by cars as an example.

The same four applies whether you are dealing with software/SaaS or other consumables. Even though the combination of ownership and operations looks tricky, there is nothing new here when we look at the ‘O’ aspect of consumption model in isolation.

P: Payment for Consumption

How we pay for the things we consume have not changed either over the years. All of our monetization models for products or services can be mapped in to these two types below.

Trio of Consumption

In short, the mode of consumption together with the ownership and operation of the consumable and its payment type makes up the consumption model

From consumption model, it is easy to parse the accompanying delivery model and the business models. No rocket science there. Next time you hear consumption, just ask if the speaker means Dig-It-Yourself, packaged, or on-tap, and in what 21st century form-factor. No more wondering if we are talking about a disease. Just MOP it!

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The utilization of submarine dark fiber is increasing. So is the capacity investments to connect data centers within a continent. In all the hoopla about cloud, cool gadgets, anytime-anywhere-content, and digitization of industries, there are unsung heroes. These heroes take the form of perceived old business players. They lack the swagger and the adulation that the cloud-gadget-content firms get.

These are the unsung heroes of the digital economy: the network providers, the co-location providers, and the power & cooling vendors for massive data centers.

This is the full picture of how these heroes come together to enable industry-level digitization.

Left to right is the value chain from technology enablers to technology providers to technology consumers.

Of course, I have just shown a few players in each category to illustrate the type of players, not the entire who’s-who.

Unsung Heroes

So who wants to hear about power and cooling? What does it take to cool a cabinet that consumes 400W? What about 42 Rack Units? Cooling isn’t cool, but today’s densely packed data centers owe their efficiencies to how well they are powered and kept cool.

Location, location, location, they say is key. But co-location providers from wholesale to retail don’t get as many songs of praise as Apple’s multi-football-field-sized data centers. If they didn’t optimize the space and the information highways that connect those spaces, we wouldn’t have high-density, responsive cloud computing.

Connectivity providers interconnecting data centers or continents used to be cool in the ’90s when the internet build-out boomed. Now they are just the pipes that we can’t virtualize fast enough so that cloud services can be provisioned quickly. Undersea cables? How cool can they be! Dark fiber? Is that a Star Wars character? Nope, lighting up all that fiber and connecting devices that form Industry 4.0 is in progress.

Well-sung Heroes

So much has been sung about them that I won’t sing more about them.

To-be Heroes

What is the point of all that cool and un-cool technology if mainstream industries can’t put them to use? Good news is that they are accelerating the application of IT in their offerings, from industrial manufacturing behemoths, to pharmaceuticals, to healthcare providers and financial service firms.

The heroes in classic industries will find ways to apply technology to improve their products and services, not just their back-office operations.

When integration of IT in to industrial products and services becomes so common-place and we don’t even realize that IT is powering them, we’d have a digital story to sing and dance about. I want to stream that story!

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