HP’s Instant Ink service offers some lessons for companies exploring what the IoT might mean for their business models. The key benefits which HP is getting from Instant Ink are: • Direct relationships with customers, bypassing retailers and getting ...

 

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Data ~ Driving the Internet of Things


Subscription models and the IoT – HP Instant Ink

iot subscription models

Are we suffering from subscription fatigue?

HP’s Instant Ink service offers some lessons for companies exploring what the IoT might mean for their business models. The key benefits which HP is getting from Instant Ink are:
• Direct relationships with customers, bypassing retailers and getting customer names, addresses and billing details;
• Monthly recurring revenue streams allowing more predictable and stable income;
• Usage data allowing better inventory planning and optimization of pricing packages;
• Ability to sell other products and services from the direct customer relationship.
HP seems to be taking lessons from the mobile, video streaming and gym/personal fitness sectors in terms of offering tiered monthly packages for its ink service, allowing usage rollovers and optimizing the pricing model to balance its costs across users who print a lot and those who print very rarely. Just like gym memberships, those who use the facilities every day are subsidized by those who joined in January and stopped attending in February but continue to pay their monthly subscriptions. In the case of Instant Ink, users who print a lot of colour pages benefit at the expense of those who print a few pages of black text.
In the same way that Dollar Shave Club brought the razor and blade business model into the 21st century, HP is attempting to bypass intermediaries by selling directly to owners of its printers. Knowing the names, addresses and billing details of its users is a massive step forward for the company and offers opportunities for upselling and the marketing of associated products. However, looking at some online discussions by users of Instant Ink reveals some possible manipulation of the alleged benefits of the service. HP outlines the cost savings offered by Instant Ink but as several users have pointed out, the ink cartridges sent out to customers are larger than those available in the shops, making cost comparisons rather tricky. It seems retailers are not able to sell ink cartridges with the same capacity as those sent out via Instant Ink. HP may wish to comment on that.
Whatever the merits of these complaints, it seems HP is fully committed to developing Instant Ink as a core part of its business strategy. This is not surprising, given the profitability of its printer division compared to its PC business. In quarter 1 of financial year 2017, HP generated $8.2 billion of sales from its PCs (laptops, PCs, workstations) and $313 million of operating profit – a margin of 3.8%. Its printer business, however, had sales of $4.5 billion but generated a profit of $716 million – a margin of 16%. Of that $4.5 billion in printer sales, two thirds came from ink and the profit margins on that would be considerably higher than 16%. According to the company’s annual 10K report for 2016, printer revenues were significantly down due to a number of factors including lower unit sales. This places increased pressure on HP to improve its margins as sales of printers fall and new ways of improving profitability have to be found. However, the new, more profitable business and revenue models need to also offer benefits to end users, a lesson many companies experimenting with the IoT are finding out. As a recent Harvard Business Review article noted:

Getting customers to agree to have their products monitored, which in turn means giving them something of value in return. To get value from the IoT, you have to give value first. Or as Intel Corp.’s vice president and GM of its $2 billion IoT business Jonathan Ballon says: “The benefit has to be to customers. There has to be a value exchange,” he told us. This is especially the case when a company’s wireless sensors are transmitting sensitive customer data such as medical conditions. HP Inc., the part of the old Hewlett-Packard that makes printers, printing ink, PCs, and other digital devices, has found the same thing in its HP Instant Ink initiative. HP outfitted its printers in 2013 with wireless sensors that monitor ink levels and automatically trigger reorders before customers run out. So HP dangled cost savings of up to 50% and reduced headaches for customers (i.e., running out of ink), and it enticed many customers. The CIO of HP Inc., Naresh Shanker, told us: “There has to be customer value – cost savings, very high-quality ink, a great customer experience – all of that.”

Whether all HP’s Instant Ink customers would agree with this is debatable. A recent article on the Trusted Reviews website noted:

To avoid too many deliveries, HP Instant Ink uses huge cartridges with much greater ink reserves than standard ones. HP couldn’t tell us the exact capacity, but it calls them “XXL” cartridges.
Another benefit is that there’s no 12-month contract – you can leave Instant Ink whenever you like. However, the cartridges are clever enough to know whether you’re signed up or not and you won’t be able to print using an Instant Ink cartridge once your membership term has expired.

The issue of special sized cartridges used in Instant Ink was noted by a commenter, Charlie, on the UK’s Which website:

I have the 50 page plan. I’m fine with this service but what irks me is that HP made a special high capacity cartridge for users of this plan so they last longer. This shows how they build in checks to make us buy more cartridges, like shipping printers with a few cc’s of ink and selling cartridges with a few cc’s more but with this plan they are responsible for replacing cartridges so they load them up with ink so they last a very long time. It’s the special capacity cartridges not for sale to the public that make this plan work for both us and HP.

However, as noted earlier in this post, the benefits of Instant Ink to users will depend on their printing habits. According to a PC Adviser review of the service:

The real crown in HP’s hat though is that those 50 pages can be anything at all. If you want to knock out 40 A4 glossy colour photographs, they count just the same as a single text page. Conversely those last pages of documents that only have a line or so at the top of the page actually become more costly under this scheme. As we said, it’s all down to how you use it.

So what lessons does HP’s Instant Ink have for established companies developing IoT business models? I suppose the key one is that the benefits for customers need to be clear and transparent. As more companies switch to subscription models it will become ever more important for users to be able to justify the growing number of monthly debits from their bank accounts. When domestic budgets are squeezed, hard decisions will be made as to which subscriptions to cancel; Netflix, Spotify, cable/satellite television or HP Instant Ink? HP is pinning its hopes that Instant Ink won’t be the first subscription to be cancelled. A recent job advertisement for a Manager of Instant Ink Business Intelligence stated:

This position is in support of HP Instant Ink, a worldwide ink subscription initiative lead out of HP’s Imaging, Printing & Solutions Global Business Unit. HP Instant Ink represents one of the top strategic priorities for the IPS business thus a critical success factor to generating future revenue growth for HP. As the market share and financial leader in the global inkjet market, HP’s inkjet business was built on the highly successful “razor and blade” business model. HP Instant Ink represents a new subscription based business model that is designed to transform the global inkjet market by radically changing the perceived value of HP ink. This is high visibility initiative that has been reviewed at the highest levels in the company.

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Terbine – an IoT data exchange to watch

iot data exchange

The IoT Inc. podcast has an interesting interview with David Knight, the founder and CTO/CEO of Terbine. Terbine describes itself as:

the first commercial-grade system for curating sensor data on a global scale. Terbine is designed to act as the trusted sensor data exchange for and between sectors, including both commercial and governmental entities. Terbine is a highly sophisticated cloud-based system that makes possible fast, frictionless distribution of IoT data, and covers the core issues involved with monetization, regulation and licensing. And Terbine can be white-labeled by large companies to enable private data marketplaces.

The company is still in beta and testing its offering with publicly available data sets before it rolls out any commercial services. David Knight lists some of the key challenges his company faces and which will be common to other IoT data exchanges:

  • sourcing unique data sets;
  • cleaning the data;
  • applying metadata to it in a uniform way;
  • persuading third parties to share their data on the exchange;
  • building in safeguards to restrict what can be done with the data by Terbine users;

He notes that while it is difficult to persuade many companies of the benefits of sharing their data, or “crown jewels” as he puts it, most of them seem fairly happy with the idea of using Blockchain technology to validate transactions on Terbine. Overall, it seems like the company are really ironing out a range of very complex issues before going live. Vibrant, commercially successful data exchanges like Terbine will be essential for the IoT to have the impact many are predicting. Whether the market will naturally go to several mega corporations such as Amazon and eBay in the consumer ecommerce space or if it will support a number of smaller exchanges remains to be seen. Network effects will play an important part, buyers will follow sellers and vice versa, but it is possible to imagine a network of exchanges using common APIs and metadata to provide seamless services to end-users.

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Toothbrushes in an IoT world

smart toothbrush iot

Key Points

  • toothbrushes are becoming data generators;
  • new business models for toothbrush makers based on data acquisition are possible;
  • opportunity for toothbrush makers to build direct relationships with users;
  • established players experimenting with data sharing with dentists but still a work in progress;
  • new entrants using connectivity and AI to differentiate offerings;
  • data sharing with health insurers may reduce premiums;
  • gamification of brushing for adults and children may improve dental health;
  • opportunity for dentists to build closer relationships with patients via data sharing;
  • data protection issues obviously important.
The electric toothbrush sector provides a good example of an industry adapting to the opportunities and threats posed by the Internet of Things (IoT). Across most developed economies, Proctor and Gamble (P&G) with its Oral-B brand and Philips dominate. According to Euromonitor in the US the 2 companies have about 45% market share each while in Germany, the UK and France, P&G tends to dominate. Germany is the largest market with almost 6 million electric toothbrushes sold in 2015, 4 million in the US and 3.5 million in the UK.
Several years ago these companies started offering Bluetooth-enabled brushes which monitor brushing patterns and transfer this data for analysis by a smartphone app. Here are a couple of screenshots of the Oral-B app showing how it presents captured data and the element of gamification it offers to encourage good brushing habits (images via the Dentristry IQ website)
oral b smart toothbrush iot
oral b bluetooth toothbrush app
Both companies allow users to share their brushing data with their dentists although this seems to be via email and so not really an integrated offering where dentists can track patient brushing behaviour over time.
The apps linked to these toothbrushes also offer information to users while they brush relating to news and weather.

Smart toothbrush business models

So do these Bluetooth-enabled brushes change anything for the business models of these companies or are they just a value-added feature for users? It’s probably too early to answer this with any certainty but digging a little deeper reveals some clues from P&G and Philips as well as several new entrants to the market.
A 2011 interview with the CEO of P&G, Robert McDonald, indicated that the company saw data capture and analysis as a key part of their corporate strategy:
So we’ve been working with all our data partners to help them understand that our need is for real-time data. For us it’s really constraint theory—understanding where the constraint in our data is and pushing it all the way to the data source. Then, change the data source.
Although McDonald is primarily referring to the data captured by retailers in the P&G supply chain, his demand for real-time data fits well with the IoT. Building direct relationships with users of their toothbrushes, for example, via smartphone apps, is a good way of expanding this process to the ultimate end-point in the supply chain as well as reducing the reliance on retailers for data.
In 2015, the associate director of P&G Ventures, Alan Goldstein, indicated that this desire to capture more end-user data was increasingly important to the company:
What’s the benefit to the consumer if a product could be connected? What else is in the environment and in the home that my product could interact with to deliver a better experience?
P&G’s experiments with Amazon Dash buttons shows a willingness to experiment with new ways to get closer to customers, albeit with Amazon acting as a gatekeeper in that instance. The company even offers a smartphone-controllable air freshener which according to Fortune magazine:
The air freshener also integrates with Nest thermostats if the homeowner has one. It ensures that the device releases the Febreze at the right time to take advantage of the air conditioning coming on in the room to optimally disperse the scent. Or in cases of high humidity, where scents tend to linger, the plug-in might not release as much scent in one burst, based on the data sent from the Nest.
 Philips also sees closer connections to users and data capture an essential part of their business strategy. The company is making inroads into the smart home via products such as its Hue smart lighting but is also a major player in the healthcare equipment market. According to Dale Wiggins, VP of the Philips HealthSuite Digital Platform, their FlexCare smart toothbrush:
It feeds into our goal of improving overall health care. By connecting our devices and modalities in the hospital or consumer environment, it provides more data that can be used to benefit our customers.
So industry incumbents such as P&G and Philips see smart toothbrushes and the broader application of IoT technologies to their product portfolios as adding extra functionality for users and building direct relationships with these customers via data capture by the apps. New entrants are coming at this market from a slightly different angle.
Beam Technologies, for example, which recently launched the Beam Brush, is adopting a data-first approach and linking with health insurance providers in the US to offer discounted dental insurance for diligent brushers:
People often refer to us as a toothbrush company, but we’re not. We’re actually not interested in toothbrushes at all. We’re interested in health data. In many ways, [data-tracking] is the entire point of the Beam Brush.
 Grush offers a Bluetooth toothbrush aimed at kids with a variety of downloadable games designed to encourage children to brush properly. The data captured by the games is then available to parents allowing them to check progress.
The still-to-be-released Prophix toothbrush has an HD camera which films the inside of your mouth as you brush Their privacy policy is interesting in that it is upfront about the amount of data they will be collecting and hints at possible in-app purchases:
We may collect and store Personal Information, Sensitive Information, and/or User Information that is voluntarily provided to us when you visit our Website, complete preregistration forms, register for an ONVI account through ONVI’s Website and/or App, activate your Device, use your Device, sync your Device with your account, complete surveys, upload pictures and/or messages in connection with your use of the Device and App, complete purchases, or customize and/or update your account. Specifically, the information with which you provide us may include, but is not limited to, your first name, last name, e-mail and physical addresses, gender, videos, photographs, certain health information/PHI, social media information, location (GPS) information, transmission data related to syncing a Device to an account, such as brush session data, App session data, motor speed, mobile phone manufacturer, operating system, App version, information regarding how you use and interact with the App, and when necessary, credit card information.
 The ARA toothbrush was announced earlier this year It’s main selling point seems to be the AI software embedded on a chip in the brush itself which learns from your brushing and adjust accordingly:
The brush’s AI learns its user’s habits to provide more accurate data. Patented deep learning algorithms are embedded directly inside the toothbrush on a low-power processor.Raw data from the sensors runs through the processor, enabling the system to learn your habits and refine accuracy the more it’s used.
It’s obviously early days for the smart toothbrush and it remains to be seen if many people actually want that level of sophistication when brushing their teeth. However, the combination of gamification, AI and sharing data with dentists shows how even the humble toothbrush can be part of the IoT. Perhaps this video of a demo of the Oral-B smart mirror shows how the bathroom of the future might look.

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Data storage costs and the IoT

data center costs

Are you clogging up our data center?

Interesting article in this morning’s FT (requires subscription) about the amount of energy used to power data centers. According to the author, Izabella Kaminska:

The information and communications technology (ICT) sector absorbs up to 10 per cent of the power resources of the UK’s National Grid. Of that, one-third of the power goes to supporting the network, one-third towards supporting our devices and the other third goes towards supporting data centers.

The solution, according to Kaminska is for data which is unstructured, not classified and not revisited after uploading to be deleted in the same way our brains forget things which are no longer important to us. The main offenders, she argues, are all the funny cat videos uploaded to YouTube and other sharing sites. Apparently, a few years ago it was pornography that was clogging up the internet but now it is more innocent content.

As the Internet of Things (IoT) starts to permeate our lives we can expect data storage to be an even greater issue. While much of this data will be structured and not have the storage requirements of large video files, it will be the sheer quantity of data flowing through the network that will challenge data center operators. However, I feel this is an issue where technology will solve the problem it has created. More efficient storage and access methods, greater energy efficiency of the servers and renewable energy sources will make incremental but important contributions. It is not clear that a system of better classified cat videos is practical at either the production or consumption ends of the chain.

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Internet of Things Statistics

IoT Installed Base growth

Finding “reliable” data about the installed base of Internet of Things (IoT) devices, market size and forecasts is not easy and can be expensive if you have to buy a commercial market report. However, there is quite a bit of free data out there which I have collated here. Creating IoT stats is notoriously difficult depending on accuracy of models, assumptions and definitions. Forecasts are often not much more than guesswork (although most analysts would not admit this publicly). However, by looking through a range of estimates from different providers it should be possible to get a rough idea of how the IoT market may look in the next few years. I have focused on providing links to the original sources where possible.

Feel free to contact me if I have missed anything and I’ll amend the list. (Updated 6 January 2017)

Internet of Things Statistics


Title: Internet of Things Spending Forecast to Grow 17.9% in 2016 Led by Manufacturing, Transportation, and Utilities Investments, According to New IDC Spending Guide

Date: 4 January 2017

Author: IDC

Summary: International Data Corporation (IDC) released an update to its Worldwide Semiannual Internet of Things Spending Guide report, which predicted IoT spending will reach US$1.29 trillion in 2020

Graphic: IDC IoT Market Share

Link: https://www.idc.com/getdoc.jsp?containerId=prUS42209117


Title: Machina Research expands the scope of its IoT forecasts and highlights a USD4 trillion revenue opportunity in 2025

Date: 3 May 2016

Author: Machina Research

Summary: “Machina Research comprehensively extends the coverage of its forecasts to include almost the entirety of the Internet of Things revenue opportunity, predicting it will rise from USD892 billion in 2015 to USD4 trillion in 2025.”

Graphic: n/a

Link: https://machinaresearch.com/news/machina-research-expands-the-scope-of-its-iot-forecasts-and-highlights-a-usd4-trillion-revenue-opportunity-in-2025/


Title: Gartner Says Worldwide IoT Security Spending to Reach $348 Million in 2016

Date: 25 April 2016

Author: Gartner

Summary: IoT security expenditure to 2018

Graphic: Internet of Things security expenditure

Link: http://www.gartner.com/newsroom/id/3291817


Title: Machina Research expands the scope of its IoT forecasts and highlights a USD4 trillion revenue opportunity in 2025

Date: 3 May 2016

Author: Machina Research

Summary: “Machina Research comprehensively extends the coverage of its forecasts to include almost the entirety of the Internet of Things revenue opportunity, predicting it will rise from USD892 billion in 2015 to USD4 trillion in 2025.”

Graphic: n/a

Link: https://machinaresearch.com/news/machina-research-expands-the-scope-of-its-iot-forecasts-and-highlights-a-usd4-trillion-revenue-opportunity-in-2025/


Title: IoT platforms: enabling the Internet of Things

Date: March 2016

Author: IHS

Summary: Forecast of global IoT installed base from 2015 to 2025

Graphic: IoT Devices Forecast

Link: https://www.ihs.com/Info/0416/internet-of-things.html


Title: Cloud Index White Paper

Date: 21 April 2016

Author: Cisco

Summary: “Globally, the data created by Internet of Everything (IoE) devices will reach 507.5 ZB per year (42.3 ZB per month) by 2019, up from 134.5 ZB per year (11.2 ZB per month) in 2014.
● Globally, the data created by IoE devices will be 269 times higher than the amount of data being transmitted to data centers from end-user devices and 49 times higher than total data center traffic by 2019.”

Graphic: n/a

Link: http://cisco.com/c/en/us/solutions/collateral/service-provider/global-cloud-index-gci/Cloud_Index_White_Paper.html


Title: IDC Forecasts Worldwide Shipments of Wearables to Surpass 200 Million in 2019, Driven by Strong Smartwatch Growth and the Emergence of Smarter Watches

Date: 17 March 2016

Author: IDC

Summary: “Worldwide shipments of wearable devices are expected to reach 110 million by the end of 2016 with 38.2% growth over the previous year. An expanding lineup of vendors combined with fast-growing consumer awareness and demand will generate double-digit growth throughout the 2015-2020 forecast period, culminating in shipments of 237.1 million wearable devices in 2020. The market will also be driven forward by the proliferation of new and different wearable products. Watch and wristband shipments will reach a combined total of 100 million shipments in 2016, up from 72.2 million in 2015.”

Graphic: n/a

Link: https://www.idc.com/getdoc.jsp?containerId=prUS41100116


Title: Gartner Says 6.4 Billion Connected “Things” Will Be in Use in 2016, Up 30 Percent From 2015

Date: 10 November 2015

Author: Gartner

Summary: “Gartner, Inc. forecasts that 6.4 billion connected things will be in use worldwide in 2016, up 30 percent from 2015, and will reach 20.8 billion by 2020. In 2016, 5.5 million new things will get connected every day.
Gartner estimates that the Internet of Things (IoT) will support total services spending of $235 billion in 2016, up 22 percent from 2015.”

Graphic: n/a

Link: http://www.gartner.com/newsroom/id/3165317


Title: IC Insights Raises Growth Forecast for IoT

Date: 16 July 2015

Author: IC Insights

Summary: Global IoT revenues by segment from 2012 to 2015

Graphic: IoT Installed base forecast

Link: http://www.icinsights.com/news/bulletins/Internet-Of-Things-Market-To-Nearly-Double-By-2019-/

 


Title: The Internet of Things: “Smart” Products Demand a Smart Strategy

Date: March 2015

Author: Woodside Capital Partners

Summary: Large (101 pages) PDF with lots of data from different sources.

Graphic: IoT Forecast Comparisons

Link: http://www.woodsidecap.com/wp-content/uploads/2015/03/WCP-IOT-M_and_A-REPORT-2015-3.pdf

 


Title: Internet of things: making the most of the second digital revolution

Date: 18 December 2014

Author: UK Government

Summary: The downloadable PDF contains some useful comparisons of estimates from the main IoT vendors and analysts. See pages 14 and 20

Graphic: Economic Value of Internet of Things

Link: https://www.gov.uk/government/publications/internet-of-things-blackett-review


Title: The Internet of Things: Sizing up the opportunity

Date: December 2014

Author: McKinsey & Co.

Summary: Installed base forecast to 2020 and value to global economy for 2025

Graphic: Internet of things forecast chart

Link: http://www.mckinsey.com/industries/high-tech/our-insights/the-internet-of-things-sizing-up-the-opportunity


Title: The ‘Internet of Things’ Will Be The World’s Most Massive Device Market And Save Companies Billions Of Dollars

Date: 18 November 2014

Author: Business Insider

Summary: Estimates of global installed base and annual growth to 2019

Graphic: IoT Installed Base growth

Link: http://uk.businessinsider.com/how-the-internet-of-things-market-will-grow-2014-10?r=US&IR=T


Title: What Exactly is the Internet of Things?

Date: March 2014

Author: Harbor Research

Summary: Slideshare deck with data on IoT devices shipments by sector and revenue estimates for those segments to 2020.

Graphic: IoT Device Shipments

Link: http://www.slideshare.net/harborresearch/harbor-researchs-infographic-on-the-internet-of-things-and-smart-services


Title: The Internet of Things: How the Next Evolution of the Internet Is Changing Everything

Date: April 2011

Author: Cisco

Summary: Downloadable PDF. Forecasts 50 billion connected devices by 2020

Graphic: Cisco 50 billion connected devices

Link: http://www.cisco.com/c/dam/en_us/about/ac79/docs/innov/IoT_IBSG_0411FINAL.pdf

 


Other Resources:

  1. For a good overview of paid-for market reports see this page from Postscapes.
  2. Forbes has a summary of market size estimates and forecasts (published in November 2016)

 

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