According to research, by 2020, annual revenues could exceed $450 billion for the IoT vendors selling the hardware, software and comprehensive solutions that will make up the Internet of Things. Vendors should base these decisions on a clear understanding of customer needs and the competitive environment within the battlegrounds that are emerging. As they form and implement their strategies, executives should try to avoid several common pitfalls:

 

1. Spreading Investment Too Thin

According to research, more than 80% of the vendors are investing in solutions targeted at four or more industries, and 45% are deciding where to prioritize. By casting their net too wide, vendors will miss the mark and develop solutions that are not tailored enough for early adoption. A more pragmatic approach is to focus on a particular battleground, select three to five specific use cases and develop solutions targeted at those, with longer-term plans to expand focus. Leaders take this portfolio approach, balancing both short and long-term bets.

 

2. Lacking Clarity On The Source Of Profits

Profits will accrue disproportionately to certain layers, with more than three-quarters coming from cloud, applications, analytics, network, systems-integration and data services. Whether in the enterprise, industrial or consumer space, vendors must have a solid plan for services and analytics solutions, either alone or with a set of partners. And for those vendors with broader scope, choosing solutions wisely and investing sufficiently in those areas are critical.

 

3. Delivering With A Traditional Ingredient Model

Vendors often expect customers to integrate their standalone products and services, which creates challenges in these early days. Instead, vendors could address customer barriers such as integration requirements, interoperability and lack of internal expertise by providing pre-integrated, end-to-end solutions. They can tailor their offerings to attract partners who help develop proofs of concept with flagship customers to showcase a new use.

 

4. Underestimating The Funding Required To Achieve Scale

IoT has attracted significant M&A activity, and on an average, these leaders are investing about twice as much in acquisitions as they are in building up internal capabilities. Despite this, vendors underestimate the amount of investment required to develop an offering, innovate continuously and go to market. Prominent telcos, device manufacturers, and operational technology vendors are investing across the stack with acquisitions. But unless these companies work with others, they will either need to invest significantly more than anticipated, or they will fail to compete successfully against the largest incumbent analytics vendors.

 

5. Repurposing Most Talent From Existing Businesses

Vendors often approach new markets with existing talent, but here they need talent with new capabilities, industry expertise and entrepreneurial experience. In a recent survey, only 10% of respondents said that they have the right people in the right roles to make the most of IoT opportunities. Companies need to hire new talent that better understands industry requirements and can work closely with partners to drive early adoptions.

 

As executives form strategies, they should look beyond their traditional offerings, understand the competitive dynamics of the battleground and formulate action plans that avoid the common pitfalls.