iot community - masstlc - harvard business school joint open forum

Smart, Connected Products: Which locations will deliver the production

technology of the 21st century?

WorkshopHarvard Business School

September 24, 2015

Dr. Christian Ketels, Principal AssociateRich Bryden, Director of Information ProductsDanny Bressler, Research AssociateInstitute for Strategy and CompetitivenessHarvard Business School

Copyright 2015 © Professor Michael E. Porter22015 SCP Boston – HBS Institute for Strategy and Competitiveness

Establishing Boston as the leading hotspot for IoT-enabling technologies


? • What are ‘IoT enabling technologies’?• What is a cluster in ‘IoT enabling technologies’?

• What is Boston’s position relative to rival locations in ‘IoT enabling technologies’?

• What are Boston’s specific strengths and weaknesses?

• What is the position in this market that Boston should/could aspire for?

• What are the actions that Boston should take to achieve this position?


Sources: Fortune, Forbes, Financial Times, Economic Times of India, Wall Street Journal, Pulse, Harvard Business Review Network World, Manfucaturing.net

Internet of Things: Dominating News Headlines


Internet of Things: Huge Economic Impact Forecasted

• Gartner: IoT product and service suppliers will generate incremental revenue exceeding $300 billion in 2020

• IDC: Estimates that the “IoT solutions” market will grow from $1.9 trillion in 2013 to $7.1 trillion by 2020

• McKinsey: Published a Report “The Internet of Things: Mapping the Value Beyond the Hype”, in which they estimate that the IoT could have an economic impact of up to $11.1 Trillion by 2025

• GE: The “Industrial Internet” has the potential to add $10 to $15 trillion to global GDP over the next 20 years

• Cisco: $19 trillion forecast for the economic value created by the “Internet of Everything” over the course of the next decade


Internet of Things: Selected Challenges

• Standards - Without agreement on key standards for communication between the different elements of the SCP system market growth will be limited

• Skills – The skills needed to design, sell, and service smart, connected products are in high demand but short supply

• Security – Without credible security solutions markets will be held back by worried consumers and firms facing liability risks

• Infrastructure – Without sufficient capacity in the internet/ communication networks increasingly higher bandwidth SCP solutions might not be feasible


From Internet of Things to Smart Connected ProductsDifferent Perspectives

How Smart, Connected Products are Transforming Companies

Where are the Emerging Hotspots in Smart, Connected Products Technology?

Markets Companies Locations


? • What are ‘IoT enabling technologies’?• What is a cluster in ‘IoT enabling

technologies’?



• What is the position in this market that Boston should/could aspire?



Towards A Cluster-View of IoT-Enabled Technologies

1. What is the core of the cluster that we are interested in, i.e. the central product or service it provides?

2. What are the relevant economic activities that together drive IoT-enabled products and services?

3. What are the linkages between them; where are there significant benefits of geographic proximity between them?


Products vs Production Technology

Smart, Connected Products

Smart, Connected Products

Production Technology

Many end-product (and service) industries…

…served by one new production technology for the digital age


What Smart, Connected Products (SCPs) Need:The Technology Stack

Identity & SecurityTools that manage user authentication and system access, as well as secure the product, connectivity, and the product cloud

External Information SourcesA gateway for information from external sources –such as weather, traffic, commodity and energy prices, social media, and geo-mapping – that inform product capabilities

Network Communication

Product Data Database

Smart ProductApplications

Rules/Analytics Engine

Application Platform

The protocols that enable communications between the product and the cloud (cellular, Wi-Fi, Bluetooth, others)

Big data database system that enables aggregation, normalization, and management of real-time and historical product data

Application development and execution environment enabling rapid creation of smart, connected business applications using data access, visualization, and run-time tools

The rules, business logic, and big data analytical capabilities that populate the algorithms involved in product operation and reveal new product insights

Software applications running on remote servers that manage the monitoring, control, optimization, and autonomous operation functions

PRODUCT

Product Hardware

Embedded sensors, processors, and connectivity port/antennas supplementing traditional mechanical and electrical components

Product Software

An embedded operating system, onboard software applications, enhanced user interface, and product control components

Integration with Business SystemsTools that integrate data from smart, connected products with core enterprise business systems such as ERP, CRM, and PLM

COMMUNICATIONS

PRODUCT CLOUD

Source: Porter/Heppelmann, 2014


Product

Smart Connected Products Technology

Product Cloud

Application Platforms

Smart Product Applications

Rules/Analytics Engines

Smart Connected Product Hardware (e.g sensors, chipsets)

Smart Connected Product Software

Physical Product

Communications

Network Hardware (e.g commsboards, product base stations)

Middleware/ Service Delivery Platform

Technical Services

Business Systems IntegrationIdentity and

Security

Big Data Analytics

Business ServicesSelected Product Verticals

Agriculture

Automotive

Medical Devices

Heavy Machinery

Tourism

Apparel

Aerospace & Defense

Distribution

Electric Power

Lighting

Recreational and Small Electric Goods

Research and Educational Institutions

Institutions for Collaboration

Insurance

Transportation and Logistics

Communications Equipment / Services

Universities

Research Institutions

Technology Organizations

Standards Organizations

Who is Delivering the Technology for SCPs? The Technology Stack Ecosystem

Supporting Infrastructure Financing – Banks

and VC/PEBusiness

Consultants

Lawyers

Data Centers/ Computing

Network Service Providers


Local Linkages Within the Technology StackCore Activities

Product


Product Cloud

Application Platforms

Smart Product Applications

Rules/Analytics Engines

Smart Connected Product Hardware (e.g sensors, chipsets)

Smart Connected Product Software

Physical Product

Communications

Network Hardware (e.g commsboards, product base stations)

Middleware/ Service Delivery Platform

Drivers of local linkages:General categories• Use of similar specialized skills and

other local business environment conditions

• Existence of deep and complex input/output relationships

• Meaningful knowledge spillovers

Linkages in the Technology Stack: Initial hypotheses• Strong linkages across most

elements of the technology stack, with the possible exception of communication network hardware

• All types of linkages relevant


Local Linkages Within the Technology StackRelated and Supporting Activities

Drivers of local linkages:General categories• Use of similar specialized skills and

other local business environment conditions

• Existence of deep and complex input/output relationships

• Meaningful knowledge spillovers

Linkages in the Technology Stack Ecosystem: Initial hypotheses• Strong local linkages of core activities

to technical services• Medium local linkages to specialized

business services and productverticals

• Weak to medium local linkages to supporting infrastructure providers

ProductProduct Cloud Communications

Technical Services

Business Systems IntegrationIdentity and

Security

Big Data Analytics

Business ServicesSupporting Infrastructure Financing – Banks

and VC/PEBusiness

Consultants

Lawyers

Data Centers/ Computing

Network Service Providers

Product Verticals



The Nature of Smart, Connected Products ClustersOperationalizing the Idea

Information Technology and Analytical Instruments• Semiconductor Machinery Manufacturing • Photographic and Photocopying Equipment Manufacturing • Electronic Computer Manufacturing• Computer Storage Device Manufacturing• Computer Terminals and Other Computer Peripheral Manufacturing • Bare Printed Circuit Board Manufacturing• Semiconductor and Related Device Manufacturing• Electronic Coil, Transformer, and Other Inductor Manufacturing• Electronic Connector Manufacturing• Printed Circuit Assembly (Electronic Assembly) Manufacturing• Other Electronic Component Manufacturing• Software Publishers

Business Services

• Scientific and Technical Consulting Services• Lessors of Nonfinancial Intangible Assets (except Copyrighted Works)• Data Processing, Hosting, and Related Services• Custom Computer Programming Services• Computer Systems Design Services• Computer Facilities Management Services• Other Computer Related Services

Education and Knowledge Creation• Research and Development in the Physical, Engineering, and Life

Sciences (except Biotechnology)

The SCP Technology Cluster – Core Industries


Questions For You

• Does this conceptualization of the cluster as ‘Production Technology for IoT” make sense to you?

• Are we capturing the relevant industries/activities? What’s missing?

• Where do local linkages (tight collaboration) and spill-overs (including tapping into the same pool of skilled labor, intense local competition driving innovation, etc.) matter the most?





• What is the position in this market that Boston should/could aspire?



Smart Connected Products: Boston Area Companies

PLATFORM

NETWORK AND COMMUNICATIONS

PRODUCT COMPONENTS

APPLICATIONS, ANALYTICS, DATABASE


Benchmarking by IoT Company HQs

But how many of them are focused on

production technology vs products?


0K

50K

100K

150K

200K

250K

300K

Employment in SCP Related Clusters, Selected IndustriesTop Regions

Business Services: #5Education and Knowledge Creation: #4Information Technology and Analytical Instruments: #3

The Boston Economic Area has a strong position in the set of industries broadly related to the SCP technology stack.Boston’s ranks across the 179 U.S. Economic Areas:


Information Technology and Analytical Instruments

Educationand

KnowledgeCreation

Business Services

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

33,2232.45

2,9016.09

3,8314.81

5,2723.36

1,4302.17

5,0981.81

1,1001.46

2,7651.42

3752.20

9121.52 595

1.36

4770.59

34,6492.26

24,2631.57

34,3641.53

23,0521.17

2,1801.88

4,3961.25 3,663

1.10

3,0710.62

Boston Area Specialization in SCP Related Industries

EmploymentLocation Quotient

BusinessServices

Education and Knowledge

Creation



Employment and Specialization in SCP Related ClustersTop Regions

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8Location Quotient

20,000

25,000

30,000

35,000

40,000

50,000

60,000

70,000

80,000

100,000

120,000

150,000

175,000

200,000

250,000

300,000

Boston, MA

Boston, MA

Washington, DC

San Jose, CA

San Jose, CA

San Jose, CA

Washington, DC

Washington, DC

New York, NY

New York, NY

New York, NY

Boston, MA

Los Angeles, CA

Los Angeles, CA

Los Angeles, CA

Business Services

Education and Knowledge Creation



SCP-Related Skill Base by Economic AreasMay 2014, Economic Areas with >100K SCP Jobs

2.6% 5.6% 6.6% 2.1% 4.6% 3.4% 6.2% 2.5% 2.7%Percent of Total Employment

Source: Bureau of Labor Statistics

Boston has the 5th

highest total number of key SCP jobs and the 4th

highest concentration of key SCP jobs

471K

399K

342K

268K245K

216K 203K 202K

135K

New York WashingtonDC

SF andSiliconValley

Los Angeles Boston Dallas Seattle Chicago Philadelphia


Patenting in SCP Related IndustriesTop Economic Areas

Patents in SCP Related Industries*(1998-2013, Metros with more than 10K SCP Patents)

Source: US Cluster Mapping Project DataNotes: *SCP Related Industries include Information Technology and Analytical Instruments, Education and Knowledge Creation, and Business Services;

>99% of the patents were in IT and Analytical Instruments in all 5 Economic Areas

88K

30K21K 20K 20K 17K

13K 11K

SF and SiliconValley

New York Boston Seattle Los Angeles Austin Minneapolis Portland

SCP Patents Per 10K Employees 235 33 56 111 29 229 51 96

Boston has the 3rd highest total number of patents in SCP related industries, but

less concentration per employee than other key areas

including SF and Silicon Valley, Seattle, and Austin


Boston Smart, Connected Products ClusterSummary Assesment

Demand Conditions

Factor(Input)

Conditions

Context for Firm Strategy and

Rivalry

Related and Supporting Industries

• A strong culture of innovation wherecompanies compete using cutting-edge technologies (reflected by the large number of patents in SCP related industries), though lagging behind Silicon Valley in terms of scale, and Seattle and Austin in terms of concentration

• Companies both compete and cooperateintensely

• A mix of large companies with scale and resources and small companies andstartups with dynamism and new ideas

• A sophisticated, young, tech-savvy populace that is a rigorous testing-groundfor SCP applications

• Boston has a world-leading life-sciences cluster, which has a number of potential SCP applications

• Strong presence of supporting industries thatfacilitate growth of the SCP cluster:

• Business services - financing, consulting, law

• Technical Services - identity and security, big data analytics, business systems integration

• Supporting Infrastructure – Data centers/ computing, enterprise-scale network

• Lack of HQs from the “heaviest hitters” in technology with the largest R&D budgets (e.g. Google, Amazon)

+ Access to the right talent to produce SCP technology, including talent in computer and mathematical occupations, electronic and computer engineering, and computer and information systems management

+ Leading educational and researchinstitutions in IT, robotics, engineering, etc.

+ Research institutions that have a strong focus on applied science and industry partnerships (e.g. Auto-ID lab, Lincoln lab)

-

+

+/-

++

+

+


Boston’s Position as a SCP Technology Cluster:Our View so Far

• Boston has strong companies active in the industry, a solid to leading position in many of the relevant industries and clusters, and strong cluster-specific business environment conditions

• Overall, Boston is positioned among the leading locations vying to be the hotspots for SCP technology; it is, however, not better positioned than key rivals like Silicon Valley

• Success is not a foregone conclusion; rivalry is intense

• Boston has an opportunity to take the lead if it focuses its efforts more strongly than others on this specific part of the broader market opportunity offered by digitalization – Need a strategy, not just a few good policies


Questions for You

• Does this characterization of Boston’s positioning in this space broadly match your perceptions?

• Who are the key rival locations Boston is competing with?

• What do you see as Boston’s key strengths, key weaknesses?





• What is the position in this market that Boston should/could aspire for?



Internet of Things: A Global Race for the TopIoT Week ‘15

Lisbon, PortugalPromotes international dialogue

and cooperation on the IoTbetween diverse actors from

industry, research and government and across sectors

Internet of Things Tech Forum ‘15

Frankfurt, GermanyBrings in players in

Industry from across the industry to discuss IoTbusiness opportunities

IoT World ‘15San Francisco, CA

“The World’s largest and most comprehensive IoT event”

aimed at creating partnerships and developing ecosystems to monetize the IoT Revolution

IoT European Summit ‘15Brussels, Belgium

Bringing together European decision makers and leading

industry stakeholders to foster IoT’srole in building a “more inclusive, smarter and competitive Europe”

IoT Evolution Experience ‘15Miami, FL

Bringing together a worldwide community of IoT technologists to

share how IoT can transform business

IoT Connect ‘14Sydney, Australia

Brings together key innovators, platforms and telecoms to examine synergies between IoT ecosystems such as smart cities, home, health,

wearables, car and agriculture

IoT Korea ‘14Seoul, Korea

Showcases products from the

Industrial Products Industry

Internet of Things Global Summit ‘14

Washington, DCBringing together key

stakeholders to discuss critical policy dimensions and

numerous commercial opportunities surrounding IoT

Sources: Event Websites

International Conference on Cloud Computing and IoT ‘14

Changchun, ChinaPromotes Bringing together business

and academic leaders to discuss recent advances in cloud computing,

big data, and IoT

LiveWorx ‘15Boston, MA

“Bringing together industry leaders to share real-world successes with IoT and, together, shape the future of this technology and business as

we know it.”

LiveWorx Europe ’15Stuttgart, Germany

“The fastest-growing network of pan-European product

development, service and IoT leaders who are transforming their businesses to gain a competitive advantage in the marketplace.”


Mobilizing the SCP Technology Cluster

• Most existing Internet of Things-initiatives focus on– Helping start-ups that produce SCPs– Helping established industries and firms to turn their products into SCPs

• This will drive, but not by itself serve, the demand for SCP technology to produce these new SCPs

• Boston has an opportunity to target this SCP technology market


Thinking About Positioning

• Successful positioning is about finding (attractive) market segments where rivals either can not or do not want to compete; it builds on finding or creating trade-offs across serving different market segments

Focus on IoT-enabled products and services for the end consumer

marketFocus on IoT-solutions in a specific set of existing

industries

Focus on launching and growing start-ups in the

emerging IoT space

Focus on the enabling technology that

companies providing IoT-enabled products and

services need


Ideas for Boston’s SCP Technology Cluster

• Harvard SCP Technology Science Park

• Skill development programs

• Global standards initiative

• Test beds, living labs, competitions …

• ‘Product vertical’-specific collaboration projects

• …


Questions for You

• What are relevant segments in this market?

• Where do you see opportunities for creating ‘trade-offs’ by choosing a specific market segment to serve?

• What should be done to make Boston a more attractive location for the SCP Technology cluster? By whom?

• How does a stronger Boston SCP cluster matter to you and your company?


Back-Up


967K699K

523K 481K 411K182K 145K 103K 35K 25K

166K 87K

447K

4.27M

SoftwareDevelopers,Applications

ComputerSystemsAnalysts

SoftwareDevelopers,

SystemsSoftware

Network andComputerSystems

Administrators

ComputerProgrammers

ComputerNetwork

Architects

DatabaseAdministrators

InformationSecurityAnalysts

Statisticians Computer andInformationResearchScientists

ElectronicsEngineers

ComputerHardwareEngineers

Computer andInformation

SystemsManagers

Total

Skill Base of an SCP Technology Cluster SCP-related Occupations, May 2014

Jobs in Computer and Mathematical Occupations(3.57M Jobs; 2.1% of National Labor Force)

Jobs in Engineering Occupations(253K Jobs; 0.2% of National Labor Force)

Jobs in Management Occupations(447K Jobs; 0.3% of National Labor Force)

In total, jobs in key occupations for an SCP technology cluster make up 4.27M jobs or 2.5%

of the labor force

Source: Bureau of Labor Statistics Note: Key occupations were determined by going through the BLS list of occupations and determining which occupations are likely very important in producing SCP technology


Jobs in Key Occupations for an SCP Technology ClusterTop 25 Economic Areas

Economic Area # of SCP Jobs Percentage of Jobs that are SCP JobsNew York‐Newark‐Bridgeport, NY‐NJ‐CT‐PA 470,530 2.6%Washington‐Baltimore‐Northern Virginia, DC‐MD‐VA‐WV 398,680 5.6%San Jose‐San Francisco‐Oakland, CA 342,090 6.6%Los Angeles‐Long Beach‐Riverside, CA 268,020 2.1%Boston‐Worcester‐Manchester, MA‐NH 245,120 4.6%Dallas‐Fort Worth, TX 215,500 3.4%Seattle‐Tacoma‐Olympia, WA 202,760 6.2%Chicago‐Naperville‐Michigan City, IL‐IN‐WI 202,470 2.5%Philadelphia‐Camden‐Vineland, PA‐NJ‐DE‐MD 134,540 2.7%Detroit‐Warren‐Flint, MI 95,080 2.6%Atlanta‐Sandy Springs‐Gainesville, GA‐AL 82,550 3.5%Houston‐Baytown‐Huntsville, TX 66,680 2.3%Denver‐Aurora‐Boulder, CO 61,020 4.1%Minneapolis‐St. Paul‐St. Cloud, MN‐WI 60,670 3.3%Phoenix‐Mesa‐Scottsdale, AZ 54,580 3.0%Miami‐Fort Lauderdale‐Miami Beach, FL 48,070 1.4%San Diego‐Carlsbad‐San Marcos, CA 45,220 3.4%Austin‐Round Rock, TX 43,320 4.9%St. Louis‐St. Charles‐Farmington, MO‐IL 34,050 2.6%Portland‐Vancouver‐Beaverton, OR‐WA 32,780 2.6%Columbus‐Marion‐Chillicothe, OH 32,460 3.4%Charlotte‐Gastonia‐Salisbury, NC‐SC 31,220 3.4%Kansas City‐Overland Park‐Kansas City, MO‐KS 30,250 3.0%Tampa‐St. Petersburg‐Clearwater, FL 27,560 2.3%Sacramento‐‐Arden‐Arcade‐‐Truckee, CA‐NV 27,200 3.2%

Source: Bureau of Labor Statistics


Patenting in SCP Related Industries*Top 25 Economic Areas

Economic Area # of SCP Patents # of SCP Patents Per 10K EmployeesSan Jose‐San Francisco‐Oakland, CA 88,071 235New York‐Newark‐Bridgeport, NY‐NJ‐CT‐PA 30,304 33Boston‐Worcester‐Manchester, MA‐NH 21,144 56Seattle‐Tacoma‐Olympia, WA 20,413 111Los Angeles‐Long Beach‐Riverside, CA 19,960 29Austin‐Round Rock, TX 16,960 229Minneapolis‐St. Paul‐St. Cloud, MN‐WI 12,721 51Portland‐Vancouver‐Beaverton, OR‐WA 11,086 96Denver‐Aurora‐Boulder, CO 9,626 56Dallas‐Fort Worth, TX 9,590 30San Diego‐Carlsbad‐San Marcos, CA 8,539 72Boise City‐Nampa, ID 8,446 343Chicago‐Naperville‐Michigan City, IL‐IN‐WI 7,656 18Washington‐Baltimore‐Northern Virginia, DC‐MD‐VA‐WV 7,395 19Raleigh‐Durham‐Cary, NC 7,096 64Rochester‐Batavia‐Seneca Falls, NY 6,472 115Detroit‐Warren‐Flint, MI 5,895 25Phoenix‐Mesa‐Scottsdale, AZ 5,768 35Houston‐Baytown‐Huntsville, TX 5,040 19Atlanta‐Sandy Springs‐Gainesville, GA‐AL 4,964 18Philadelphia‐Camden‐Vineland, PA‐NJ‐DE‐MD 4,927 17Sacramento‐‐Arden‐Arcade‐‐Truckee, CA‐NV 4,251 53Miami‐Fort Lauderdale‐Miami Beach, FL 3,077 14Burlington‐South Burlington, VT 2,821 168Cleveland‐Akron‐Elyria, OH 2,813 16

Source: US Cluster Mapping Project DataNotes: *SCP Related Industries include Information Technology and Analytical Instruments, Education and Knowledge Creation, and Business Services;

>99% of the patents were in IT and Analytical Instruments in all 5 Economic Areas