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Take Page from Google Alphabet By @EsmeSwartz | @ThingsExpo #IoT #M2M #RTC #InternetOfThings

No one will argue that Alphabet was a change Google needed to make to remain relevant, fresh and innovative

Take Page from Google Alphabet: Innovation is Necessity Not Luxury for Cloud & Internet of Things

In the last blog leading up to our #IoTuesday chat we touched upon some examples of value creation made possible by cloud and the Internet of Things (IoT) and their role in reshaping both the Consumer Internet and the Industrial Internet. But, too often the uncertain return on investment (RoI) results in a short term focus on operational cost savings and not on how IoT can be used to transform companies and industries through innovative new business models. And in the age of the Internet, cloud and a globally connected society, innovation is no longer a luxury, it is a necessity. We'll be joined by Alex Bakker and Ron Exler, from analyst firm Saugatuck Technology to continue the discussion.

To Stay Innovative Cut the Red Tape
There are many parallels to Google's move to set up Alphabet as a holding company to remain at the forefront of innovation and what is required by all companies to foster innovation in the age of the Cloud and IoT. No one will argue that Alphabet was a change Google needed to make to remain relevant, fresh and innovative across a number of product initiatives. Under the Alphabet structure, Google provides operating divisions with the freedom and accountability for making decisions all while being nimble and quick on their feet. And perhaps most importantly, keeping their most creative people engaged and well...creative and not stifled by red tape and bureaucracy.

Although it can feel comfortable to focus on the cost saving aspects of IoT, the benefit is much greater when we move from simply streamlining processes and look at the plethora of opportunities when new business models are created to capture value. When creativity is encouraged for the benefit of short term gain and bottom-line financial benefit, we lose sight of the forest for the trees. Just like Google which did not want to get too comfortable doing the same thing by making incremental changes, to fully realize the potential of IoT requires stepping out of our comfort zone and driving new ideas and value creation. Every business should be asking itself: How do we rescue innovation? How do we give new ideas enough oxygen to breath and succeed?

And Old Thinking
All companies engage in activities designed to encourage customers to pay for an offering that is perceived to be of value by the customer. This is the backbone of all companies; build well developed products that stand out against the competition. Often this is achieved through a mine's better than yours feature comparison. As a result, new features are created incrementally and companies eventually end up competing on price as products become commoditized.

A New Generation of Companies to Emerge
But in a cloud and hyper-connected world, billions of everyday objects talk to each other over the Internet and most things come equipped with some type of network connection option and a variety of things-thermostats, TVs, refrigerators, cars, lights have a unique Internet identity. Electricity meters can talk to the grid to get you the best deals. Health monitors can keep an eye on your heart rate. Water pipes can warn of a fall in pressure. Industrial equipment can self-diagnose. The IoT tsunami is driving a new applications economy to augment already familiar applications. We have reached the pivotal point where smart things can learn and even anticipate and react to our needs and we can expect a new generation of companies to make use of IoT to create novel new applications.

While we have always had services, we now have services with connectedness and service agents. Being online means that these services can be decomposed, repositioned, resold or bundled with other services by another service provider that can do a deal with the service originator as part of a mashup. Connectedness means that every agent that is created has the potential to work with other agents to conceive and deliver services, and create new combinations of services. Agents collaborating with agents allow for services encapsulated within other services, service components extracted from one service and built into multiple others and so on. And thanks to the cloud, new features and value can be pushed to customers on a regular basis and products can be monitored and enhanced based on how customers' behave while analytics drive new services and create new experiences of value that can be monetized.

With a New Take on Revenue Generation
The traditional way of creating value is being turned on its head with cloud and IoT. We are moving from setting the price for a product or service based on parameters like profit and margin to a focus on capturing new revenue after the initial product sell. Applications, value-added services, recurring revenues become more meaningful than the initial product sale. This model is appealing to companies and investors for obvious reasons; instead of hoping a customer will be loyal and continue buying new products, a recurring revenue model provides predictability. And perhaps the greatest benefit of all is that context is possible as information is collected, aiding in personalizing the service and brand. And the evolution continues as companies shift their focus from enhancing value through internal development to growing an ecosystem of partners that will share in the value created by the ecosystem. Monetization also takes on new meaning as the IoT stack provider must take into account how they make money and how the ecosystems gets compensated for their contributions.

If your company has built its brand and value through a traditional product-based business model, be concerned as your competition and new upstarts will certainly take advantage of Cloud and IoT even if you don't.

Follow us on Twitter and join the discussion as we explore this topic in our next #IoTuesday Twitter chat being held on August 18 at 1:00pm EDT.

More Stories By Esmeralda Swartz

Esmeralda Swartz is VP, Marketing Enterprise and Cloud, BUSS. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda was CMO of MetraTech, now part of Ericsson. At MetraTech, Esmeralda was responsible for go-to-market strategy and execution for enterprise and SaaS products, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. She was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of resource and service control software, now part of Extreme Networks.

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