Can Asian, EU companies win the IoT?

Jouko Ahvenainen/Grow VC Group
04 Jun 2013
00:00

Consumer internet ecosystems are dominated by American, especially Silicon Valley based, companies. In China there are large, local Chinese services. But it has been a really challenging market for many Asian and European companies to create international success stories. Can Machine-to-Machine solutions and the Internet of Things, IoT, be another case? We have reasons to expect so.

American culture has always been consumer and consumption oriented. It has helped build many companies and services that are really tailored to consumers. Mobile internet and the related ecosystem was originally led by many non-American companies, like Nokia, Symbian, NTT DoCoMo and several other carriers. Now Google, Apple and to a certain extent Microsoft, dominate the mobile internet ecosystem.

Non-American companies have failed to build a significant role in the global internet and mobile internet ecosystems. There can be several reasons; probably aspects such as too much control on everything (walled gardens), too high revenue shares (e.g. carriers often wanted the majority of revenue from content or applications), too much trust placed in slow standardization work and not the right type of competence to build global ecosystem businesses.

The Internet of Things is now emerging. McKinsey have just estimated that its potential economic impact will be $2.7-$6.2 trillion annually (in 2025), the 3rd biggest disruptive technology after mobile internet and automation of knowledge work – making it larger than cloud technologies. We can simplify IoT is an opportunity at least for four types of companies: 1) Ecosystem providers that offer operating systems, connectivity, centralized cloud services and data centers, 2) equipment manufacturers, e.g. car, machine and solution manufacturers, 3) B2B2C solution providers, e.g. make M2M components and software to equipment manufacturers, and 4) consumer application developers, e.g. those that make applications that can utilize data from different sensors and control different devices.

Asian and European companies are strong in the manufacturing industry, in machines and consumer equipment, and also in areas like logistics and process optimization. Telecom carriers also have a good opportunity to play an important role in the ecosystem business. IoT can be a significant business opportunity for Asian and European carriers, industry companies and B2B2C startups that find larger partners.

But it’s important to learn from past experiences how to create a successful network businesses. It probably means open ecosystems and platforms, large developer communities, scalable solutions and business models, fair revenue share to all parties, and fast development cycles - not merely waiting for standards to be created. Google is already now strongly entering this area with its ecosystems, devices and cars. There will be a fierce race in the Internet of Things, but we have reasons to anticipate it will be a global business with strong players around the world.

Jouko Ahvenainen is serial-entrepreneur and co-founder of Grow VC Group (growvc.com), a new funding solution. In the 1990s Jouko worked for Nokia in Europe and Asia, and then lead the 3G practice at Capgemini globally. The last 12 years Jouko has been an entrepreneur and investor.

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