"Any fact becomes important when it's connected to another."

Umberto Eco

The technological landscape of the last few years has decisively been underwhelming. Perhaps the once distinctive creativity of the "tekkies" suffered from a transitory lack of courage or perhaps the macro-economic dislocations have contributed to misallocation of capital and funding for good ideas.

Whatever the reason, the tech cycle of late seems to have focused, for the most part, on non-transformational issues and pushed agendas centered merely on applications designed to solve minimally incremental problems rather than life changing tools.

However, we might be standing on the verge of one significant and truly transformational wave: CONNECTIVITY.

Connectivity is also referred to as the Internet of Things (IoT) and its pervasive influence seems to be getting traction.

IoT will be a sweeping change in the way we experience life and the way we manage our health; it will produce radical change in the manner we organize industrial production and distribution and last but not least, it will turbo-charge our ability to gather and, most importantly, process information for a better world.

The ability of the internet to provide an environment and a standard protocol for billions of sensors, actuators and mobile devices to connect and interact with each other will result in an augmented life experience and increased productivity. As we implement this massive project of connectivity, the role of the internet as the backbone of our social system will go beyond the wildest dreams of their creators.

Sensors that can gather recurrent data, and by ways of connecting into a grid of information, exchange it, process it and implement consequent action will generate a transformational wave.

Industrial applications could achieve a value of up to $3.7 trillion (McKinsey) over the next few years in areas from factory and equipment optimization to worksite safety and improvements in energy utilization.

Of course, consumers will largely benefit either indirectly – via an improved production and distribution process – and directly via a myriad of apps engaged in optimizing people’s homes, transportation and most importantly the management of their health. It is projected that the value of IoT in health and fitness could be as high as $1.6 trillion (McKinsey).

The challenge with the IoT space resides with one’s ability to look at this massive universe and rationalize it to the point where an investable framework can be built and successful catalysts can be leveraged. McKinsey identifies six distinct categories of applications that seem to be emerging in two general areas: Informational Analysis and Automation and Control. In the IT segment, McKinsey focuses on Tracking Behavior Processes, Enhanced Situational Awareness and Sensor Driven Decision Analytics. In the Automation and Control space, McKinsey see opportunities in Process Optimization, Optimized Resource Consumption and Management of Complex Autonomous Systems.

To be sure there are challenges. This transformational wave will not unfold without glitches; such hiccups will span from the policy realm to the technical process, from behavioral responses to business modeling. The biggest issue will relate to security and how data will not be compromised. Data protection and avoidance of systems integrity deterioration should be priorities at the technological design level and, naturally, at the policy and regulatory stage as well. The IoT framework will also need a convergence toward a set of accepted technological standards and protocols that would facilitate the dissemination of the connecting systems.

Additionally, early adopters will have to become an embracing testimonial of the incremental value created by this wave of connectivity. An emphasis on value based outcomes will not only come from the end consumer but also from solution providers. As vendors increase their exposure to positive outcomes by aligning interests with their clients at an early stage, the resulting dynamic will be a faster increase in the adoption of IoT solutions.

In conclusion, we expect multiple smaller waves inside the deployment of the fundamental and longer duration wave in CONNECTIVITY. Opportunities will fluctuate within a shifting environment but the destination is certain.

Please feel free to call us should you want to discuss in more details ways to invest in the IoT space.