March 27, 2017
With Paul Miller
In March 2017, Bosch hosted its annual internet-of-things (IoT) conference, Bosch Connected World (BCW), in Berlin. Since last year, the event has doubled in size, attracting 2,500 attendees from businesses and vendors. This jump reflects the growing interest in IoT. The number of attendees, however, also highlights the relative immaturity of IoT compared with bigger technology themes. Despite being smaller than events such as GE’s Minds + Machines or Mobile World Congress, BCW has established itself as a premier IoT event, as it has a very distinct “IoT practitioner” feel to it. We took away some key observations for IoT practitioners from the event:
- To succeed in IoT, you must build and participate in open ecosystems. No vendor or end user can plan, build, and run end-to-end IoT operations that address the entire customer life cycle. This message comes through loud and clear at all the IoT events that we attend, be it IBM’s Genius of Things or GE’s Minds + Machines, and it was repeated by all the BCW speakers. The notion of coopetition was tangible, with Bosch emphasizing its partnerships with IBM, Software AG, Amazon, GE, SAP, and many more. Also noticeable was that all ecosystem participants are grappling with what it means for the shape of their business and their relationship with the customer.
- Software and data analytics is replacing the product. Bosch’s IoT strategy and vision is firmly built on placing software and data analytics at the center of customer value creation. Of course, IoT is not about software but about helping users make intelligent decisions. Hence, software in combination with data analytics will enhance connected products and create new revenue opportunities for Bosch and Bosch’s customers. For instance, agricultural equipment business Agco revealed at BCW that machine downtime is the biggest challenge for farmers. Bosch uses telematics to monitor the health of farm machinery and then connects the farmer to a dealer via the cloud. Bosch also helps integrate data into the farmer’s overall business by doing farm analysis — e.g., helping with crop usage, planting, and machine usage.
- Connectivity matters greatly for IoT, as smart assets need to become connected. Already, 50% of Bosch products are capable of being connected, and it has a target of hitting 100% by 2020. Bosch’s investments in ProSyst and FogHorn and its cooperation with Huawei, Nokia, and Sigfox for mobile broadband and low-power connectivity underline its awareness of the importance of connectivity and the need to design networks with edge computing in mind.
- An increasing distinction between IaaS and PaaS offerings is emerging. Bosch is offering both IaaS (Bosch IoT Cloud) and PaaS (Bosch IoT Suite). At BCW, Bosch emphasized its growing partnerships with IBM and AWS for its IoT Suite. We believe that Bosch IoT Cloud is unlikely to be pitched as an alternative to global or regional cloud providers. Instead, we see Bosch IoT Cloud becoming more of an internal capability for Bosch, with IoT Suite — running on various clouds — being the real differentiator for Bosch’s IoT offerings.
- Achieving cross-divisional and cross-silo collaboration is a tall order for IoT initiatives. Bosch rightly emphasizes the critical role of open source to drive collaboration. But as Aethon, a leader in delivery automation and tracking solutions, explained, IoT will only start to deliver real customer value if it helps to connect the “islands of automation,” such as waste removal, product testing, product shipping, and sub assembly with final assembly. For Bosch, the question is to what extent its own Bosch Software Innovation (BSI) division can act as a central enabler for collaboration across all of Bosch’s divisions or whether BSI will remain a lighthouse of excellence that Bosch can’t replicate in its other business units.
- AI ultimately needs to become the main differentiator for Bosch. At BCW, Amazon outlined how its virtuous customer experience cycle is central to everything that it is doing in its retailing activities. Artificial intelligence (AI) will be critical to support this customer experience cycle. Equally, AI and machine learning will bring together all of Bosch’s big data IoT activities and help redesign its business model. We’ve observed similar trends at vendors like IBM with Watson or at Hitachi with Pentaho. BCW underlined that all organizations must be careful not to confuse “right, clever, and necessary transformation” with “right, clever, and uniquely differentiating transformation.” Complacency and self-aggrandizement are the biggest enemies of successful digital transformation.
- Bosch needs to boost customer-facing awareness throughout its organization. IoT is about much more than cost control and operational efficiency initiatives. Bosch’s top management fully understands this. To successfully transform into a digital business and become a leading IoT player in the years ahead, all employees must internalize the fact that Bosch’s relationship with its customers is changing fundamentally, driven by IoT-powered service-based models. If Bosch employees lose sight of that, Bosch may lose the customer relationships that it already has. The net result will be disintermediation elsewhere in the value chain. Of course, this applies to all businesses. However, the stakes are particularly high for Bosch as an emerging global IoT orchestrator, so it must boost its customer-facing awareness.