1. Webinar Internet Of Things — How To Make Money With It Stefan Ried, Ph.D., Vice President, Principal Analyst May 19, 2014. Call in at 10:55 a.m. Eastern time

2. © 2014 Forrester Research, Inc. Reproduction Prohibited2 Agenda › Digital products in the age of the customer › The connected world — Internet of Things (IoT) › The IoT business model dilemma › Crossing the mass-adoption chasm › Forrester’s IoT business model maturity model › Industry recommendations

3. © 2014 Forrester Research, Inc. Reproduction Prohibited3 Source: October 10, 2013, “Competitive Strategy In The Age Of The Customer” Forrester report We have entered the age of the customer

4. © 2014 Forrester Research, Inc. Reproduction Prohibited4 A traditional linear value chain Source: March 10, 2014, “The Future Of Business Is Digital” Forrester report

5. © 2014 Forrester Research, Inc. Reproduction Prohibited5 The BMW i Remote App shows car location, range, battery charge level, etc. Charging can be initiated remotely. The car has an SDK to develop third-party apps into the car’s dashboard and the smartphone app. Endress+Hauser Consult is a leading manufacturer of sensors. In addition to the traditional sensor hardware business (capex), it offers supply chain services (opex) based on connected sensors. This turns, for example, a low level in an oil tank into an order in a supplier’s SAP system. PhysicalDigital Digital products complement physical products

6. © 2014 Forrester Research, Inc. Reproduction Prohibited6 Dynamic ecosystems of value Source: March 10, 2014, “The Future Of Business Is Digital” Forrester report

7. © 2014 Forrester Research, Inc. Reproduction Prohibited7 ( DCX ) (DOX) IoT supports DCX and is a pillar of DOX Source: March 10, 2014, “The Future Of Business Is Digital” Forrester report

8. © 2014 Forrester Research, Inc. Reproduction Prohibited8 Most IoT Consumer cases Most IoT Enterprise cases Source: March 10, 2014, “The Future Of Business Is Digital” Forrester report A good IoT strategy avoids the digital dinosaur trap

9. © 2014 Forrester Research, Inc. Reproduction Prohibited9 Connected world systems from the macro to the micro Forrester defines the connected world as one where: Technologies enable objects and infrastructure to interact with monitoring, analytics, and control systems over Internet-style networks. Source: October 31, 2013, “Mapping The Connected World” Forrester report

10. © 2014 Forrester Research, Inc. Reproduction Prohibited10 Source: July 22, 2013, “The Connected Car” Forrester report and December 23, 2013 “The Internet Of Things Comes Home, Bit By Bit” Forrester report Technically, a lot is possible — but are there business cases?

11. © 2014 Forrester Research, Inc. Reproduction Prohibited11 Business outcomes: the goals that organizations have in mind when evaluating connected world solutions Market opportunities: the relative maturity of connected world solutions within specific industry contexts System operations: the (generalized) architecture and (typical) deployment sequence of connected world implementations Mapping IoT to business outcomes Source: October 31, 2013, “Mapping The Connected World” Forrester report

12. © 2014 Forrester Research, Inc. Reproduction Prohibited12 Ripeness of connected world opportunities varies by industry and application Source: October 31, 2013, “Mapping The Connected World” Forrester report

13. © 2014 Forrester Research, Inc. Reproduction Prohibited13 Source: October 31, 2013, “Mapping The Connected World” Forrester report Connected world vendors

14. © 2014 Forrester Research, Inc. Reproduction Prohibited14 Consumers have an appetite for home control, but uptake is low Source: December 23, 2013, “The Internet Of Things Comes Home, Bit By Bit” Forrester report

15. © 2014 Forrester Research, Inc. Reproduction Prohibited15 Enterprise adoption is low. Security and cost are the main concerns. IoT did not take off in enterprises until now Source: October 31, 2013, “Mapping The Connected World” Forrester report

16. © 2014 Forrester Research, Inc. Reproduction Prohibited16 Consumer Enterprise Mass adoption ✔ E.g., wearable computing devices Business models based on hardware sales are mostly collapsing because of price pressure. Most enterprise IoT use cases build on their own or dedicated things/devices and do not leverage an open device ecosystem. ✔ Enterprise and B2B IoT business models are sustainable once they are profitable, which does not happen for many due to high device cost. The IoT business model dilemma MOST IOT BUSINESS MODELS ARE UNSTABLE IN BOTH THE CONSUMER AND ENTERPRISE SPACE Sustainable business

17. Chicken or egg — device or business model — first?

18. © 2014 Forrester Research, Inc. Reproduction Prohibited18 Bring-your-own-thing will stimulate enterprise IoT business cases BYOD STIMULATED A CORPORATE SOFTWARE INVESTMENT FOR TABLETS Source: May 19, 2014, “Bring-Your-Own-Thing Enables The Digital Business” Forrester report

19. © 2014 Forrester Research, Inc. Reproduction Prohibited19 Source: May 19, 2014, “Bring-Your-Own-Thing Enables The Digital Business” Forrester report IoT has to overcome the mass-adoption chasm

20. © 2014 Forrester Research, Inc. Reproduction Prohibited20 Example: wearable computing/healthcare WEARABLE COMPUTING IS STILL DOMINATED BY CONSUMER BENEFITS OVER COMMERCIAL MODELS Source: May 19, 2014, “Bring-Your-Own-Thing Enables The Digital Business” Forrester report

21. © 2014 Forrester Research, Inc. Reproduction Prohibited21 Forrester’s IoT business model maturity model GET TO LEVEL 3 QUICKLY; PREPARE TO 4 AND 5 TO REACT TO Source: May 19, 2014, “Bring-Your-Own-Thing Enables The Digital Business” Forrester report

22. © 2014 Forrester Research, Inc. Reproduction Prohibited22 Health insurance: Work on incentive models for younger insured people based on wearable devices, and consider the third maturity step as a quick target. Also consider the cooperation with hardware vendors or home care products such as remote-accessible blood pressure measurement. Consumer products and appliances. Focus on getting a major market share in the next generation of IoT-enabled appliances. Partner with alliances such as Qivicon (Deutsche Telekom, Miele, Samsung, and others) or the joint initiative of ABB, Bosch, Cisco Systems, and LG Electronics or smart home “middleware” devices such as Revolv or Homee. Even if you don’t embrace a mixed hardware and services model, you need to make sure that as many of your brand’s devices as possible are brought into other vendors’ BYOT scenarios. Automotive or telco industries. Make sure you find, develop, and market systems of engagement with the help of BYOT momentum to achieve mass adoption as soon as possible. Automotive OEMs and telcos will fight for the ongoing service and customer relationships with owners of connected cars. Make sure your concept is open and considers a connected car and a connected home as one ecosystem. Both cars, with third-party smartphones and smart homes with many different connected devices, are a highly heterogeneous interoperability challenge. Your chance to innovate is a hybrid model of hardware and connected (cloud) services (e.g., Daimler’s car2go and moovel). Industry considerations Source: May 19, 2014, “Bring-Your-Own-Thing Enables The Digital Business” Forrester report

23. © 2014 Forrester Research, Inc. Reproduction Prohibited23 Discrete manufacturing industry. The ubiquitous connectivity accelerates industrial automation into Industry 4.0 business models.* Add to your core hardware business model a new service-only business branch. Your customers will expect BYOT openness for their existing assets. Process manufacturing industry. There are pilots and already real deployments of GPS- guided agricultural harvesting and sensored plant growth by Claas and Deutsche Telekom or even more advanced by John Deere (Deere & Company). However, the service providers might not deliver the full process alone and rely on a tractor from a local farmer running side by side to unload the corn. arvato Systems’ “farmpilot” is a blueprint for this. Based on this, the CIOs in these industries should look for interoperability and build an ecosystem. Cities, hospitals, and large infrastructure operations firms. There is a wide range of cost- saving business based in IoT, such as energy efficiency or environmental goals like emission reduction down to holistic smart city concepts. Additionally, encourage your citizens to bring their devices into your network as well. The geofencing of thousands of cell phones not only can save some parts of a detailed traffic-monitoring network, it can even be more predictive. If citizens share anonymized motion data, you will be able to predict traffic jams before they happen and redirect people. Blurring the lines between the industrialization of your own processes and the consumer benefits will create innovative citizen engagement scenarios. Industry considerations (cont.) Source: May 19, 2014, “Bring-Your-Own-Thing Enables The Digital Business” Forrester report *Industry 4.0 is a project in the high-tech strategy of the German government, which promotes the computerization of traditional industries such as manufacturing

24. © 2014 Forrester Research, Inc. Reproduction Prohibited24 Systems of record host transactions in the virtual world. Systems of engagement guide people in their physical world. Leverage the system of engagement momentum Systems of engagement move faster than systems of record. Source: November 16, 2012, “Great Mobile Experiences Are Built On Systems Of Engagement” Forrester report

25. Next steps:  Focus on systems of engagement.  CMO and CIO, DCX, and DOX: Deliver together your company’s digital business.  R&D of physical and digital products must merge.  CIOs are the moderators between CMOs and product development.

26. Thank you 26 Entire contents © 2009 Forrester Research, Inc. All rights reserved. Stefan Ried, Ph.D. +49 69.959.29856 +1 650.581.3844 sried@forrester.com blogs.forrester.com/stefan_ried forrester.com/Stefan-Ried Twitter: @StefanRied www.forrester.com

27. © 2014 Forrester Research, Inc. Reproduction Prohibited27 Back slides for Q&A

28. © 2014 Forrester Research, Inc. Reproduction Prohibited28 Consumers don’t want a smart home — they want to solve a problem Source: December 23, 2013, “The Internet Of Things Comes Home, Bit By Bit” Forrester report

29. © 2014 Forrester Research, Inc. Reproduction Prohibited29 No industry is immune to digital disruption Source: March 10, 2014, “The Future Of Business Is Digital” Forrester report

30. © 2014 Forrester Research, Inc. Reproduction Prohibited30 Digital technology is a critical driver of business strategy Source: March 10, 2014, “The Future Of Business Is Digital” Forrester report

31. © 2014 Forrester Research, Inc. Reproduction Prohibited31 Forrester Reader For iPad THE EASY WAY TO READ OUR RESEARCH — ANYTIME, ANYWHERE › Discover new content. › Read online or offline. › Highlight and share excerpts. Download at forrester.com/app or directly from the Apple App Store.