Thursday, January 15, 2015

Disruptive technologies and the Internet of Things (IOT)

Disruptive technologies

Disruptive technologies are the ones that catch the leader in an industry by surprise. 

These technologies when they enter the market, they do not appeal to mainstream

customers  as they are  low on performance attributes. They do not appeal to the market

leader because  they are low on profit margins. But most of these technologies follow

 Moore’s law and keep  improving at a very rapid rate both in terms of performance as

 well as profits. And before we  know it they become the market leaders. We have seen

 this happen again and again with companies like Xerox (Photocopy) and Kodak

 (Cameras)  in the past and with Google (Search), Apple (Music, Phones, Tablets),

Facebook  (Social Network), Wikipedia (Encyclopedia), M-Pesa (Mobile payments

 and remittances  in recent years. All the recent  disruptions have been riding on the

 internet and mobile technologies. Let us try to understand some of these examples

in a bit more detail and try to see what this might mean to our future.

Birth of the Internet

The internet was conceived by the Defense Advanced Research Project Agency

 (DARPA) as Advanced Research Projects Agency Network (ARPANET). It was

 mostly used for defense and military purposes for the first 30 years. The internet

went public in the 1990’s. It created something similar to the Gold Rush for the first

 10 years when people started using the words like “New Economy” and valuations

 for companies born on the internet went through the roof and millionaires were

 created overnight. By the year 2000 the craziness had reached a peak.  As with all

bubbles, the internet bubble burst and we had the dot com bust during which many

internet companies went bankrupt and many people lost their fortunes. As shown by

 the famous Gartner hype cycle we are now getting out of the trough of disillusionment

and entering into the slope of enlightenment and Plateau of productivity for internet

companies. What follows arestories of companies who are creating the latest disruptions

 in the internet era.

Google (Two Sides Markets, Search, Automatic Cars, Internet Balloons, Robotics, 

Machine Learning)

Google was founded in 1998 by Larry Page and Sergey Brin when they were PhD

students at Stanford University. Their primary product was a fast search engine

 that provided the most relevant results on the internet. They monetized their Search

technology with AdWords by offering users relevant Ads based on what the user was

searching for. This was the use of the two sided market concept where Advertisers

 paid while the users got to use the search engine for free. After search they went into

Gmail, Maps, Chrome (browser and OS). They acquire YouTube (videos), Android


They are now focusing on Automatic Cars, Internet Balloons, Robotics and

 Machine Learning.

Apple (Disrupting Music and Telecom industry. Creating Tablet industry)

Apple first came into the limelight by disrupting the music industry in 2001 with its

 iconic iPod. The iPod soon became a fashion statement and allowed people to carry

1000 songs in their pocket and allowed consumers to buy a single song for 99 cents

 from the iTunes store. This was disruptive because, before the iPod and iTunes came

 along, people could only buy CD’s which contained 10 to 15 songs of one particular

 artist or band. Now people could buy 15 different songs from 15 different artists at

a much cheaper price at the click of a button in a matter of minutes.

Then Apple went on to disrupt the telecom industry with the introduction of its iPhone

 in 2007. The iPhone came with a multi-touch interface and it was a phone, music player

 and internet browsing device all in one. It did all these things in a simple user-friendly

way with a beautiful user interface.

Then Apple created a totally new device and new market with its iPad tablet which

 was released in 2010. Many people called it a bigger iPhone and some people even

 made fun of it by saying that the name iPad felt like it was a feminine hygiene product.

But it was Steve Jobs and Apple who had the last laugh.

Now Apple is planning to disrupt the payments industry with Apple Pay and the

wearables industry with iWatch. Another interesting technology they are working on

 is 3D mapping Laser beam projector system.

Facebook (Social Networks and Viral Messages)

Mark Zuckerberg started Facebook in 2004 when he was a Harvard undergraduate with

 2 of his roommates. It rapidly spread from Ivy League campuses to high schools and

 eventually to everybody with access to an internet connection. Facebook recently

 went mobile in 2012.  The Facebook platform allows users to share experiences like

 listening to music, viewing a photo, reading an article and movie reviews. It allows the

users to share their deepest thoughts, emotions and feelings and it is saved on their

 timeline. It also allows users to discover people, photos, places and interests.

Currently there are 1.23 billion active Facebook users. So a wealth of rich data about

all these users is now available on this platform. The concept of viral

marketing and viral messages became popular because of the ability that Facebook

provides its users to share all kinds of content with their friends and acquaintances.

Facebook is now looking into Virtual Reality, Payments by Facebook Messenger

which may very well change the way we socialize and the way we transact in the

digital world.

Wikipedia (Wisdom of the Crowds)

Wikipedia was founded in 2001 by Jimmy Wales. In a short span of time it became

 the 6th most popular website on the internet with 34 million articles in 288 languages.

It has 18 billion page views and 500 million visitors each month. It is able to manage

 this with contributions from all its users and 73,000 active editors. It is completely free

 with no advertisements. It is relevant as it  keeps getting updates on a regular basis.

Its accuracy keeps on improving as it is reviewed by a  lot of people.

(“Given enough eyeballs, all bugs are shallow” – Linus’ Law as formulated by Eric


In the future Wikipedia may be able to offer us virtual reality tours into the past,

present and future based on the content it accumulates.

M-Pesa (Mobile and Bottom of the Pyramid)

M-Pesa was launched in 2007. It was owned by Vodafone and operated by Safaricom

 in Kenya. It is a fast, secure and affordable payment service to “Send Money Home”

 by SMS. It does not need a Bank account. This was one of the key selling points for

 this service as many people in Kenya at that point in time did not have a bank account.

Annual money transfers using M-Pesa have reached 10 billion USD as of Mar 2014.

M-Pesa made a profit of 183 million USD in 2012.  M-Pesa is a classic success story

 in the Mobile space and highlights the fact that there is in fact money to be made at the

bottom of the pyramid as highlighted by C K Prahalad in his book Fortune at the bottom

 of the pyramid.

Sharing Economy, Collaborative consumption (Uber, Airbnb)

The latest disruption that has come up is something called the Sharing Economy or

 Collaborative consumption. The primary premise behind this concept is that there

 are a lot of underutilized resources and assets which can be put to good use with

 the help of platforms that can match these assets or resources to the right people.

This has led to emergence of disruptive companies like Uber in the transportation

 industry and Airbnb in the Lodging industry.

Internet of Things (IOT)

All the above leads us to the Internet of Things which is the next big wave in technology

 based disruption. As of today the primary devices that connect to the internet are

laptops, mobile phones and tablets. Going forward more and more devices will connect

 to the internet. Cars, Refrigerators, Microwave ovens and many such appliances will

connect to the internet and exchange data back and forth. For example your refrigerator

 will automatically send an order to an online retailer when it is running out of milk,

eggs, and fruits. Your car will send a message to your mechanic to book a time slot

when it is due for servicing or when there is an imminent part failure.

Ray Kurzweil an eminent technology thought leader predicts that by 2029 a 1000

USD computer will have the same raw computing capacity as that of a human brain.

He also predicts that nano computers will be embedded into the human body in the

 not so distant future. Biology and computer technology will merge. This will lead to

some kind of collective intelligence which will govern the Internet of Things.

This also leads to possibilities depicted in movies like the Matrix and Terminator

 series where machine intelligence overtakes human intelligence and machines take

 control and start destroying humans. Since I am an optimist I believe that we can

control this next phase of evolution which will see a convergence of Information

Technology, Biotechnology and Nanotechnology.