Evangelist THINGS®, CEO Wbird AB and Founder SMSE
In a couple of years we will not talk about IoT anymore, says Magnus Melander, Evangelist THINGS®, CEO Wbird AB and Founder SMSE. We are just adding a new layer but it´s still the Internet. We are now past connectivity stage, in the operational stage of IoT, where we are still looking for savings, but slowly shifting to value creation. In five to ten years from now several companies will have changed their business model from sole producer to service provider. Because of the amount of data that is gained, analysed and used predictions are much more accurate and add to efficiency. The main challenges we will have to face are security and privacy.
Where do you think we stand when it comes to IoT at the very moment?
Magnus Melander: We just left the teenage stage, we are all adults, early grown ups in the industry.
From my understanding early grown ups are funny guys still fooling around.
Magnus Melander (smiling): Yes, maybe. From my view we start with Internet again, it´s the same process but a little bit faster and the impact will be bigger, but it will end up being Internet again. In a couple of years we will not talk about IoT anymore. We are just adding a new layer to the Internet. I make all my comparisons to when the internet came because I think that that’s the only reference that is valid.
The first step is connectivity, then comes operational value, when you save money on something – like posting your price list on the web – and thirdly we reach the strategic value stage – when you develop a brand or you change your business model. So I think we are past the connectivity stage – you remember the talk about 50 billion connected devices 5 years ago? – that´s really boring, nobody wants to talk about that anymore. We ended up in the operational part two to three years ago and this is where we are right now. People still look at savings and easy rationales for investing. We will start to enter the value creation or added value-stage really soon. Some people are already touching it – by starting to deliver services instead of products for example.
There is a noticeable shift from sole production of products to merely offering services and thus not only changing the business models but significantly changing the structure of companies.
Magnus Melander: Everything is going to change and it’s for good. The reason I think why this is really going to happen across the line is because this is the only way we can deal with the environmental challenges. If the vendors own the equipment or products they will make sure they are efficiently used and recycled. I think we are going to see that across all industries but that will take about ten to fifteen years from now. There are lots of opportunities for companies in this field as lots of money is lost because either you produce too many of something and you have them on stock – which kills your cash flow and result – or you produce too few and you cannot capture opportunities. The management of large companies is facing the challenge of optimizing to make sure they hit the right expectations all the time. But if you turn your production business into a service business, you will know by ninety percent the numbers for the upcoming year which manifests in the company’s performance on the stock exchange but at the same time is solving sustainability issues that are an equal important driver.
What do you think will be the biggest challenge we have to face within the next ten years?
Magnus Melander: There are two major challenges to IoT: security and privacy. Security is the smaller problem because security can always be fixed, we can cure them, fill in a hole somewhere, you can ask for forgiveness, you can fire a guy, you can always deal with security. And on top of that human beings tend – for some reason, which is really bad – to forget. We suppressed what happened in Paris last year, nobody remembers that Sony lost credentials of millions of their customers 2011 – memory is very short and forgiving. That´s why security it not the big issue – privacy is a huge issue.
First of all I am absolutely convinced the view of privacy will change. It is just not possible to continue the way we are going. People give away all the data they have, they even allow others without reading terms and conditions that they can sell and process their data. Someone who grew up in a hard dictatorship would never do that. In our culture it´s somehow normal – as we are trusting and think we have nothing to hide. But this will change. People provide for example voluntarily data with sports apps which together with other data could be used to figure out if someone is pregnant. So if they then have a job interview and don’t get the job because the company knows that the person will have a baby in few months – that´s the point where people will start to question their behavior.
Government will change policies over time of course – that’s a smaller issue because its an open process and will not happen overnight. Consumers can react over the weekend, they can kill a service in two days, as you have all information on all devices, if for example the story leaks that the company or service treated a person badly – reaction can come immediately. The issue with privacy is that you should have an architecture in your whole service from day one which caters for privacy. You can’t add privacy afterwards. If information or data is out – you can never take that back. On top of that you need trusted partners in your delivery system who you trust to care for you and your data.
As with all the connected devices and services you are suddenly faced with many partners you have to share data with or forward it up to a certain extend.
Magnus Melander: I think that is by far the most important thing that will hit us. What the outcome is? – I don’t have any idea.
I work with connected cars for example. When we started develop our solution at Springworks we asked: who owns the data? We believe it´s the driver/owner of the car – but the car companies think they own the data – they argue they do because they want that data to know how well the performance of the car is doing and when it needs service or spare parts. And maybe even to cheat – Volkswagen made it easier for me to argue for mobile operators as trusted partner in the connected car industry.
I think the user has to own the data and manage it himself. He should be able to tell what part of data he wants to share with whom and hence be in control of his own data.
At the moment people post everything on Facebook and other social media, how do you think the awareness for privacy is going to be different when it comes to IoT services?
Magnus Melander: That’s why I make this point because this is exactly what everybody says. But we have got to change and should think about ”dark forces” for example. What a wonderful tool for criminals and terrorists. This complete knowledge about every single person and what they do, who they know – it is terrible. We don’t want that. That’s my view.
If you develop and launch a service on the internet without being aware of privacy that is a big mistake because you cannot change this afterwards.
Who could be a trusted partner in this circumstances?
Magnus Melander: If I was a mobile operator today I would put all my bets on that to be a trusted partner in the country. For a lot of reasons but mainly because they need to actually find another role because connectivity is becoming comoditised. They need to find other areas of applications and new business models. So I think the perfect role for an operator is to jump in the middle of a specific market like homes or cars to build and manage the ecosystem there and to cater for people’s privacy.
With entering the strategic value stage when it comes to IoT applications, as you said before, how will the startup/company ecosystem evolve?
Magnus Melander: It is not that easy because there are a lots of components. For me startups are kids to industries and even if you can it’s not nice to make money on kids. You treat them well but don’t spoil them, you challenge them but you have to take care of them also. And then if they are successful and grown up they might buy you lunch or something – that´s how it works. And that’s also how it works for hardware startups.
As soon as startups become an industry by itself it will explode. I think unfortunately we are not to far away again from what happened fifteen years ago, that’s what worries me, that´s why we try play our game differently by working really close to enterprises and cities.
What´s your game then?
Magnus Melander: We have a 2000m2 co-working space in Stockholm called THINGS®. 30 startups all relating to hardware are situated there, because hardware is difficult. We do IoT, wearables, automation, robotics, sensors and 3D print/scan. And we have a handful of industry partners such as Assa Abloy, ABB and Husqvarna interested in the same areas and eager to learn how to work with startups. Together we try to learn how to transform innovation in small companies to value creation in large ones. From my point of view it takes three things to succeed: process, quality and a genuine interest in learning how to take the road together as a team.
Building a large international company from scratch takes a lot of time so it’s often easier to integrate innovation in an existing large company to create value. When large organisations have to bring in innovation from outside and startups having to get their innovation into established companies’ solutions you need the right persons on both sides to face that challenge. Those who learn how to do that well will be successful. At THINGS® we are independent from investors and manufacturers as we have partnerships with several of the most successful and innovative export companies in Sweden. That helps us to put challenges to startups that are focussed on the output without depending on other factors that come along with funding or investment money.
Many initiatives or public fundings work like drugs, they make startups, our kids, work and focus on the wrong things. I am sceptical to those methods as in my view startups are kids to industries, they need to focus on innovation and customers but will still fail in many cases.
In Europe is a lot of willingness in good faith to drive development and innovation with special public funding and investments. I think most of that money should be used for healthcare and schools as to my opinion in many cases we are just ruining development.
What should be done?
Magnus Melander: Opening the public sector in Europe or in any country for startups would be a very important thing to do, because then the public sector is a customer, acts like a customer, has demands, requests and pays the startups for what they do. But unfortunately the public tender system kills the whole idea as small companies can´t participate in public tender. But it would be healthy for our economic system if that was possible.
What is your your personal vision?
Magnus Melander:I think there are three huge issues that everybody shares. Companies, large or small, nations, poor or rich – they have all the same topics on their agenda today. Maybe I’m ignorant but I don’t think that’s happened before.
The issues are security, efficiency and sustainability. They have their own situation and priorities but they all work on these issues: safety and security to prevent natural disasters or terror, efficiency to pay for education and health care and to provide a decent life for all people, and we havet to do a huge effort to save our planet. None of those issues can be sorted out without IoT. You cannot protect a country without technology. It’s just impossible. You cannot become efficient enough in health care for instance without all this technology and you cannot fix sustainability issues without analysing data. So that’s why I am happy to work this out. I love this. That’s not a vision but I’m very positive person and I’m sure everything’s going to work out nicely.
Magnus Melander is a Swedish entrepreneur and ICT professional with 34 years of international experience. Magnus is Sales Director at the connected car SaaS company Springworks, the owner of the consulting firm Wbird, he is co-founder and evangelist at the hardware hub THINGS and serves at the boards of THINGS, Evothings, Clue, April Systems, Possio, Mobile Institute Stockholm and Calazo. His focus is on IoT/M2M and he founded the Swedish M2M Service Enablers (SMSE) alliance 2012, today having 60 members and 18 partners.