5 Things Enterprise Still Needs to Learn from Startups in IoT

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The IoT journey is not just about implementing new technology, it’s about the corporate transformation the process can potentially unlock.

The corporate world seems to have an unending fascination with startup culture. Mired in processes, groupthink and incremental projects, we yearn to resurrect the exhilaration of moving at speed in pursuit of a great idea. Eric Ries tried to capture some of this startup “secret sauce” in his book, The Lean Startup. And countless articles and blogs—in publications from Forbes to Emirates—have imparted tips on what big companies can learn from startups.

While it may seem the subject has been thoroughly covered, the Internet of Things (IoT) is compelling us to take a new look at these lessons. The speed, complexity and disruptive power of IoT make these learnings newly and urgently relevant to the success of large enterprises.

See also: Six in 10 enterprises fail to take IoT beyond the pilot stage

The IoT journey is not just about implementing new technology. You may start out with a simple plan to connect the machinery in your factory—and wind up transforming your business processes, realigning your workforce, and creating new business models and go-to-market strategies. For that kind of transformation, you need to embrace the speed and agility of a startup, without losing the disciplined strategy approach of an enterprise.

A tall order? Sure. But in the age of IoT, these are not just nice-to-have skills. They’re essential. Want to get going? Here’s a starter list:

#1: Pivot immediately

It’s not that large enterprises don’t see disruption coming—they’re just slow to react. To get in front of the IoT disruption curve, big companies need flexible structures to bring good ideas to the top, try them out, then move on quickly from projects that are going nowhere.

Startups understand that not every idea or approach will be a success. But rather than succumbing to “paralysis by analysis,” they jump in and try it. Likewise, big companies can create small, diverse teams that work outside of the main organizational structure to identify and develop solutions for fast-moving opportunities. Google’s “X” subsidiary, for example, gave the world the self-driving car. Cisco’s “Innovate Everywhere” challenge encourages employees across all functions throughout the company to form their own teams and develop solutions for various company priorities. The winners get corporate backing to develop their ideas further.

#2: Don’t try to boil the ocean

IoT will transform whole industries, but it won’t happen all at once. Joseph Bruner, CEO of IoT startup relayr, told me, “We take an approach of, ‘crawl before you walk, walk before you run.’” The same holds for enterprises. Have a big vision, but start with a small project, a single use case that is rooted in a real business problem.

Look at your first IoT project as a proving ground for success—it doesn’t have to be a game-changer, but it does have to solve a real problem. For example, Cisco wondered if it could trim energy costs at one of its factories in Malaysia. So it deployed a network of 1,500 sensors and connected them to energy analytics software to pinpoint problem areas. By identifying and replacing inefficient equipment, the company reduced overall energy consumption in that plant by 15 to 20 percent—and has expanded the energy-cutting improvements to more than 20 other factories around the globe.

#3: Move innovation from the edge to the core

Startups live and breathe innovation. Enterprises tend to engage in “innovation tourism”—one-off projects that are fun to show off but don’t stay for the long run. The IoT journey demands a long-term commitment to fundamental change—in business processes, in organizational structures, in employee hiring and training, in corporate cultures across the board.

Make room in your culture for experimentation—where risky behavior is encouraged and failure leads to learning, not the end of a career. This is easier said than done. From my experience, today most large companies pay lip service to a culture of entrepreneurship and “failing fast.” However, when a researcher asked executives how well their companies learn from failure on a scale of 1-10, they answered in the range of 2 or 3. Our performance management systems tend to be set up to punish failure, so people will naturally be reluctant to take on risky projects. Companies that are serious about winning in the IoT age need to reshape their culture from the top down, rewarding creative risk-taking and fearlessly examining failures to see what lessons they can apply to the next experiment.

#4: Connect people, not just things

Ironically, IoT is more about people than things, transforming job roles and work cultures along with processes and technologies. One of the advantages of startups is that everyone knows they have to work together as one team toward a common goal. Most enterprises, on the other hand, have developed large, siloed organizational structures that often fail to communicate with each other, let alone collaborate.

In implementing IoT, one of the most common cultural disconnects is between IT and operational technology (OT). IT focuses on data flow across an organization and historically hasn’t been involved in production and logistics environments. OT is rooted in physical operational systems, such as assembly lines, electricity distribution, and oil production facilities. OT leaders may be confounded when IT schedules a weekend shutdown to update software without regard to production requirements. And IT leaders don’t understand OT’s use of proprietary or specialized systems. IT is deeply concerned with cybersecurity, while OT has traditionally based system security on the physical isolation of its facilities. The cultural divide runs deep.

A few years ago, iconic American motorcycle company Harley Davidson was facing global competitive problems. It created a cross-functional team bringing together people from both IT and operations. This unified team then integrated multiple separate systems into a single enterprise network and created an IoT-enabled plant that reflected the best thinking of both IT and OT. The results were dramatic: the company shrunk its 21-day production cycle to just six hours and reduced operating costs by $200 million.

#5: Know your role in the partner ecosystem

IoT is built on interconnectivity—not just between devices, but among customers, partners and suppliers. Because IoT is such a big, complex, fast-changing field, it offers startups a unique opportunity to carve out their own place in the market and innovate with established enterprises—if they do it right. Typically, IoT startups have two choices: They may develop a differentiated horizontal module—addressing security, connectivity, real-time analytics or another broad IoT capability—and partner to complete a vertical solution. Or they can go deep into one vertical segment, focusing on a single market or sub-market, and provide a specialized capability such as remote asset management for oil and gas, or predictive maintenance for mining equipment. But they should never try to do it all.

Similarly, enterprises must cultivate a flexible network of partners to work together on solutions for a fast-changing IoT market. The IoT ecosystem spans a range of horizontal, vertical, and geographical requirements. Like a startup, if you have expertise in broad IoT capabilities, you’ll need to partner with someone with deep vertical market knowledge. And if you have that vertical expertise, you’ll need to work with someone who can provide the horizontal foundation for your solution. The important thing to remember is that no matter who you are or how big you are, IoT is too complex and fast-moving for any one company to tackle alone.

One example is Cisco’s long-standing partnership with industrial automation leader Rockwell Automation. Cisco provides technological expertise in IT infrastructure, security, and collaboration, and market knowledge of the IT industry.

Rockwell brings technology know-how in manufacturing automation, and market knowledge in manufacturing, transportation, mining, and oil and gas segments. Once the Cisco and Rockwell partnership was well established, they started to include additional partners. One of them was FANUC, a leader in industrial robots. The three partners worked with end customers to develop a solution that extracted data from robots and securely connected them with people, processes and things to provide insights into robot performance—all based on industry standards.

Of course, one of the best ways to learn from startups is to make them part of your IoT ecosystem. Because startups are nimble and numerous, you are likely to find several that can fill gaps in your IoT solution. Collaboration between enterprises and startups might have its pitfalls, but if you approach it right, you can have a productive, mutually rewarding relationship.

And you might find a few things you can teach a startup, too.

Maciej Kranz

About Maciej Kranz

Maciej Kranz brings 30 years of networking industry experience to his position as Vice President, Corporate Strategic Innovation Group at Cisco. He leads this group to incubate new businesses, accelerate internal innovation, and drive co-innovation with customers and startups through a global network of Cisco Innovation Centers. Prior to this role, Kranz was General Manager of the Connected Industries Group at Cisco, a business unit focused the Internet of Things. He built a $250M business from the ground up in 18 months, making IoT one of Cisco’s major priorities. Previously, Kranz led efforts across Cisco around Borderless Network Architecture, wireless, mobility, and the stackable Ethernet switching business through its expansion from $400M to $6B in revenues. Prior to Cisco, Kranz held management positions at 3Com and IBM. In his New York Times Best Selling book, Building the Internet of Things, Kranz offers the first practical guide on why and how business decision makers can implement IoT. His thought-leadership forum can be accessed here.

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