IoT – Intelligent Operations Technology

Whether you believe in Climate Change or not, there is little debate that large scale weather events have become more frequent and intense.  We appear unprepared and in many cases unable to deal well with these events.  In September 2017 alone tropical storms Harvey, Irma and Jose battered both the southern mainland US and devastated many Caribbean islands causing billions of dollars in damage.  The storms have left many areas – BVI’s, US Virgin Islands, areas of Puerto Rico effectively flattened and parts of Texas/ Florida – with severe economic and personal disruption.  The core infrastructure we all take for granted will take many months if not years to return to normal Basic capabilites to communicate, transport goods, distribute power and water, not to mention both residential and commercial buildings they serve are heavily impacted.  We are much more vulnerable, less secure and far less resilient than perhaps we thought.

“We are witnessing a fundamental shift in the assumptions used to build our 20th and 21st century infrastructure for energy, manufacturing, city planning, communication, transportation, supply chain/ distribution and more.”

In the past, we led with the thinking (which for a long time held in fact) that scale and centralization would lead to greater efficiencies in production of goods, services and products.  We are now at a practical limit to that thinking.  As a result, we need to embed different assumptions into Design-Thinking going forward. And… we need to incorporate these assumptions in a way which will do so with limited cost penalty to our daily lives.  Fortunately, this is both possible and practical.  Looking as a reference example, internet protocol was created not to enable chat rooms and social media, but as a way to fundamentally increase the resilience and security of communications by breaking data into smaller pieces, providing multiple paths for it to go from sender to recipient and dramatically reduce single points of failure in that network.  This was driven by military and defense needs, but as we look at the future of our commercial infrastructure, this same thinking and design approac is valid.  And the role industries play may change greatly in the years to come.

All About Sensing – the new world of intelligence around us…

Today, we respond to a crisis.  Tomorrow we need to sense that it is coming and act in advance.  Today the Internet-of- Things (IoT) is a series of connected, but not ‘’interconnected’’ elements.  We may know a great deal about whether our washing machine is running, or our house has been broken into, or what we have set our temperature to… but we’ve not stitched these things together and today have a bag of parts to deal with.  Some pundits rightly claim that it is today more the ‘’internet of broken things’ since it is difficult to make these elements work alone and even harder to make them work as part of a coherent system.  While the example noted is about our homes and the things we see every day, the same is true of the world around us.  The energy we use and take for granted.  The cities and transportation grid we assume will work and always be there.  They too are today just a bag of parts held together with brute force.  Being able to respond to the changes happening will force us to change in many ways.

Energy – signaling the return of distributed electric production….the rise of the ‘utility-as- a-battery ‘?

Early electric power facilities provided generation to support the local community – as a function of both technical and evolutionary limits of their time.  The Pearl Generating Station built by Thomas Alva Edison in 1882 to service the New York Financial District provided the early market for his nascent electric light bulb business and quickly moved from a novelty to a necessity.  The use of DC generation quickly shifted to AC as distribution areas expanded, scale grew, and the need for greater efficiency emerged into what became the public utility model for the United States in the early part of the 20th century.  Until the 1970’s the model changed little.  Greater scale and centralization of generating assets, higher voltage and greater distribution from those centralized facilities, and local retail delivery were the models not only in the US but globally.

As the economies of scale for traditional power generation using coal, nuclear and hydro leveled off, and the variety and cost of distributed production assets including natural gas, solar, wind and distributed hydro amongst others declined significantly. In the case of solar, for example, price per kWh has dropped on average by 80% over the last 10 years in the US and globally (2) with the price per kWh for generation stabilizing at $0.06-0.07/ kWh. Interestingly, this is very near the cost of baseload power at scale. The story for wind, small scale hydro and natural gas is quite similar. Even more interesting, these price points for power are achieved with very limited correlation to scale (4) and for facilities built close to the area of use. In addition to competitive costs of power production, by virtue of being localized there are much lower transmission and distribution costs and losses to meet that peak power demand. That ‘power matching’ – peak gen to peak load – creates a near perfect combination to reduce the loads to the existing grid system. Solar and gas compliment both base load generation (from coal, nuclear) and more flexible generation from hydro sources. What does this change? Lots!

This presents an incredibly interesting opportunity to the electric industry to insert a fundamental shift to over 100 years of design thinking. By being much more granular in thinking through system design, there is a unique opportunity to reduce single points of failure, enhance energy security and to create new paths for resiliency of the power systems. Reducing single point opportunities for failure… when well done…. can = fewer catastrophic outages, reduced downtime of customers, improved return-to-service times and at limited change in ultimate power cost. Simple examples of change such as the addition of storage in the electric system at local substations, in homes with both backup natural gas/ diesel generation and storage products such as Teslas’ PowerWall, and ultimately including the transportation network via grid-connected cars requires rethinking the electric delivery system. It requires deeper thinking in both localized system design and overall network intelligence… creating greater resilience to disruption from whatever cause at a local level requires a change in roles of the utility from the sole provider and distributor of power to the orchestrator of a much more diverse power delivery paradigm. While there are substantive steps being taken in this direction today (3), a major change to design thinking, the elements of control (IoT devices) in the network, and the existing regulatory environment will be needed to move us into this new world.

Next Up……Cities – “Smart City… Heal Thyself?”

Energy is but one part of the picture. In the next post we’ll explore a few thoughts about the importance and current state/ evolution of design thinking toward the often highlighted topic of ‘Smart Cities’’. Energy powers the cities but what makes them ‘’smart’’, efficient, safe, effective and… ultimately more resilient? It goes much beyond marketing banter…. are we capable and ready to act?

Unicorns Amassing Billions in cash, Decoding their technology spending patterns

The term Unicorns was coined by Venture Capitalist Aileen Lee in 2013 symbolizing the statistical rarity of such successful ventures. However, these organisations have now become almost commonplace, reaching 220+ in number and multiplying at incredible speed, a CAGR of 233% to be exact during the last 3 years.
The massive economic scale of the Unicorns club can be understood from their combined net worth which has reached nearly $724 billion USD in 2017, just shy of Netherland’s gross domestic product (GDP). If Unicorns were an independent nation, they would form the world’s 18th largest economy!!

These organisations, being digitally native, structurally lean and technologically agile have emerged across all industries designing, hacking, and changing products, structures and business models of traditional industries.
The top of the herd is dominated by some of the very big ones including the Uber, Airbnb, Chinese Xiaomi, Didi and China Internet Holdings which are among the fourteen decacorns, a term used for private venture-funded company’s worth over USD $10 billion.
What are they doing with the money? Not a lot, it would seem.
Leveraging our DRAUP platform, we estimated that Unicorns spend on technology reached a massive USD 32 bn, growing exponentially at a rate of 133% YoY during the last 3 years.

Product development and Infrastructure Support are the major spend areas for all Unicorns. Nearly 47 percent of the total technology spend is consolidated on product development, being the key differentiator of superior product experience and growth enabler for Unicorns. Technology spending on digital areas such as Design, Data science and AI are amongst the core focus segments for creating a personalised experience in consumer space and intelligent products in enterprise space.
On the infrastructure-support front, the heavy technology spending is to ensure robust scale that can support a large number of customer transactions, active security requirements and analysing a large dataset of customers, products and other stakeholders within and outside the organisation. However, being born digital, nearly 95 percent of their infrastructure is based on cloud platforms which is reliant on global external vendors. The spending on Cloud hosting, network management and security & maintenance activities is a huge component, comprising of nearly 53 percent of their total technology spend. AWS maintains a significant market share lead, controlling nearly 65% total market among Unicorns. Unicorns such as Snapchat has already announced a contract with AWS for spending USD 1 bn on latter’s cloud services over next 5 years.
How do these hyper scaling organisations put up large technology capability in a short while?
The answer lies within the unconventional route which has been adopted by Unicorns compared to the traditional organisations.
During the growth stage Unicorns rely on infrastructure from 3rd party platforms, open source OS, libraries and other platform providers.
Take the case of Airbnb which has built its backend infrastructure supported by open source nginx platform and used AWS for hosting. It has also developed capabilities through partnerships, acquisitions or acqui-hiring niche solution providers such as Twilio for communication, LocalMind for navigation, Trooly for identity verification etc.
As Unicorns scale, they bring critical capability inhouse in order to provide the users with a seamless experience across the product stack. They also invest in enforcing a comprehensive product control as well as an overarching security, privacy and regulatory compliance.
Many Unicorns such as Uber has invested nearly half a billion on Mapping project to build inhouse capabilities and plans to create its own detailed maps for traffic patterns, pickup location etc. for its autonomous car project. Cloudera is building necessary data centre infrastructure in-house and Airbnb has developed a search and discovery algorithm to search 35k diverse property listing on its website.
As they develop deep expertise in their technology stack, Unicorns sometime opensource their capabilities. Airbnb has already taken a step ahead by open sourcing its AirMapView API to co-innovate and experience data from real world models. Its API enables interactive maps for devices with and without Google Play Services to support multiple native map providers such as Google Maps V2.
Given their openness to work and readiness to scale their existing capacity in emerging areas, Unicorns are good potential segment for Technology Service Providers (TSPs) to collaborate.
So, how should the TSPs leverage this hyper evolving Unicorns ecosystem? Are Unicorns a viable target segment for technology service and solution providers to target?
We have already seen instances where TSPs have partnered with scaled Unicorns. Outsourcing giants such as Wipro has partnered with Uber at its Bangalore based map improvement group. Tata Technology Services has announced plans to work with NextEV and Faraday Future to codevelop battery technology for Electric Vehicles in Bay Area.
But what are the activities where Unicorns need help to develop capabilities?
Most of the Unicorns have small existing development teams focussed on core product activities. These companies face challenges in scaling up their existing workforce and infrastructure set-up to address potential exponential growth. Non-core functions such as Dev-Ops, Customer Support and Q/A are the areas where Unicorns lack capability and leverage third party solution providers to help them scale.
However, TSPs need a proactive sales approach and thinking while planning for collaboration with these hyper evolving companies.
Unicorns needs are dynamic and short lived. Secondly, it has been observed that their decision-making is widely different from traditional organisations. The Product ownership and responsibilities in many Unicorns is distributed across new age stakeholders such as CMOs, CROs, CAOs, CInOs etc., unlike the traditional organisations where decision making is confined to senior stakeholders such as CIOs.
1. TSPs need to be proactive in selling and need to engage early with young Unicorns to offer integration services for scaling latter’s core product capabilities
2. This would require TSPs to develop capability in digital areas to explore new age partnership in segments such as User Experience, API management and integration services etc.
3. Decision makers in Unicorns have diverse roles across emerging markets, products and business segments. TSPs need to establish deep connections with new age stakeholders as compared to restricting engagement with only CIOs
4. Most of the Unicorns does not have global engineering presence. TSPs need to engage through an on-shore delivery model to sell customized services by understanding the technology stack and dependencies of the prospect. This would require deep understanding of the pain points by working closely with the in-house engineering teams.

Many events such as large VC investment%