Accelerating the
Industrial Internet of Things

EP018: Evolving Innovation in IIoT - An Interview with The Kerton Group's Derek Kerton

Published on 12/06/2017 | IoT Index

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IoT ONE

Accelerating the Adoption of Industrial Internet of Things.

IoT GUIDE

This is an episode of the "Ventures in Industrial IoT" series brought to you by GE Ventures. In the series we explore success factors and challenges in Industrial IoT markets with CEOs, investors and experts. 

IoT Spotlight Podcast introduction:

The IIoT Spotlight Podcast shines a light on Industrial IoT solutions that are impacting businesses today. Every episode we interview an expert about a specific IoT use case. Our goal is to provide insight into the planning and implementation of IIoT systems, from new business models to technology architecture selection to data ownership and security. The IIoT Spotlight is produced by IoT ONE, an information platform that provides market insight, partner development, and go-to-market support for technology providers, end users, and investors. Don't forget to follow us on twitter. You can contact me directly at erik.walenza@iotone.com.

Summary:

One of the biggest challenges still standng in the way of mass adoption of Industrial IoT solutions are the knowledge gaps that exist in the ecosystem. Bridging these gaps is a monumental task due to the mere complexity of the technology and the unconventional supply chains that drive the Industrial IoT market.

In the third installment of the "Ventures in Industrial IoT series" brought to you by GE Ventures, we are pleased to have Derek Kerton, Managing Director of the Kerton Group with us to discuss how end users can still drive innovation despite of the very challenging prevailing market conditions. 

Learn more about The Kerton Group: http://www.kertongroup.com/

Learn more about GE Ventures: https://www.geventures.com/

Podcast Links: ​

Libsyn: http://directory.libsyn.com/episode/index/id/6024422

iTunes:  https://itunes.apple.com/us/podcast/industrial-iot-spotlight/id1228185407?mt=2​ ​

Speaker bio: 

Derek Kerton is a man who wears many hats. He is the managing director and principal analyst of The Kerton Group. He is also the founder and chairman of the Telecom Council of Silicon Valley as well as the chairman of Auto Tech Council. In addition, Derek is an advisor on both RCR Wireless News and Makesbridge Technology. 

He is working hard to drive innovation in the Industrial IoT space by creating opportunities for ecosystem partners to network and share information that addresses some of the inherent knowledge gaps that exist in this very complex market. 

Company Overview:

Strategy, Insight and Analysis for Next Generation Telecom…

The Kerton Group is built by mobile and telecom industry experts with a razor-sharp focus on innovation. Our analysis covers market strategy, trends and innovation across the communications industry. Their internationally recognized telecom experts have extensive knowledge and deep, vertical experience in advanced telecom that allows us to fully understand technology, market, product, and business issues for our global clientele.

With success in every aspect of the wireless value chain - from consumer to enterprise, content to applications, mobile devices to wireless infrastructure, and short-range to wide-area technologies, The Kerton Group is renowned in the industry.

Blurbs:

"[Silicon Valley] is too tech-savvy in the sense that often we build products that only we would like."

"That beautiful insulation [from the end users on the ground] is one of the biggest problems that Silicon Valley can have."

"In the IoT ecosystem it is not so much a supply chain as it is a web if you want to assemble a solution."

"You have to be cobbling together different solution providers to get the solution you want. And because of that complexity it stunts the adoption of the market."

Podcast Transcipt:

[00:15:56]

Welcome back to the industrial IoT spotlight. I'm joined today by Derek Kerton. Derek is founder of IoT forum.

[00:16:03]

He is also in wearing multiple hats so Derek is also the managing director and principal analyst of the Kerton group. He's the founder and chairman of Telecom Council of Silicon Valley as well as the founder and chairman of Auto Tech Council. And Derek is also an adviser on both RCR Wireless News and Makesbridge Technology Derek. The topic today is open ecosystems to support innovation in industrial IoT. From your background you are the right man to be talking to. Before we dive into the topic can you give a quick overview of yourself and in particular your role in these organizations and the background for why you decided to found these organizations and the value that they've created for you and then for the companies that participate.

[00:16:56]

A loaded question Well thank you Erik. Good to be here and thanks for the opportunity. First of all I guess what we do here at those organizations you mentioned Telecom Council, Autotech Council, the IoT forum being my three main areas of focus. We try to build communities in Silicon Valley where we source local innovators and entrepreneurs and start ups and we kind of give a light screening to them. We find good ideas as they're forming and then we take them to the big players in those different marketplaces. So if were the you know idea in the automotive space we have a variety of members out of Tech Council like carmakers Ford Mitsubishi Toyota Nissan Peugeot things like that. And we talk to them good ideas in the automotive space. Same thing in the telecom space where the larger companies the network operators the Ericssons Nokia's Orange France Telecom British Telecom Docomo you name it we try to find innovations in Silicon Valley in California and bring them up more quickly. Our ambitions are to help these these companies with large and small foster an ecosystem where innovation can reach the customer faster and of bring the future and the benefits of the future to us move more quickly. So we do that in those areas and of course lately we've been doing it in the IoT space and the ambitions are very similar. How do we get innovations out to the marketplace as quickly as possible.

[00:18:18]

Okay great. And maybe then focusing on IoT forum how does this work in practice. The concept makes perfect sense. I think practice much more complicated to effectively bring these companies together.

[00:18:32]

Right. And so you know a lot of organizations that claim to do stuff like we do do it in a variety of different ways and some of them are more successful and some of them less so. What we tend to do is kind of an age old technology. It's basically mashing people together so we want to do is get the right people in the room and then make it a dynamic in that room that gives him a reason to connect engage you know shake hands literally face to face as humans and then maybe proceed onto the next level. The format and structure therefore is we call the meetings but other people might see that there is a mini conference. But think of a mini conference or a meeting of perhaps 100 people and those people have all been focused along topic lines so if it's an IoT that's great that's a little bit of a narrowing of Silicon Valley down to the IoT people in the space but then we might take it a level further and say today we're talking about agriculture IoT and so people specifically interested in that narrow sector would show up for that meeting. So already having the people up and down the peninsula here in California and other Bay Area say while actually relevant to me I'm going to go to that meeting. Now the people in the room are interesting. There are startups who have solutions that they want to sell into the marketplace and they are buyers who are active in agricultural and the farmers and farm groups and cooperatives who are looking for interesting technologies and those spaces and then we also have a host of middleware providers is great where we can provide analytics on top and then will have some hardware people so I want to come there because I have some hardware some sensors for ground moisture. So it will come into the room. They have been filtered by the content by the topic and we use our pretty big mail list to kind of get the word out that the meeting is happening. Once those 100 people in the room. This is not a huge meeting. I know it's a small meeting with the people are encouraged to kind of meet everybody there that day. Then we have your typical conference has people go up and do a 45 minute presentation and explain what they're showing. We like to compress that people here in California pretty rushed up the bay area. And also we want to do is want to let people explain what they do and then get off the stage and go start networking. So our presentations are very short between seven and 10 minutes in our conference and the great thing is if you are interested in what the present company is saying so maybe a startup is showing their new sensor that as mentioned sensors ground moisture for agricultural use you're interested. Great you going that when that guy walks off the stage during break you're going to exchange business cards and arrange a follow up if you're not interested. While you last seven minutes we're onto the next one. So that's the method of engagement long breaks in encouraging people to network during those breaks and giving the startups the opportunity to go up and kind of do the seven minutes. So it's not like a random networking thing where you have to work the room you're going to go up and get your brief window of time pitch which you have. And then anybody who's interested in connecting with that because that sensor is of interest to them will will join you at the break. And of course we also do as an organization we try to make sure if people say hey were that guy go walk people around the room and help them find that person. And if after the fact they say listen I met everybody needed except for that one guy from that soil moisture sensor we'll help people connect after the fact is what was the essence of what we try to do is make those connections happen for the next follow up meeting. So we deliver everything up to that first significant one hour meeting what we expect and what does happen after we provide kind of our engagement room we provide is those companies that are interested to have those when our follow up meetings in a number of cases they actually follow on to have business relationships and contracts.

[00:21:59]

Great so far you're in a very savvy part of the world a very tech savvy part of the world I imagine even you know farmers are going to be quite comfortable.

[00:22:07]

I can see it's too tech-savvy of course to go out so many. I mean that is a serious way it's too tech-savvy in the sense that often we build products that only we would like. But go on. 

[00:22:21]

One you know I'm based in Shanghai and also an interesting part of the world. But if I try to explain you know an IoT solution to a farmer there's going to be a significant understanding gap. To what extent are you wrestling with this and how do you how do you address this. How do you address the fact a lot of the technology that's coming to market is very complex. It's not only the root technology but it might also be looping in six or seven different technologies together into a systems also complex from a system perspective and then you have end users who are very traditional businesses. You play a role in this or do you expect the vendors to basically figure out how to present their value?

[00:23:01]

So sticking with I'm beautifully insulated from the fact that the farmers don't actually know anything about what's being built for them and they have to focus on their farming. We're nicely upstream where I'm connecting these technologists with these big companies that want to sell solutions to farmers and that beautiful insulation is one of the biggest problems that Silicon Valley can have. So we try to avoid getting into a mindset of let somebody else worry about that. And in fact we try to communicate that throughout our membership as part of the discourse at our meetings whenever we have them is we need to be thinking about selling through to the end customer. It's not enough for Silicon Valley. I mean I said this We're in a very tech-savvy place and that's one of our curses as you're asking the question we can keep building these products that maybe are great but if you can't communicate the greatness to the end user the product will fail and then what's the global impact. What's the innovation impact on the world of products that were great but didn't go anywhere. It's still zilch doesn't matter how great it was in theory. So we we like to step back and not just be you know relish our insulation that I don't actually sit down and talk to farmers very often. I do need to think about those different markets. And so in my organizations what we try to do is actually as I said bring a farm in cooperative or or a large agribusiness to some of our meetings to say here's what agribusiness wants and make sure that Silicon Valley is communicate directly with that end customer. Now to be fair it's pretty hard to get the actual end user in the room here in Silicon Valley. It's why I mentioned farming cooperatives. And I mentioned agribusinesses you know when you talk about a small independent farmer he's not flying up to Silicon Valley or Chicago or you know at New York City or anywhere there's a big conference to talk farm tech you know where is he getting his technology. He's getting it from local vendors and that's why when we do talk to the farmers we talk to cooperatives because they're larger they do have innovation officers and things like that that are out looking for them with technologies and these will be kind of where the technologies first landed hit the ground but so you really you've touched on one of the bigger challenges in IoT that we're noticing when we contrast it to the other markets will work unlike telecom and automotive. And that is the nature of the supply chain and IoT. So I want to shift I think that was my answer to that question we need to be very conscious of the end-user but it's tough to get them to get on a plane and come to a conference to learn the latest tech. Realistically it doesn't happen. So how do you get the message out that you need to sell them.

[00:25:40]

 I see what you get into it I think was going to be my next question which is looking more generally at the supply chain than you know again if we look at this also as a global ecosystem where you might have sensors and a lot of the hardware being produced out of southern China you have a lot of the software coming out of Silicon Valley. You have a lot of the the intermediaries maybe in the Midwest and this supply chain is it's complex and it's very immature right.

[00:26:07]

So I think one of the reasons I stumbled back there because we're mixing two very important topics. One is how do you communicate with the ultimate end user and that's a big thing. Honestly they haven't got the answer for but I'll share some thoughts later. But the one you're touching on that I do think I can open right now and deal with is how complex the ecosystem is here for business. And if I compare that to existing systems like the automotive industry and if you're a customer you want to go buy a car you know where to go. You go to a car dealer and you buy your car. So let's just use Ford as an example and go to a Ford dealership because that's what you want. Pick up a mustang. They're going to go where did the dealer get the car. Well the dealer knows where to go. They look upstream. It's Ford Motor Company. So they have an arrangement with Ford as a franchise operator buy the cars from there. Where did Ford get the car. Well they're car makers so they're finally know they assemble them and they're the ones that sell them slap the brand on it. But it turns out they get the parts for a variety of Tier 1 and Tier 2 automotive suppliers and they know who those suppliers are and they work with them on a regular basis. And then the parts and sensors that go into those elements while the Tier 1 and Tier 2 suppliers also have their suppliers and their raw materials being steel chemicals things like that everybody up this value chain it's kind of linear. Everybody knows where to look up the chain and where to look down the chain. Now let's translate that and say Hey does that work in the IoT IoT is pretty new fields or it's not really hashed out like that. It's not really that simple. And then also the additional from it. Now I don't think it ever will be because in IoT ecosystem it is not the supply chain is very much a web where if you want to assemble solution if you're a customer you're Farmer say I want to know I want to make my a smart farm we're going to have to do well. There's a variety of hardware like sensors you're going have to buy from somewhere you're gonna have to get a services provider who maybe can install this for you will provide your analytics computer systems to make sense of the data that's coming off of that you might want to go to another vendor like a John Deere to buy equipment to leverage that information. And all these things have to be integrated together. But you might say I'm not a John Deere user I actually use Mitsubishi tractor. Okay so they got a different provider but you don't want to use the same smart solutions providers you have. You got start to have this problem where you know you are. You have to be cobbling together different solution providers to get the solution you want. And because of that complexity it stunts the adoption of the market. If there's not a simple adoption process for the average user the average farmer they're going to look at this and say this is too complex. I'll just stick with doing nothing for now until it gets simpler. So that's the nature of what we have this complex web where you can pick different solutions from all kinds of different people taking it back to the car thing one more time. If you buy a Ford car you don't really choose your radio. You get the radio that car that Ford provides you know you get the tires that Ford originally provides. You can obviously change those. But what you're buying is the solution that Ford provided but if you want to build an IoT solution usually you have to pick all those different pieces and assemble them yourself. That's the situation we're in today in 2017. Now how do we solve that make life easier for the customers. Is one of the major questions that we face in the whole IoT ecosystem if we don't make the solutions easier to implement and simpler to make the choices people are going to get scared off and do nothing for a while. Only the most ambitious companies will start deploying IoT and that's kind of who's doing it right now. I was at a conference where I talked about some of these subjects and I got a question from a guy who's in the plumbing industry. Turns out he's actually private equity guy. He's buying a bunch of different plumbers and he's putting together and cleanse what's around them in a metropolitan area and have a lot of different plumbers under one brand. It's just call it a one. Plumbing first in the phone book and things like that. He's saying OK as I as I aggregate these different small plumbers into one business I want to leverage technologies that make this organization more efficient and IoT seems like a pretty good technology. I've heard people talk about connecting each one of these plumbers vans having an inventory of which parts are in each of the van as part of the system so that story is one plumber will go to repair a customer's problem and their house and say oh I don't have the part I need. Let me just launch into the system and the system will tell him hey you know the closest part is in Frank's van five miles away. Frankest 30 minutes from finishing his job you know. Do you wait for Frank or you drive to Frank's standing at the park. Or do you drive 30 miles to the warehouse and because you can now go five miles to get the part of the Franks and then return to your job. There is an efficiency achieved by that plumbing. So this VC private equity guy who has learned about what he could do for says That sounds great. How do I do it. I haven't got a clue where to start. Instead I've come to this conference. I've met dozens of people and I feel like I'm further away from knowing where to start than before I got here. Basically he's blinded by the options. You look you can use any of these 100 different sensor companies any of these 30 different vehicle tracking solutions any of these you know 30 different sales force automation and analytics platforms and inventorying platforms and you can use these 10 different system integrators and AT&T wants to talk to you about connectivity solutions but so does T-Mobile and Verizon and Sprint and also some MVNOs like Erris want to talk about connectivity for advanced it goes on and on and on. So this guy who was keen on the subject went to a conference and based as I said grew more and more confused and more and more reticent to launch into any effort because it's the way he would have. Has the paradox of choice where there's so many choices that he'll feel like any choice he makes is bound to be not the best choice and therefore he might be frozen in his tracks. It's essentially when you have that many options there's no way you can invest them all investigate them all. And the only thing you can be certain of is the choice you made is probably not the best one. That's that's a fact that's just a statistical fact that you probably didn't make the best choice. So what we do is as humans we let the perfect be the enemy of the good enough and instead building a good enough solution that you can just go out and build today. We're you know we want to build the perfect solutions that our CEOs our bosses don't say hey why don't you use X vendor. I heard they're better like managing a look at that. So this particular plumber real story a real guy that came up to me and he asked me how it was on a panel. Then we had a further discussion after we got off the stage. He truly wanted to know and he is representative of so many other farmers plumbers factory workers oil patch companies like truly want to know where do I start. And so I had some answers to. I like to share with you on the on the podcast here. But I think as an industry we have to kind of share these answers with all of our customers out there. So where do I start. QUESTION I think the answer has to be once again don't let the perfect be the enemy of the good. What you need to do is build a good solution and get out there and start leveraging it because there's ROI available and you know you can iteratively improve on it. Yes it's hard to swap out entire components but turns out if you do something now you'll have five years of of of learning and benefiting from that system and then you can reiterate in five years that's okay we rip out what we got or do we build on it before you kind of double down into another medium term reinvestment how do you build that five year plan for connecting to your plumber shop for example the IoT as I said is no where to start. So I said you've got to just pick a starting position you've got to say you know what. What's really important to me. The connectivity I need my bands to be connected 100 percent that time then start with a carrier who can argue for perfect connectivity is it the analytics you just want the best analytics start there. So find an analytics company that says we got a good analytics platform that works for services firms like plumps so shop just that don't shop everything sensors tracking device. Just start with what's important to analytics. Good. You're going to pick an analytics firm and go and go with them is it okay when you talk to that firm you're going to ask. Now that I like you for my analytics. Who do you recommend for connectivity. Who do you recommend for vehicle tracking. Who do you recommend for sensors. You can do integrate with sales force dot com from my sales call. So start with that one firm and then find the recommended partners up and down the up and down the line. And what you build out of this complicated web it's almost impossible for somebody to solve what you build at least is a virtual chain. You simplify it you've picked the first that vendor which in this case analytics and you've asked them what's your chain up and down worried that I can build something that you're telling me I know is compatible and will work together at least and I can get that as a starting position.

[00:35:03]

 And then you can take their advice or you can say you know what I have heard that Verizon  might have better coverage in my region than sprint so I'm going to swap that element out and hopefully they can figure that in but I'm basically going to take this recommended solution. Up and down and that's a good way to kind of let them nail something down as a starting point. And that's kind of my advice to the plumber. But my advice to our industry us is we've got to have these suggested solutions in place so that if somebody comes to you you can say yes I can sell you the sensors I'm a sensor company but I can also suggest who we connect with you know with network tools connect with us with modems work with my solution which analytics solutions people are layer on top and find are good partners. So you have these recommended partners up and down. None of it mandatory but if somebody comes and says I would like a turnkey solution we're able to offer something akin to a turnkey solution. So that's that's my recommended industry. And then hopefully we get over this huge educational hump. But as I said my expectation is that at no point in the future does IoT become as simple as the automotive industry for example which by the way is a simple industry I simplified it down but IoT will always be even more complicated than that.

[00:36:21]

A great great answer I think this is something that every company does need to internalize but also communicate to their customers and their partners. One of the things that you know we interact a lot with startups at IoT ONE and many companies even as they progress towards the growth phase have kind of an open horizon for what industries and what needs they serve we ask them Are you you do sell the oil and gas industry. Yes we do. Okay wouldn't reference customers do you have. Well we don't have any yet. We know our technology is very applicable to oil and gas and so everybody has this. Many companies have this perception that their technology is very horizontal which it might be technically but if they're not to. Focus on a specific customer and say this is the customer that we're serving even though many other companies could potentially use our technology it becomes very difficult for customers to prioritize because everybody is basically telling them that our technology can help you to solve your problem even if we've never helped a similar company solve that problem in the past. So this is something I think as certainly as a as a collective we have to get better at this. In this you know domain of IoT which is just very early so companies are kind of figuring out where they want to focus right now.

[00:37:42]

I think Erik you know that's a fun question you hit on. You've hit on one of the perennial challenges for startup and there's you know a couple of things that you experience started people probably know is that you might have a technology that is horizontal but in and you can say oh yeah we could do oil and gas or we could do you know municipalities and water where we could do you know flood prevention and things like. And you can easily say all we could do all those things as a startup you need to be nimble and you need to be able to say yes to any reasonable demand a customer has because you need those early customers. So the flexibility if you truly have this horizontal technology you kind of want to say yes yes yes we can do all the different things but the paradox is that as a startup you cannot do biz dev that way you can't go to every conference like the automotive conference the municipality conferences. You can't try to do biz dev with all these people because the resource requirements for having a dev staff and sales staff would be way too high. You blow all of your startup money trying to get the word out to all of these shotgun scattershot different industries. You need to be more focused as a startup and spend your resources on biz dev. So the paradox is that while your technology you want to be as broad as possible when you try to talk a broad story as you actually get that whittled down to a sales message or a marketing message you need to talk to a specific industry and you need to have a good message that resonates with that industry. So you need to make sure you're actually having conversations with people in that as you do go to the conferences you do meet with them so you can actually speak their language and make sure that you're addressing some other real needs. So you know as I said this that's why it's a paradox. A startup needs to be very flexible on technology and very focused on biz dev and we think the way that happens is it frankly you know what you is beginning I wear many hats they need to wear many hats many hats and it might seem kind of like they're being fake at first but this is the life of start to make a. Technology can be broadly applicable and then say no we're just for the gas industry. We're all about the gas industry. You double down your bills on the gas industry and you try to get a beachhead in something and get some established clients and then later in phase two you go to different industries because you know you have the resources and you're growing up and you can actually use the gas industry success as a reference case. Plan B of course if you didn't make any sales in the gas industry so maybe you'd go find another industry and you hope you have enough funding to last that that often happens right. But I think you said people who are experienced startup will know you can't do biz dev across the board. You've got to focus on a certain customer case. So that continuing on with that. So let's assume the startup is doing it right has a broadly applicable technology but has focused their biz dev message down to what they hope are the correct target audience and they're focused on them and giving them time and spending resources getting the messaging right for that target audience. 

[00:41:53]

So once they pick that target audience then they get back to what we talked about before where they're going to build up a more complete solution. And this again this is why I started do across the board. I built up a complete solution. I mean if you're back to making that one agricultural ground moisture sensor and that's what you're trying to sell. And now you're talking to agricultural potential customers cooperatives agribusiness. And you say I've got a sensor. They're going to say great but that's not a solution. So you're going to have a sensor maker going to have to work you know across the board with other people that can integrate your sensors into the complete solutions. So maybe it is John Deere. So you're going to have to have a range of partners. You're going to get to go to that end market with the suggested implementation plan. So yeah we got great sensors for you and if you choose to use our sensors here are the additional vendors we recommend you work with. They put together a great solution with us. So you need to build the partners in that area of agribusiness if that's the one you choose to focus on. That's no small feat. And this is the reason it's so complicated and so difficult for a startup to sell into this is because as I said we're back it's a complex web and IoT is new and there's a lot of education you have to do. And frankly this is why when there's new waves of technology like IoT there will be a lot of a lot of bodies left in the field like that will be a lot of dead startups because there's a lot of you a slow education process right now because we're early in the game.

[00:43:20]

So this is advice for start ups. If we look at larger companies you explain their role in this in terms of identifying the right technology that's coming out of startups being able to help those startups commercialize develop this into solutions that are communicated to the customer and and help to ease that adoption. And can you give us an example of one company that you see doing a particularly good job of playing this role. Surveying the technologies that are coming to market integrating them into into real solutions that are you know maybe not plug and play but at least can be communicated to customers.

[00:43:53]

Yeah Erik I can in fact I think I'm going to pick an example that has a horizontal solution because frankly that's the ones that you see more often nice most often. So I'm going to mention for AT&T and they've got a device that is a sensor unit and it's of course connected to the AT&T cellular network can roam around the world. And the idea is the sensor can measure temperature vibrations light in a variety of things.

[00:44:19]

It has all the sensing capability built into it. It's kind of one size fits all package. This is why it's horizontal. You could take this thing you could slap it inside a shipping container. You could put it on an expensive piece of equipment say a caterpillar bulldozer or something like that you could put it in a refrigeration truck and monitor the temperatures in there. And the idea is that you can buy this from AT&T. It comes with connectivity it comes with all those sensors. AT&T provides use of preferred partners in terms of the analytics so you can track your vehicles as they're driving around with these refrigerated units. You can track the temperature you can have a alarm's situations put into the software. So AT&T is coming at you with kind of a complete solution that will hardware bundle they've got is enclosed. It's already got the radio from a radio provider for example it could be Erixon or somebody else. It's got the sensors providing a sense were center providers and probably a circuit board as well that they probably assembled through a part so they put together a whole lot of partnerships already in the hardware. They add their connectivity as a service and they recommend the analytics and cloud layer on top of that they have a variety of people you can choose from so that you can kind of go to them and pick a complete solution if your needs are horizontal. Right. And that's great. Now I know this podcast being sponsored by GE so there are a great example to bring up as well. But this is going to be a much more vertical solution that is less familiar to people because these vertical things are usually this is kind of inside poker inside pool rather inside baseball for the industries of play. But if you look at something as complicated as a jet engine maintenance on those is very important. Obviously we don't want to have them dying in flight and is also very expensive and just because of the nature of a jet engine the way it's constructed it's very deep and there's a lot going on behind a series of blades. So they actually work on the interior of the engine is pretty expensive. So what you can do with an IoT solution is you could put a series of sensors inside the engine that can sense different failure conditions and prevent them from occurring or since before they occur. And then you can also get those sensors provided from by a sensor maker right and you integrate them into the engine which could be a GE engine and then you need to provide a service on top of that that airlines can use to monitor the condition of their engine. So you can do that as a service to the airlines and of course ultimately this serves the general flying public and you know it gives us cheaper airfares and a higher level of safety at the same time pretty strong benefits by modding the internals of the engine. So you can get these very verticalised solutions that that not maybe a national story and you don't see them at every AT&T retail store and you get those great horizontal solutions that the average person could walk into a store. Hey what's this little box. Oh that's something we've got for IoT. The guy at the store could tell you. You think that might actually apply. I mean I'm I run a locksmith's and I got four trucks in town. I'd like to monitor where they are. That's a simple solution. Bang. Put that on there. Interestingly you know I asked him what's the light sensor for like what what do people need to do. Monitoring a light inside a container thinking are there plants growing in there and the answer is actually interesting. Well there's a lot of shrinkage during shipping rates so if you put a shipping container from Shanghai to where you are Shenzhen to New York City goes across the ocean and then it hits the port let's say Los Angeles Long Beach and then gets thrown a train or truck trucked cross-country in New York. There's a number of opportunities for somebody to tamper with the shipment and take something out of it. You know a couple of laptop computers or airconditioners fell off the back of the container the light sensor is mostly for knowing when the doors were opened. So if you're worried about shrinkage first are you can that you know through the tracking where your container is. I don't know if it's had severe vibration so that if a bunch of air conditioners inside are broken you might be able to bill it back to the shipping company saying what happened Sunday at 10 15 a.m. seems like my container was dropped. But importantly if the doors are open you know when. Now let's say you take those vibrations and you just kind of record those into a log. If the air conditioners come out of the box just fine in New York City you don't care that the vibration occurred. If they're broken you might use that lock but the light is a little different. Let's say that when you put your closed container doors and Shenzen you activate an alert that says if your sense lights notify us immediately so that you know two weeks later that container is on a truck rolling through Utah. That's why in New York City stopped for unusually long amount of time and the light sensor indicates there's light inside the container you might be able to immediately react and call police and say hey can you have a look at this or call reagents and immediately contact the trucker and go either you or somebody else has open that truck smell. Could you please verify that nothing is missing. So you can immediately react to that shrinkage problem. Through an alert. So there's all kinds of things you can do with that horizontal. Such a solution. Pretty neat.

[00:49:18]

Cool thanks. Great examples.

[00:49:22]

The GE one I think in particular a great illustration of your point of the need to focus because if you're in this sensor manufacturer that wants to set into it sell into a jet engine and you believe you have a horizontal technology you've got to be 100 percent focused on the aerospace industry is not going to have that confidence in you as a supplier even if even if it's applicable to other areas.

[00:49:44]

Right. We see a lot of that what you just said we see a lot in the automotive industry where people make some really good sensors or consumer electronics and see how we could put this inside of a car. But the requirements for an automobile are you know everybody wonders why is this car stereo cost you know two thousand dollars when I can buy the same thing or you know I could slap an iPod in my car for so much less. And the reason is you know you cycle that iPod or iPhone out every two years but hardware that goes into cars need to be able last least 11 years or more needs to be able to function in temperatures ranging from minus 40 Fahrenheit or minus 40 Celsius all the way up to 150 Fahrenheit. So the tolerances and the vibration resistance are huge. So yeah you need to be focused on an industry to get them specifically what they need.

[00:50:31]

And last question. So you've created ecosystems in Shanghai. We've also created ecosystems large companies sometimes make the decision to start to start a consortium around a particular technology or to fund the foundation of an industry consortium. Many other companies prefernot to start their own or participate in the founding of a new organization but they'll participate as members in multiple. How do you view the the basic make versus buy decision around an ecosystem. When does it make sense to craft your own and when does it make sense to spend your resources to participate multiple.

[00:51:10]

Yeah. So I think there are times when it makes your sense in general like open ecosystems and I find that if you look long term they're often the ones I had the most success of Windows versus Apple as an example. And of course it's not the only one but there are examples where trying to shoot the moon basically trying to run the entire ecosystem yourself pays off in the iPhone. You know Windows versus Apple is one example than I've owned versus Android is a different one right. Were Android definitely wins the shipping numbers contest for iPhone iPhone wins the profit. So it's very profitable for them to to run vertically. So here are the things you need to see if you have if you want to run vertically and try to buy the entire solution. First of all you need be well capitalized big business because a startup just can't come out and do a vertical solution with any kind of credibility. We talk about how the focus to get your resources and you can't do every step of a vertical solution and provide the supply chain yourself. You know if you're a sensor company you can't go build the enclosure then build a radio then build. You've got to have partners you know going to build a network and the network operator that connectivity etc. etc.. So it should be super large if you want to shoot the moon. And then the other thing is you have to have a credible play like where people can identify your brand. That makes sense in that space that really helps a lot. So you know if you're John Deere for example you might have some good credibility if you want to build a vertical solution for the agricultural industry. If you are not on immersion Technologies who provide haptic sensors for phones and do a great job at that. Well if you want to say hey we've got a great haptic sensor for some Agra thing we want to go shoot the moon people go Yeah I don't see you as a strong player in the agribusiness space. That's not really credible play. So you got to have credibility. So I know I'm up to two capital and credibility and the next thing is you have competent solutions across that whole range you can't have. You might have the best sensors you have to have a competence solution in terms of connectivity in terms of analytics and things that you want to do by the vertical thing. Does that the best at every step that has to be competent it can't be bad. And that's where you know things usually fall apart because customers go why do I. Why are you locking me into your crappy analytics platform when there's much better ones available. I love your sensor but I'm not going to buy it because you're locking me down. That's where you start losing if you can't be competent on every level. So capitalize competent at every level. And the third thing is I would say early ecosystem so so if it's early in the ecosystem sometimes it's good to provide the vertical solution because education becomes easier and remember back to that story told about the plumber who's actually a private equity guy who was buying plumbers didn't know where to start. Well you can go with one turnkey solutions say listen you don't know where to start. I can give you turnkey start to finish. Total solution from my one from one vendor one one. So it's a joke if you have problems at customers going like that so early in the ecosystem is a good time to try to shoot the moon. So basically in IoT industrial IoT and home and everything we are early ecosystem. So a lot of people are tempted to try to shoot the moon because that early element the question is do they have the other two things I talked about credibility in the space and adequate capital and competence across all things. Looks like I got some CS foresees credibility competence capital and and early ecosystem where I got three seasons and I guess I have to work on that before I write my book.

[00:54:36]

That's a good point when very very few companies can can meet these criteria right even on the competence level.

[00:54:42]

Because we've seen a lot of the companies that have been traditionally quite vertically oriented around electrical and mechanical engineering solutions. Now they're finding that there's this big competence gap in analytics I.T. connectivity which are areas that they didn't have to deal with previously in their vertical solution.

[00:55:01]

Yeah yeah it's you know it's the history repeating itself. So you know one of the biggest in high tech world one of the most well-known stories is the route 128 Massachusetts versus Silicon Valley battle and the way Boston companies made computers back in the Mainframe days tandem computer and deck and things like that. They fully integrated they made their own computers. Silicon for the process is all the way down to the keyboards were made by the company they made you buy their keyboard had a set of plugins and that was great because early in the ecosystem. But as the ecosystem developed and flourished grew people started going to best of breed solutions and integrated solutions that were based on open standards like a to port for a keyboard. Great. Now I can buy a cheaper keyboard than the one deck was trying to sell. So the route 128 model lost out to the Silicon Valley model of get your processor from Intel get your box from Dell get your cooling fan from somebody else etc. etc.. So the that open ecosystem is long term is usually the way things go unless somebody manages to truly lock it down well. So if you look back and you know we're talking about you we're talking industrial IoT but let's talk briefly Smart Home and Home IOT stuff you look at a lot of players right now trying to jump and be the dominant player in that space. And most obvious ones are Amazon through Alexa Google with Google home product and anyone else who's kind of trying to jump in and play that space as well and a little bit behind that leading two. But these people have got the notion of hey you know what the best way is to get up there quickly and offer a pretty comprehensive solution but you'll find that even those guys like Amazon who has a pretty you know do they have credibility do they have capital. Yes and yes. They're trying to be very open as well. We want Alexa's to be the front end that people integrate work with to work with their smart home you know. Tell Alexa to open the doors, tell Alexa to on the lights. But they want to be very compatible and open so that they can turn on lights from neutron lights Tron and a bunch of other fighters at the same time. So even players like that are saying OK we're we're going to do what we do and let and then make open API and partner with other people. And what you'll find is that's a smart way of building it and those companies said where is the real profit in value. And they're saying hey it's at the front end that interacts first with the consumer. So if we just do that really well we can be open and let other people bring the other parts of the solution and share ecosystem revenue with them. But I mean we might be the more profitable side of that equation. That's what's going on in the Smart home right now.

[00:57:39]

Interesting. That's a great point to round us up here. Last question. Very quick.

[00:57:46]

What is one company that you've seen in the past 12 months in the IoT spacethat you would like to put a spotlight on that you think doing great things but people might not know what they're bringing to market.

[00:57:57]

You know I got an example that I love I got I got like a startup crush on this company called Sutro AI and I got no interest in them and I can't explain it that's why it's crushed. But Atwa I do like their products I'll tell you a little about it and if you're a pool owner it will make sense to you. Otherwise it may not seem too good but it's a device you throw into the pool and it bobs around like chlorine dispensers often do but what is actually doing is a periodic basis. It's measuring your water in doing the same thing that poolers do where they basically pour drops of solution in and measure the colors that come up to from the pH level of water. The alkalinity in their water and the chlorine levels in the water. So this device does it in periodically as I said as it floats around in your pool and then it uploads those either and there. Is a start up so they're not fully fleshed yet but they're going to work with sigfox for longer range connectivity so it can reach pools in the backyard or they might provide a WIFI solution which sometimes has trouble reaching back yard pool. So it's going to upload those to a cloud and the cloud is going to be able to tell you how to manage your pool. And the reason I have a crush on that company is because I currently waste a lot of time and money forgetting about my pool and then remembering it putting in too much chemicals and they say oh you must put in a bit of chemicals don't put it all on at once. I don't want to keep coming back to my poor five times. So I just throw it all in it once I'm over it. A lot of people want to do this. Then you put in too many chemicals. So by having a smart connected pool basically having your the water in your pool connected to the Internet and the cloud and having an AI serviced by Sutro monitor that water and by the way it knows the capacity of my pool knows which in my water through some early initial measurements and such. I'm going to get text messages. Hey Derek looks like your pH levels are a little high. Put in three quarters of a cup of this chemical and you should be good. So it's going to give you precise measurements. Tell me how much to do and also tell me when to do these things. So I'm going to kind of be able to forget and just get alerts on my phone that they put this and now I'm going to be putting in fewer chemicals at the right time probably even after I pay them. Saving money. To me that's that's the great kind of solution whereas makes my life easier and saves me money and pays for itself. So I like that company a lot. And other thing that's cool about them is they're using their sensors are basically that the chemical sensing technologies developed also in some agricultural endeavors and stuff so that they're active in both Pool and Spa and agribusiness business so we'll started to look for Sutro.

[01:00:33]

Derrick thanks so much for taking the time to speak with us today. My pleasure. Great. How can people get in touch with you or learn more about what you're doing.

[01:00:42]

Sure. Well one of the best ways to get in touch with us is to just look at our website. So Silicon Valley IoT forum and you know your interest in the stuff we're doing on telecoms and Telecom Council.com and also auto tech council.com for the auto stuff and I'm on Twitter @derekkerton.

[01:01:02]

All right. Have a great day Derek. Great. Thank you very much.

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