May 2006
Interview
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Glen AllmendingerEMAIL INTERVIEW  Glen Allmendinger & Ken Sinclair

Glen Allmendinger, President & CEO Harbor Research, Inc.

M2M Expo


M2M@BuilConn

A simple way to look at this in terms of a business model and economic returns is to ask whether my device is going to be part of an ecosystem at all, who will be in the value chain and how will they organize around my asset or vice versa?

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Sinclair:  You will be running a workshop in Palm Springs addressing M2M business models for OEM’s and End-Users. What is the thrust of this session?

Allmendinger:  Well, as you know this is a theme we have been developing very consistently for some time now. The main challenge still lies in creating ecosystems and everything else that builds the infrastructure and technical capabilities to support M2M solutions and the smart services derived from them. It's really all about organizations, social systems and the inter-related people trying to come together to create a shared understanding. A simple way to look at this in terms of a business model and economic returns is to ask whether my device is going to be part of an ecosystem at all, who will be in the value chain and how will they organize around my asset or vice versa? We’ve come up with four general categories that reflect the different  business models adopters of smart services are implementing.

Sinclair:  Briefly, what are these different models?

Allmendinger:  From lowest to highest in terms of customer value and proximity with the customer, they are: the Embedded Innovator, which integrate smart services directly into their product; the Aggregator, which integrate the sales and service of the product, as well as the interaction with the customer; the Synergist, which contributes and participates in an alliance web where no single company “owns” the aggregator function; and finally the Solutionist, which provide many or all of the services around the total lifecycle of a product. In the workshop I go into great detail in describing all of these scenarios with real examples.

Sinclair:  Harbor is in the business of helping device manufacturers, or “adopters”, build business models to implement M2M solutions. One of the tracks at the M2M Expo and Conference in May in Palm Springs deals with the various challenges in theses endeavors. What has changed recently in the approach adopters are taking to bring these capabilities to market?

Allmendinger:  We have seen a major shift from companies thinking about cost savings to thinking about revenue generation as a primary motivator. In turn, this is driving more and more executive level buy-in. A few years ago projects that involve connected devices and smart services mostly stagnated in low-level departmental projects because no one really understood what this was all about. But now since there is a critical mass of success stories out there, new initiatives are being started off with a real plan in mind and with more internal buy-in at the senior level. These projects are going much faster, but still not fast enough in most cases.

CatNet Systems Sinclair:  What is the hold up in these cases? Why are more OEM’s not making this a priority?

Allmendinger:  Most businesses are not really well organized around managing information flow. As you add connected devices into this equation, they create new relationships simply based on the availability of new information. So, we have a new information architecture on top of an existing business system and value chain. The definition of this movement of new information and how it is shared an organized is not a skill that is resident in many organizations today. This is a new skill. Until people recognize this skill it will be very difficult to organize effectively the transfer of simple data collected from remote devices to the decision support context that drives real business value.

Sinclair:  Is there a time in the near future when Wall Street will recognize this movement?

Allmendinger:  I do believe it is coming soon, particularly in the equity analyst tracking of the large diversified industrials -- the so to speak GE’s of the world. Sometime in the next 1 to 2 year window there will likely be a move from an implicit understanding to an explicit understanding of this space and the measure of device connectivity and smart services activity will become a normal part of equity analyst coverage. The organic growth opportunities that everyone keeps on talking about are largely going to feed this movement to a point where it will become quite visible and straightforward. The value of a company will still be based on many factors, but a significant new factor now emerges that measures how organizations are leveraging connected assets.

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