The hype over the Internet of Things may be reaching pitch fever following CES, but the chatter started in earnest last year.


John Chambers, CEO of Cisco, gave a keynote to a packed house predicting that there would be 50 billion connected devices by 2020, while  Sara Silverman starred in a Cisco video offering a peek into the brave new world enabled by the Internet of Things. For all the talk, the installed base of connected devices has grown more slowly than Chambers predicted. Gartner Research predicts just under 5 billion connected devices by the end of 2015—not the 25 billion Cisco hoped.

Still, 5 billion is an awfully large number, and it represents some serious growth. It’s no surprise, then, that this is still a sexy space. Few doubt the potential of the IoT, but the slower-than-expected growth may stem from some key challenges—3 of them, in fact—that are yet to be solved. Nevertheless, the IoT is dominating CES this year, with wifi being embedded in everything from refrigerators to thermostats and entertainment systems.


The amazing IoT scenarios, the boosters predict all depend on one thing: the nirvana of Network effect, wherein small changes at an individual level are harnessed for larger effect. The network effect in action can be seen like this: Nest’s aggregated thermostat data is transmitted to the local electrical utility which uses that information to redeploy power from one, low-demand, part of the city to another to better balance the load on the grid and save energy on a municipal scale.

For now, however, even the hottest IoT devices shown at CES remain monolingual and unable to communicate outside their own simple systems. Your nest may turn on your heat at the right time based on what it learns, but that’s point-to-point connection, not the network effect.

The network effect benefits may be plentiful, but the three main barriers to IoT reaching it still look daunting:

1- Privacy concerns, trust issues, and cybersecurity: The days of the gmail hack look quaint now that whole tranches of personal information get heisted from huge global retailers. Scare stories of computer viruses have been replaced by the truly terrifying prospect of having your computer held for ransom. That’s all digital ephemera. Losses like that don’t keep you out in the cold. Things get freakier when your house gets involved. Getting your house hacked could be a far more personal and consequential violation. Imagine coming home from work to find your house is locked down unless you pay some gang of cyber criminals an exorbitant fee!

2- Internal interoperability: Your devices can’t speak to one another yet. They need to start. The “Works with nest” program is starting to bring other manufacturers together into a shared language, but that requires you to choose your car or washing machine based on its ability to speak nest. That’s not real interoperability. That will come when the sensor on your Nest that sees no internal motion can cross check to detect if your phone is on the wifi network to make sure you are actually out of the home. Armed with that information, the refrigerator slows down the cooling since it is unlikely to get opened and the Roomba vacuum starts cleaning the house.

3- External interoperability: Things will get interesting when the IoT starts interfacing with large-scale external systems. Right now, these individual, small-scale IoT networks are like the early computer systems—small, local networks that barely connected with one another. The internet brought external interoperability, and just look at what happened as a result. We’re at an inflection point with the IoT. Mobile phone carriers, for example, know population density and location. They could use that to increase the frequency of subway trains or buses—if only they were motivated and able to share.

Profound though they may be, those barriers can be overcome.  It’s going to take two big developments:

First, we need a Switzerland-like platform allowing connected devices to communicate with one another, making collaboration easy and advantageous.

Second, manufactures need rewards to encourage creation of devices that are more interoperable.


Until then, the only option left to consumers may be to set up their own House of Coates, a technical experiment where Tom Coates made his house tweet updates to the world.

During CES, one tweet read, “Looks like Tom’s off doing something. He posted a photo to Instagram.”

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