What does the future look like for companies with the incoming ‘Internet of things’?
Technological innovation is an unstoppable force, and for wildly successful companies like Amazon, it is also a way of life. The secret to staying creative, innovative, and ultimately profitable often involves looking towards the future, but what does this mean for entrepreneurs and leaders? Is there a way to approach the ‘internet of things’ as a business owner that will keep us competitive?
John Rossman is a Managing Director at Alvarez & Marsal where he specializes in innovative business models and organizational change, including the Internet of Things. He was an executive at Amazon.com where he launched the third-party selling business, which is over 50% of all Amazon units, and supports over 3 million sellers. He has appeared on CNBC and the New York Times. He's the best-selling author of The Amazon Way: 14 Leadership Principles Behind the World's Most Disruptive Company and The Amazon Way on IoT.
I recently interviewed John for the LEADx Podcast, where we talked all things internet, innovation, and everything in-between. (The interview below has been lightly edited for space and clarity.)
Kevin Kruse: What do you mean when you say ‘Internet of Things”? Where might we be seeing it in the future?
John Rossman: IoT or ‘Internet of Things’ or connected devices, they all mean the same thing. It is the approach of putting sensors on to everyday devices to collect data and events, and then doing things with that data and events that otherwise you wouldn't do. It gives you insights into your services and products, and how they're being used with your customers that you've never had before. It allows you to either A) create and improve customer experiences, B) to drive for operational improvements internally, or C) to create new business models.
So, IoT, one of the things we always talked about at Amazon was we had an inherent advantage in our business because we were a digital business so we could always have more data than traditional analog retailers would have. What IoT allows you to do is to create a digital shadow of everyday processes and everyday items that are being used in the business to create that same wealth of insight and wealth of data and events, and to do it in a real time manner.
It’s really a foundational capability that will allow for ongoing innovation in businesses. That's what I explore in the book; if you have this type of capability, how can you apply it to improve your business going forward? It's a book for business leaders to help answer the question, "What should my Internet of Things strategy be?"
Kruse: Where would we see companies deploying an IoT strategy today? Does it include the sensors in our cars? The little Amazon push button where I can reorder Tide?
Rossman: All of those. You see it a lot in industrial businesses, on pumps, on devices, on flows, all to better understand “How's it being used? What's the failure or maintenance need going to be? What's the environment that it's operating in?” Basically, ask yourself the question, "What data or what event would I like to know about something?" You can typically work backwards to a sensor and an approach to be able to measure that and get it with a sensor. That's the inductive problem solving that you can now do using IoT.
Kruse: I saw John Deere using automated tractors with GPS. So in an industrial way it's already here, but we're seeing more of it as consumers in our homes as well.
Rossman: Yeah but I think the point that a company like John Deere now becomes a data and a service company versus selling equipment is the fundamental—one of the fundamental business model changes that you're going to see over the next 20 years—is transitioning from transactions and products to selling outcomes and selling services, and where the data becomes such a highly valued aspect of the business and of the product.
Kruse: From a consumer standpoint, the kids and I call out to our Amazon Echo now and then. Is that a Trojan horse part of Amazon's IoT strategy?
Rossman: IoT can be both consumer and industrial or B2B, and sometimes a mixture of both. When you think about healthcare, that's partially consumer, partially B2B types of scenarios. So, Alexa or the Echo device, Alexa's the software that's on it, is definitely—and that's actually a term I use in the book—it's a Trojan horse because it's really a platform that allows Amazon to integrate to hundreds of other companies that deploy skills onto these devices to be able to answer questions and deliver services to Amazon's customers. I think the fundamental change you're going to see is voice as a great user interface going forward, both at the home and consumer basis, but also in business, where voice will become yet another user interface.
It's definitely Amazon's way of continuing to improve the customer experience and it will end up driving business over time for them, but that's exactly the type of non-intuitive bet that Amazon makes into something where they don't know if it's going to work or not, but they know that it's like, "Man, this would improve the customer experience. Let's commit resources to do it. We don't exactly what the financial payback is going to be," but that's truly when you're innovating and making bets, when you don't know what the outcomes are going to be. Now, they have the clear lead in the voice recognition market.
Kruse: Is it always going to be this three horse race, or do you see the market sizing up just for these voice-enabled consumer devices?
Rossman: I think Samsung's coming out with one, right? I think it's going to continue to be a war of features and specialization like Apple's will apparently focus more on music or sound quality and things like that. Where I think it's going to be more interesting is when devices have this voice recognition system versus just a separate speaker, right? There's now home security devices and everything where they're using the Alexa software as essentially the operating system for the device, so there's not a separate speaker for it.
It's part of the object to have voice recognition to it. So, that's what I think the real mega trend and more interesting trend for me personally is when you start seeing software like that into everyday objects. You just say to your dishwasher, "Turn on," right? Instead of having to press the buttons. Or, any other types of scenarios. The software's not going to be a separate item in this little canister.
Kruse: I would love to be able to shout out to my car dashboard, “How fast am I going?” Or, “Change the radio station.” That can't be far behind, right?
Rossman: No, a lot of those use cases are already being enabled today, but it's really the quality of the experience I think still has a long way to go. If you think about talking to your voice assistant today, how many times do you have to repeat yourself and everything, right?
I think both the use cases and the quality and just the vast extensiveness of the enablement still has a long way to go, but there are, as you point out, a lot of these early, especially home-based scenarios that are being opened up today. I think about the business implications beyond the home where the business environment is going to be more impacted by these capabilities.
Kruse: I like to challenge our listeners to become a little bit better every single day. What's something you'd tell us to do today to get a little bit better?
Rossman: Well, here's a real piece to the secret sauce from Amazon, which is they don't use PowerPoint. They always write out their important proposals or projects or ideas as narratives. So, stop doing PowerPoint and force yourself to write out with clarity what you're proposing or what your big idea is. It needs to be written well enough and simply enough so that another person with some background in a scenario could read it and completely get it, right? If you can write both holistically and clearly enough to be able to explain it versus dumbing it down with PowerPoint where you need to explain it, that will improve your thinking. That's really why they do it at Amazon, they don't use PowerPoint, they develop these narratives.
Kruse: Is it true that when people call a meeting, there will be time to actually read some of those narratives?
Rossman: Absolutely. So, meeting starts with 10 or 15 minutes of silence where the narrative is read, and then discussion ensues. You can really tell the quality of the narrative by what types of questions that ensue. The higher quality questions are going to be more implication type questions or alternative type questions versus questions that like, "Well, explain it to me again because I didn't quite get it." Well, that's an indicator that the narrative wasn't quite on base yet. The meeting absolutely starts with time to digest it and truly understand it.
Kruse: What advice would you give a first-time manager?
Rossman: I think for a first time manager, one thing that I took, I got to work with several ex-Navy submarine officers. One of the things that happens in a naval submarine is that an officer is able to do every job that's underneath their command. Ostensibly, the captain of a submarine could do every job on that submarine. So, I think that as a first time manager, truly having the skills to be able to do every job that's underneath your function will give you insights into being able to better manage, better innovate, and better support your team.
I think that's a good challenge, not in every circumstance, but for first time manager, I'm thinking about a limited scope of business, truly having the mastery skills of everything that happens underneath that. It's a great way to earn the respect of your team, it's a great way to have better empathy, and it's a great way to truly have insightful insights to be able to innovate. If you want to advance in your career, in this times, in this economy, you can't just get the job done.
Like, you actually have to improve it, and so setting that up for being able to actually have insights to improve the business going forward I think is the critical mindset that every business person has to bring to their job.