Why data about things is worth more than things themselves

We will soon consume everything as a service

 
Visit any hipster coffee shop in San Francisco, New York or London and pause to enjoy the show. Beans are ground to a precise size by a fancy grinder, measured into the basket and converted at a specific pressure and temperature into a shot of espresso by an impressive machine – posing as a piece of industrial art – manufactured by firms like La Marzocco. To all intents it appears like any automated industrial process – the temperature at which coffee is extracted (and milk steamed) is manipulated by a PID controller, pressure is pre-set while precise scales and dosing mechanisms are used to accurately manage volumes and weights. 5 years ago if you had asked a barista to define an espresso they might have said: ‘a small, rich coffee with a creamy layer on top, of the kind typically found in Italy’. Now it’s a precise technical outcome: 60ml of purified water heated to a temperature of 92ºC and forced through 19g of precisely ground coffee at a pressure of 9-10 bars for about 25s.
 
Now imagine the data stream this process creates. All the measurements of weight, temperature, pressure, and how they change during the day in response to usage or ambient temperature and humidity. This can all be tracked and analysed, allowing new ideas and innovation to be programmed and tested. Fruit flavours can be emphasised, texture manipulated, different outcomes for different ultimate products – adding steamed milk or water, slow brewing or drinking as a shot. Throughout the process, a skilled barista can monitor the impact of each micro manipulation on the final product. Ah, you might think, here is a small example of the much-heralded innovation ushered in by the Internet of Things! The 4th industrial revolution comes to Hackney!
 

 
Every-thing as a Service…
 
Except…except, in this case, this process is not really about the thing. Data about things, it turns out, is more important than things themselves. It is actually more I-data-T than I-o-T. The quality of coffee as a raw material is, of course, important – but this is all about manipulating the process via the data trail that it creates.  And what’s interesting about data is it can be abstracted, manipulated, analysed and enhanced in a way that things can’t. And the results of all that activity can ultimately tell the first thing or a bigger group of things what to do to produce a desired outcome. In this way usage of physical things will be linked together to become services – and we believe that because technology makes data about things so readily available, we will increasingly expect every-thing as a service. The term IoT suggests connectivity – things connecting to the Internet – we’re suggesting it’s rather more about data about these things – collecting, combining, computing and controlling it – in order to provide a service, a sort of IoT-as-a-service, or more elegantly Everything as a Service (EaaS).
 
A few examples. Put sensors in cars and connect them to the Internet, and sure, they can send selfies to each other and blog about this season’s best colours for metallic paint. But take all the data they generate, process it and then turn cars into one element of a bigger mobility-as-a-service vision and goodbye Instavan and Pinmobile, hello Waymo, Uber and Lyft. In aerospace, you can instrument big jet engines, capture and process all the data and sell airlines predictive maintenance or even airplane availability rather than engines. Monitor the maturity of crops, their ripeness or even vulnerability to disease and sell farmers yields. Or manage continuous production processes, dark pools of manufacturing capacity and sell guaranteed delivery times, throughputs or flexibility. And at the pointy end of East London, add a lot of engineering and data to ground coffee and turn a cup of joe into a gourmet experience – with all the nuance of fine wine.
 
…will drive the next Industrial Revolution
 

 
This is great news for businesses and consumers out there for whom thing-usage and thing-management have been a distraction or who have had problems like poor asset utilization. Now you will have more choice, greater flexibility and reliability – consume just what you want, how you want, when you need it. You used to have to buy cars, tractors and machine tools – now you can buy transport, harvests and a new product line. You used to have all the capital expense upfront, and then have all the operating costs and maintenance to commit to. Lots of things you weren’t expert in had to be dealt with. Businesses had departments doing stuff that was a distraction from the core mission. Now you can just pay for the value you consume as you need it.
 
And of course, it’s also good news for all the innovative big data, AI, VR and sensor companies out there that are identifying innovative new ways to interpret data streams and collapse historical business models. Industries are going to be atomised and rebuilt as digital-first outcome-centric services. In fact, we believe that rather than robots taking everyone’s jobs, this revolution will unlock a massive productivity dividend and democratise access to experiences in the same way the first Industrial Revolution did – things-as-a-service make thing outcomes cheaper and broadly available. One of the largest value creation opportunities in history is just getting started.
 
But there is potentially bad news for traditional thing-producers as we see a massive value-shift from thing-value to data and service value. Asset utilisation for example – if a car is unused 96% of the time, turning it into a service increases usage perhaps 10 or 20 fold, so you might need 10% of the number of cars to deliver the same market utility. The same applies to any other under-used things, be they power washers or ball gowns. So even if you make really, really, really nice things, it would be good to adopt a healthy dose of paranoia about having a good EaaS strategy. Because in the transformation from things to data-about-things to services, the people who know about data and services are probably going to win. Oh and by the way, in this context, we believe lots of stuff – including experts, drugs and much of what we think of as traditional in-person services – are things also.
 
So it’s as good a day as any to join the revolution – do you know what your things are doing?

Paul McNabb

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