Saturday, January 24, 2015

The Internet of Things, Big Data, and John Deere

What is the internet of things? It's essentially the proliferation of smart products with connectivity and data sharing capabilities that are changing the way we interact with them and the rest of the world. We've all experienced IOT via smartphones, but the next generation of smart products will include our cars, homes, and appliances. A recent Harvard a Business Review article discusses what this means for the future of industry and the economy: 

How Smart, Connected products are Transforming the Competition by Porter and Heppelmann (the same porter of Porter's 5 competitive forces) : 

"IT is becoming an integral part of the product itself. Embedded sensors, processors, software, and connectivity in products (in effect, computers are being put inside products), coupled with a product cloud in which product data is stored and analyzed and some applications are run, are driving dramatic improvements in product functionality and performance....As products continue to communicate and collaborate in networks, which are expanding both in number and diversity, many companies will have to reexamine their core mission and value proposition"

In the article, they view how IOT is reshaping the competitive framework through the lense of Porter's five competitive forces. 

HBR continually uses John Deere as a case study example of a firm that is leading the industry leveraging big data and analytics as a successful model for an IOT strategy, particularly the integration of IOT applications through connected tractors and implements. So, the competitive space expands from a singular focus on a line of equipment, to optimization of performance and interoperability within a connected system of systems: 

"The function of one product is optimized with other related products...The manufacturer can now offer a package of connected equipment and related services that optimize overall results. Thus in the farm example, the industry expands from tractor manufacturing to farm equipment optimization."

A 'system of systems' approach means not only smart connected tractors and implements, but layers of connectivity and data related to weather, crop prices, and agronomics. That changes value proposition not just for the farm implement business, but also the seed, input, sales, and crop consulting as well. When you think about the IOT, suddenly Monsanto's purchase of Climate Corporation make sense. Suddenly the competitive landscape has changed in agriculture. Both Monsanto and John Deere are offering advanced analytic and agronomics consulting services based on the big data generated from the IOT. John Deere has found value creation in these expanded economies of scope given the date generated from their equipment. Seed companies see added value in optimizing and developing customized genetics as farmers begin to farm (collectin data) literally inch by inch (vs field by field). Both new alliances and rivalrys are being drawn between what was once rather distinct lines of business. 

And, as the HBR article notes, there is a lot of opportunity in the new era of Big Data and the IOT.  The convergence of biotechnology, genomics, and big data has major implications for economic development as well as environmental sustainability. 

Additional Reading:

This article does a great job breaking down insight from the HBR paper: How John Deere is Using APIs to Grow the World's Food Supply  
From the Motley Fool: The Internet of Things is Changing How Your Food is Grown

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