How AI is shaping the IoT

October 10, 2016

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Jenny Fielding of the Techstars accelerator on why the world needs a smarter IoT that will move from collecting data to delivering actionable insights.

 

What does the future of the internet of things (IoT) look like? Answering that question is top of mind for Jenny Fielding, IoT managing director at Techstars global accelerator. In this role, Fielding invests in and mentors IoT startups through the organization’s annual New York–based boot camp program. Its third such program kicked off a few weeks ago and focuses on the industrial side of IoT. (PwC is a corporate partner of the program.) Fielding believes the key to success there—and in all markets—is artificial intelligence and machine learning that enable action. At the same time, she sees interoperability and security as critical challenges to overcome.


PwC: Your program is in its third year. What were your results from the first two?

Jenny Fielding: The first program focused on consumer IoT applications. Companies that graduated from that program have done well in fundraising and going to market. In the second program, we experimented with B2B [business-to-business] applications of IoT. In this third program, we’re experimenting with a new thesis around B2B and focusing a bit more on industrial applications. Our portfolio now has between 50 and 60 IoT companies in it, depending on how you define IoT (that day!). The definition seems to change all the time.

We’ve had some companies in our portfolio that are finding success in the consumer market. Sphero is the company that made the toy version of the BB-8 Droid, which was part of the movie Star Wars: The Force Awakens. We also had a company called Revolv, which was in the home automation market and was acquired. A key trend fueling consumer applications is that people have started feeling more comfortable that startups can deliver hardware solutions and delight customers through consumer hardware.

We all started thinking that if this success can happen on the consumer side, it can happen on the B2B and industrial side. That’s been the hypothesis. I don’t think it’s necessarily been proven—I haven’t seen too many B2B companies scale yet—but I’m optimistic about it.

“A key trend fueling consumer applications is that people have started feeling more comfortable that startups can deliver hardware solutions and delight customers through consumer hardware.”


PwC: How do the challenges of building IoT technology for the industrial market differ from those in the consumer market?

Jenny Fielding: Interoperability and security issues in a connected home environment are really just an annoyance right now. These issues are definitely bigger on the industrial side. If an organization’s devices can’t speak to each other, that lack of interoperability is a real problem. Security is also a bigger issue. If a train breaks down or equipment stops working because the software isn’t up to par, those events carry some big consequences. There’s more opportunity in B2B, but there’s also more risk.


PwC: What are some of the leading examples of innovation you’ve seen in your program so far?

Jenny Fielding: We have had many. For example, we had a drone company called Skyspecs that was really a software company involved in developing collision avoidance software by using sensors. They put the technology in a drone, but they could deploy it in any type of hardware. We also had a company called Filament, which develops wireless mesh networks and helps companies to connect their factory floors via a direct connection, as opposed to sending everything to the cloud, for example. Another company used beacons in event spaces to track and to engage with attendees. We’ve just started to see the tip of the iceberg for B2B solutions.


PwC: Right now, the center of gravity in industrial IoT seems to be in predicting failure, as the biggest cost for most businesses is unanticipated failure. It’s important to know ahead of time if something will fail, so you can intervene. Is that your experience in B2B?

Jenny Fielding: That was the 1.0 scenario. For example, in the consumer market, the connected thermostats were really about a person’s immediate comfort. Now, devices like the Echo represent a second iteration, which is more about learning and AI [artificial intelligence]. I think that same kind of shift is happening in the B2B industrial market. It’s not just about predicting failures but rather about learning the industrial environment to get smarter. I think the next iteration is really AI. Many startups are focusing on neural networks, AI, and machine learning. People already can extract too much data through sensors. It’s really about what happens next.


PwC: Among the companies you’re working with, are they developing solutions for a particular vertical, or are they operating across multiple verticals?

Jenny Fielding: Right now, most are in individual verticals, but this situation will evolve over the next two years. I’m already seeing a bunch of startups that say, “Yes, we work in healthcare and we work in advanced manufacturing, and all of this work is based on our core technology.” A few years ago an investor would say, “Well, you’re really unfocused.” But now the core technology is really about AI. It doesn’t matter what the distribution point is.

It’s the same as focusing on mobile companies in 2006, when mobile was a vertical. Now everything is mobile. My theory is that IoT will follow the same path as mobile, as a category that has gone away, because everything will be IoT. Without getting too philosophical, I think that the core of IoT is really about the software and not the device itself.


PwC: What do you hope to see develop in this industry in the next two years?

Jenny Fielding: I hope the standards and interoperability issues will be sorted out. I’m not super hopeful that they will be, but one of the things holding all of us back is that none of these devices can talk to one another. That is actually a bad experience for the end user, on both the consumer and the industrial side.

The other issue is security. While today people will be okay if personally they have compromised security, on a larger level that starts getting very uncomfortable. I think more startups will work on security solutions, because that is an integral part of the ecosystem.


PwC: Do you agree that building AI into products represents a very big change?

Jenny Fielding: People are saying, “Well, the connected home is connected, but it’s not smart.” It’s definitely not a smart home. It can tell a person what’s happening, but it can’t really do much about it. Just because a system presents a dashboard of data to the end user doesn’t make it useful. Does it matter if I know how much energy the building is using? Am I really going to pay every month to see that? I could ask the same question about all the air quality monitors. So that is the air quality—now what?

AI has the ability to provide the next step, which is the action. Don’t just tell me that something is wrong. Fix it. AI is really the key to generating actionable insights around any type of IoT product. We should expect things to get smarter as AI gets embedded into the solutions.

“AI has the ability to provide the next step, which is the action. Don’t just tell me that something is wrong. Fix it.”

 

PwC: What excites you most about the road ahead?

Jenny Fielding: I’m most excited about the idea of smart cities. IoT has the potential to work on some big problems beyond turning a light switch on and off. But I’m nervous about selling into governments and cities. The sales cycle is long and bureaucracy is high. Because of all those layers, can people really change cities quickly enough by using smart technology? The same thing applies to enterprise settings. Manufacturers are slow. Car companies are slow. Consumer adoption has been quick. So the question is, can innovators really find those early adopters within the enterprise and industrial world?

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Chris Curran

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