The Internet of Things: Where is it Now?

Delwin Graham - Feb 20, 2018
Is there any larger concept than the “Internet of Things” (IoT)?  The idea is that any device with an on/off switch can be connected to the internet and thereby to each other.

Is there any larger concept than the “Internet of Things” (IoT)?  The idea is that any device with an on/off switch can be connected to the internet and thereby to each other. (Cf., Jacob Morgan, “A Simple Explanation of ‘The Internet of Things’,” Forbes, May 2014).  The IoT is envisioned as a giant network of connected “things” (these things also include people).  The relationship is between people – people, people – things, things – things. 

 

This idea is not new. For a decade or more, consumers have been promised a future filled with fridges that text us when the milk goes off and coffeemakers we can turn on from our beds.  (Cf., Katharine Schwab, “Is the Internet of Things Dead, or is it Growing Up?”, www.fastcodesign.com, February 12, 2018). And the hype has come from high levels.  In 2014, Cisco’s outgoing CEO, John Chambers, characterized the IoT as the “Internet of Everything” and boldly proclaimed that there would be 50 billion devices online within 5 years, with a total market worth of US$19 trillion. Another leader in this sphere, Siemens, has said that these smart things are starting to power a fourth Industrial Revolution (after steam, electricity and computers).

 

But the IoT looks to be a Revolution in search of a “killer app” – how many of us actually own an online coffeemaker? One of the breakout successes to date is the Nest Learning Thermostat. With a clean design, a simpler interface than existing programmable thermostats and backing from Google (which paid US$3.2 billion for the start-up in 2013.), it is getting some traction. (Cf., Alec Scott, “8 Ways the Internet of Things Will Change the Way We Live and Work”, www.theglobeandmail.com). In this case, the connectivity of the device is not changing the world but unobtrusively benefiting our lives.  Thermostats control more energy in ours home than is consumed by our appliances, lights, TVs, computers, and stereos combined.  Nest boasts that its device - which “learns” your schedule, programs itself and can be controlled from your phone – could save users 20% on energy.  The effect is evolutionary rather than revolutionary and for that reason the device is useful.

 

Fitness trackers like the FitBit and Apple Watch could be said to be online devices that change behaviour. (Cf. Scott, “8 Ways”, Globe and Mail). Demand is booming and the market has already surpassed $2 billion, with well over 84 million devices sold so far.  These monitors measure heart rate, sleep patterns, diet, exercise and more and beam that data to mobile apps. These statistics can not only be used for self-monitoring but can also be used by companies for business purposes.  US insurer John Hancock (a subsidiary of Manulife) is offering clients up to 15% off premiums if they willingly hand over data that proves that they lead a healthy lifestyle.

 

Here then is the promise and the danger of the IoT. Technological innovations will develop to the extent that they can solve problems and these solutions will depend on technical options at hand. For example, the use of sensors in the automobile industry has followed the development of semiconductors so that sensors are now being used in engine management and braking systems and back up cameras to improve operating efficiency and safety. In the case of driverless cars, this technological development is brought to its logical conclusion. The question remains whether driving itself is a problem to be solved by technology.  Sometimes the solution is worse (i.e., too complicated, expensive, dangerous, annoying) than the problem. In the case of the IoT, we are at the point of technological development where the potential interconnectivity of things can be used to solve “problems” or at least make things easier. Broadband Internet is becoming more widely available, the cost of connecting is decreasing, more devices are being created with WiFi capabilities and sensors built into them, technology costs are going down, and smartphone penetration is skyrocketing. (Cf., Morgan, “A Simple Explanation,” Forbes). Whether the solutions that the IoT offers are worthwhile and thereby adopted will depend on the specific circumstances of each case. Perhaps an online coffeemaker will make sense to us at some time. The market will decide.

 

However, in offering these “solutions” the IoT creates some issues of its own. (Cf. Scott, “8 Ways”, Globe and Mail). First of all, there are language problems.  For example, smart home devices speak a number of wireless languages depending on the manufacturer.  Your home’s thermostat and HVAC system might communicate in Bluetooth, the fridge and coffeemaker in ZigBee, the locks and blinds in Z-wave and the smoke detector in WiFi.  Making sense of this babel is one thing, but security is another. Sensor embedded machines will dramatically increase what we can find out about each other. Can they hack into my toaster to get my S.I.N. number? There are also questions of ownership.  Does the personal information collected by my fitness tracker belong to me or the manufacturer? Of course, technical solutions will be offered for these technical problems (e.g., widespread encryption and electronic copyright protection).

 

Please contact me (delwin.graham@canaccord.com; (780) 408-1518) for further details and a few actionable investment ideas.

 

 

Canaccord Genuity Wealth Management in Canada is a division of Canaccord Genuity Corp. Member-IIROC/Canadian Investor Protection Fund.

 

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