Mister Beacon Episode #149
The Internet of Trillions of Things (IoT2)May 03, 2022
What’s going to happen to the world when the Internet explodes by a factor of 100 times, from billions to trillions of things? Steve talks with a friend of the show, and Deloitte’s Chief Futurist, Robert Schmid, to explore when this change will happen, where the opportunities lie, and how to take advantage of what will be a disruptive revolution in the IoT.
We also discuss the prospects for the retail industry and what it must do to survive as we move into an ever more connected world.
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Steve Statler 00:00
Welcome to the Mr. Beacon podcast. This week's episode is about the Internet of trillions of things. What's gonna happen when the internet explodes in size 100 times bigger than it is at the moment. So going from 10s of billions to trillions of things that are connected to the cloud, that is the subject of this week's podcast. And this is another one of those episodes where we turn the tables, we have our friend, Mr. IoT, Robert Schmidt, from Deloitte, he's going to interview me and that gives me a chance to give you what I've been thinking about and looking forward to writing about in the sequel to Beacon technologies, the next book is probably not going to get written for a while. But I believe IoT is really important. It's an inflection point change. And so it's great to have Robert here so that we can explore it together. And hopefully spark some ideas in your mind. So thanks for joining us and have us. The Mr. Beacon podcast is sponsored by Wiliot, Intelligence for Everyday Things Powered by IoT Pixels.
Robert Schmid 01:19
I have to say, I'm honored that you invited me to be the host of your show. Yeah, I feel the pressure a little bit, you know, now on my show, if I say something wrong, it's okay. I can tell them to cut it. But now you're gonna get to decide what you cut. So thanks for having me. Thanks for letting me host your show. ask you questions. But I know how you feel. Whenever people make interview me, it's much easier for me to ask you questions. So here we go. I gotta ask you about this IoT2 What does that stand for? And I mean, you told me but I still think it's worthwhile because I like the abbreviation. It's an interesting one. So what's IoT2?
Steve Statler 02:01
Yeah, we like things that stick in people's head. So the internet of trillions of Things, or IoT2 for short. It's something that we've been thinking about for years. And we believe that it's going to be massively disruptive, it's going to be as significant as the transition to desktop computing, handheld computing, ie smartphones, this thing that we're part of that Wiliot, but it's not just us. There's a whole ecosystem moving to computing elements that are the size of a postage stamp, which are going to cause the Internet of Things to explode. And specifically by 100 times, so two orders of magnitude, what does that mean in numbers, the Internet of Things is, arguably small 10s of billions of things. If you look at how many phones are sold couple of billion a year, that's a lot. But actually, there's an order of magnitude more RFID tags sold every year 10s 20 30 billion of those. But those are only just IoT devices, they're intermittently connected only when they're scanned, which is very occasionally, but let's say it counts. So think of those really big numbers, multiply them by 10, multiply them by 10. Again, and that's the the size and the scale of the change in the size of the internet that we're talking about. And the things that we're talking about are not cars, and washing machines, and smart speakers, which are already being connected today. It's the everyday things. It's food and medicine and clothing, and hundreds and hundreds of other things that are at the moment offline, in the in the dark. We don't know where they are. We don't know what they're doing. We don't have any sensory information. And at the moment, you know, it seems like oh, well, yeah, they're offline. What does that what difference does that make, but once they are online, it's going to change everything, it's going to change the way products are made, the way they're distributed, the way they used, the way they're reused in the circular economy, which we have to move to if the planet is going to survive. And ultimately, it'll change the way they're recycled. Because all of those things will have a digital birth certificate or passport. And there'll be streaming data continuously back to their owners, it's going to change business models. There'll be companies that are fat and happy, doing great and leading their categories that will disappear that will fail. Because new companies, many of whom we've never even heard of at this stage latch on to new business models, which be will be enabled because the internet of trillions of things will allow the power of the cloud be applied to the 99% of the world that is currently offline. So that's what IoT2.
Robert Schmid 05:08
I've heard this before. And every time you do this, I get sort of like, you know, I get blown away by it. And it's not because I believe in what you say, right, but it sounds so freakin big. I have to say one of the things that occurred to me was like, you know, when you said IoT, too, I had to laugh. Because isn't it IoT, IoT, the Internet of Things off trillions, IoT? IoT? No, that's way too complicated. I'm sorry, I'm going off topic here. But I want to come back to talk to us about we, many of us will remember when we said the internet of everything. And I feel like there was a backlash on it, because it's hype, and it's this and that. And now you talk about birth certificate of mind your shirt or the birth certificate of food festival, I love the term birth certificate. But talk to me about why trillions and how far away is this? I mean, I get it, there's so much out there. But how far away? Are we talking is this?
Steve Statler 06:14
Well, that's several very good questions all tied into into one. So I think we should go here. Yeah, yeah. What Why the heck should we do this? You know what? So what I think how long it will take is a really interesting question as well. And the answer is, is going to take a while, but the the consequences will start to be felt like very soon in the next year or two, even though it's probably going to take 10 years to be fully utilized to, to fully materialize and transition. It's a little bit like the move to ecommerce. I remember a few years ago, when I was at Qualcomm, we were talking about e commerce and you know, do we really need to bother about this? It's like less than 1% of transactions are now going over E commerce. Now a few years later, what is it? It's somewhere between 10 and 20%? I don't know the exact number. So, you know, the vast majority of transactions are not going over E commerce. But what is it done to our economy, there's massive retailers that have gone under their stock prices plunged through the floor, because suddenly shareholders lost confidence in what they were going to do new business models, subscription business models, you can, I can now subscribe to probiotic pills, because Amazon knows that I buy them all the time. So my point is, it's going to take probably a decade for the full IoT to, for us to actually get to an internet that's 100 times bigger. But I can tell you that in the next two years, fortunes will be made and lost by companies that either ignore it or do so. So that's kind of a little bit of fear and greed. You could lose your job with fear the chairman or the CEO, and you should be able to talk to your shareholders about what your strategy is to deal with this, because it's going to happen. But why should you care beyond keeping your job? You know, what's, what's actually the benefit? And what are the drivers for moving to IoT to, and it's many things. The thing that I love about IoT to the most is, I think there's a really great alignment of people, planet and profit drivers, the triple bottom line. And what we see is, if we just look at one aspect of this, the supply chain supply chains at the moment, mainly in the dark. Most goods that leave the shipping door, that's the last we've actually seen it them and maybe we get the occasional letter home that says, here's where I am. But overall, most companies have no idea where their products are, even before they get to they certainly don't know them when about where they are when the consumer buys them. And even before that in their supply chains, it's very difficult to know. So how do we deal with the fact that we're in the dark? Well, we basically made twice as much product as we need to. And I really believe that. That's the that's the level of oversupply that we're seeing. Because we have no idea where stuff is. We make so much of it that it doesn't really matter. We kind of throw it out the door. And we hope that enough size XL size, medium size small gets in the right store so that when Joe Bloggs or Mary bloggs goes in there to buy something there's enough product out there with IoT too if all of those products are connected all the time, I can probably make half the number of shirts, jackets, Coats, Trousers, car batteries, whatever it is, because I know where everything is if I actually have visibility on the rack on the shelf of the store and I can see exactly what the inventory is. These are what economists call demand signals and I I can see the moment something's out of stock that will allow me to regulate where I'm directing things. Look at what's been happening in the pandemic with PPE is the the masks, the face masks that suddenly, we all decided we want wanted to, we didn't have enough. But I think we all know that if you went to a hospital and went from one floor to the other, one floor would have a little cache of extra face masks, the others wouldn't have enough. If we actually knew where they those were, you could smooth out and route and share the products. So the shortages weren't, weren't there. So there's so many things we can do just and supply chains are just one example of where visibility will allow me as a manufacturer to say, Oh, I'm going to drastically cut the capital employed in inventory, I'm going to cut production of inventory by 50%, I'm going to, I'm going to stop doing Dynamic Delivery, I've got 100,000 retail outlets, what if I could just visit the 50,000 that were out of stock and the other 50,000 I don't visit, that means I can have less trucks driving shorter distances, and I can have, you know less of my capital tied up in inventory. If I do that, my balance sheet is going to look so much better. If I can eliminate out of stocks, I'm going to sell more of the inventory that I make. And by the way, my ESG, my environment sustainability governance report is going to look amazing, my carbon footprint is gonna go way down, and I can start doing a better job, I'm gonna have less wasted time, so my employees have better lives, I can produce a better quality product. So I think the future of connected products, just from the point of view of managing supply chains is better. And then if you add on to that traceability, safety of products, being able to manage safety recalls, more effectively and efficiently. There's so much room for improvement. You know, who knew we start using the Internet and the cloud and computing and apply that to all these problems that are afflicting us, then there's a lot of money to be made, there's a lot of environmental savings to be made, there's a lot better accountability, there's a lot better safety. So that's why I think we should want to do it. And some people are going to hear this message and do something others, others won't. And that's really the situation that we're in. So that's my story, and I'm sticking to it.
Robert Schmid 12:33
I think it's way more than a story, actually, I think it's just a great list of examples of where smart products connected products can help. I mean, I love the whole sort of sustainability piece, right? If we produce only, you know, either we produce half of what we currently produce and therefore throw less away think of food. I mean, if you you, you know how much food gets thrown away, because in particular, the US, the fruit isn't perfectly looking anymore, which is crazy, but also in terms of what gets produced. And then from an end user perspective, there's a lot of benefit I see. And I don't want to say but but I want to say and I look at this, and I feel like there is people in that whole supply chain that benefit from these inefficiencies. What about those abs, just gonna pick on one and you welcome to pile on to that one, I'll pick another one, right, but retail, they live from the fact that you have to go to a store and you know, they hold a monopoly and owning the customer what I buy and passing on the information, where's the stuff gets sold? You know, the location of your product gets sold at high premiums? It's amazing, right? Are they not gonna? Is that going to have a significant impact on whole parts of the supply chain? In this scenario? Yes. What do you think we'll be?
Steve Statler 14:09
I think retail is a fascinating thing to pinpoint. If you're a clothing retailer, now, you've just that your worst nightmares just happened. Everyone got trapped at home, and they figured out they could buy clothing online. And they could do it without having to get in the car dealing with the screaming kids and, and showing up at stores and thinking they're gonna get something and no one can help them. And let's face it, shopping is an experience. Half the time it's a nightmare. And maybe the rest of the time it's good. Sometimes it can be great, but it's generally generally shopping is not going to Nordstroms it's it's being in the nightmare of a shopping mall and not being able to find what you want and running out of time and anxiety and stress and so forth. So I I actually love retail. And I think we all glow when we have a good retail experience. Like I went to CVS last night, and I got talking to the guy behind the counter. He's been working with Michael, he's been working the CVS, in Rancho Bernardo and San Diego for 14 years, I got a personal connection. And I came back smiling because I've made a human connection. How often is shopping like that that is the exception rather than the rule. And I think it can be so much better than it has to be if that apparel retailer is going to survive the fact we've all been trained to, to buy stuff online. So you know, what do they what can they do to untrained people to get them, lure them back into the stores. I don't think this is about having magic mirrors and weird shopping apps that are putting VR overlays on things, I think it's doing the basics, making sure that everything that you want is in stock, being able to look on the phone and see what's in the store and going there and not being told, actually, we don't have it in stock, or we've got it in stock, but I have no idea where it is in the store, which is I think happened to many of us, we go to, you know, a DIY store. And they're huge, and they know it's in there somewhere, but they can't help you. And it's deeply frustrating. When that happens, how much better would shopping be if you had continuous inventory if all of those products were connected? For for a price that was insignificant? And you said, oh, you know, do you have a large black pair of pants or a sweatshirt or whatever? And they said, Yeah, we do. And actually, someone just tried it on the change room, they will straighten it up, and we'll get it to you or it's in the back of the room. If if the shop assistants could do that, they would be spending less time running around and more time giving you the Nordstrom experience rather than that. I'm terribly sorry, I don't know where that is, as a people in the service industry are being run ragged at the moment, they're understaffed. And the experience, whether you're going into a hospital, or into a shopping mall is poor. And a big part of it is because people don't know where the stuff is. And they're wasting their time rather than doing the thing that we want, which is having a human connection, and getting the thing we came in to shop for. And you know, if it's tagged, if it's connected to the internet, there's so much more we can do in terms of storytelling, you could have concierge apps, the shop assistant can tell you a bit about the product, real insights, but they're not they're looking for it, rather than selling it. So let's have sales staff that are relationship building that is selling. And I think if we do that, you know what the smart retailers will find is that they can have less staff delivering better service in a smaller store footprint so they can save on the they can have more of a showroom more of the apple experience, where you have a beautiful environment. And there's the minimum of stock in in the back. But it requires you to know where everything is. And that's all about connectivity and technology. And again, it comes back to smart things connected to the internet. And so I think retailers are in a fight for their lives. And they have to compete with the online experience. And I believe that connected products are the way that they will survive and thrive.
Robert Schmid 18:40
I was smiling because he talked about your experience at CVS. I just bought this at Nordstrom. And it was a great experience. It was exactly what you said. I walked in there was someone who walked up to me, I forgot his name. I was thinking if I remember his name, but he helped me and I do this once a year I go and I buy a bunch of stuff. And then I don't buy anything for you. I don't go shopping I should say I buy stuff, but I go shopping like this, but it was an experience. They brought me stuff I was in the changing room. I liked this one. I didn't like other ones. It was just really, there was this connection of you know, the gentleman advised me on what I should wear shouldn't wear and it's like, you know, that's something you trust in a human interaction and I like it. But I have to say there were problems in that experience that I think a very sort of typical even at that high end retail I was at that person had to walk back to their computer to check what they had an inventory. It wasn't that he could just go there, look it up on his phone, tell me scan it and move on it. He had to leave for that. And you know, I know you didn't ask me here to go give my opinion but I'll share it anyhow, which is I think this is an example of retailers need to invest First, they need to invest this excuse of the margins are so slim, is valid, I get it, and it's not going to sustain them because of those reasons. Let me ask you a different question on this. So let's say we all agree with you, right? This is what needs to happen. I agree. Let's say you and I, what, what do companies need to do here? And I want to you gave me this question, but I want to bifurcated into two different examples. What do existing companies need to do what to do? Not just retailers, but manufacturers need to do? Number one, but also, what would be the new upcoming company that you're gonna see on the Shark Tank next month that you would do around this? So you talked about this early on the ones that we don't know yet? What are those? Like, what are they doing? someone that wants to listen to this and really take this to heart and be a leader in this space? Who would that be? And what would they do so long story, but here is the existing versus the new.
Steve Statler 21:10
So I think there's a ton of opportunities for people to build platforms that make what we're talking about possible. So you know, Wiliot, we've got an axe to grind, we make these postage stamp size tags, we have the cloud services that leave them and this is, you know, for pennies, you put the product online with this. But that's just a very slick, thin foundational layer. We think it's an important one. But I think there's an incredible opportunity for people that are writing the apps, the cloud apps, the mobile apps, and, and that could be someone that's building software solutions to sell to the companies that have got these problems that need to make this transition. Or it could be someone who's going to do retail better. You know, it's really, really hard. You look at electric cars as an example. I mean, Tesla is fairly secretive, but it's no secret what they're doing. And yet you have the rest of the car industry's value is just collapsing, because they can't make the change. They know theoretically, what they need to do. But they've got 10s of 1000s of people that grew up with the combustion engine. And I think that's the challenge that existing retailers, CPG companies, food producers, all of these companies pharmaceutical companies have. And so I think there's a lot of opportunity for people that start again, from scratch and say, Look, we're just going to gather the people together that want to do this differently. And so they can build their own platforms, they can buy platforms, and they can start business with the paradigm being everything's online, all of our products are continuously connected, whether they're in the supply chain in the wholesale, retail, or if they're in our customers hands, you know, what if I could have food containers that reordered themselves, when they became empty, I could become the Netflix of herbs and spices, I could have a subscription relationship, direct relationship with my customer. And I can cross sell, and I can make sure that I have loyalty, my cost of cost of customer acquisition goes down. So that's, I think, a really exciting business plan. And there's some incumbents that could execute that just very hard for them to do it, because they've got a legacy of, they've got a legacy business that they don't want to cannibalize too quickly. They've got a set of staff that are real experts in Oregon, oh, and garlic, but maybe not in cloud computing, not in user interface, design, all of these things so that that so I see the new company opportunities, you can either be an enabler or you can actually be a practitioner, you can use that and say I'm going to deliver services based on IoT, too. So what do you do if you're already in the business, if I'm on the board, or I'm a, I'm the chairman or CEO of a top quick service restaurant, or a CPG company or a pharmaceutical company? It's hard because you've got a culture and you've got a structure that serves a business that's offline. And if you go to any apparel company, their idea of innovation, a lot of it is around fabrics and dyes and not cloud computing, not user interface design, not the internal systems that are required. So what do you do about that? And actually, you know, that's where compass, your day job comes in. The, the delights and I hate to say it, the McKinsey's, it's going to be management consulting Kevin never heard of the second integrators Yeah. Okay, don't worry about. But you know, this starts at the top, this is not something moving to IoT to is not something that a director of supply chain can do. This has to be done in the CXO suite, because it's about changing direction. Objectives, it's a fundamental change to the business model, if you're going to have a subscription relationship with apparel customers, if you're going to rent them clothes, take them back and then reallocate them. That's not a side project. It's about a culture change. It's about a strategy change. It's about hiring different people. It's about building infrastructure. It's new approaches to marketing it. And it requires someone to come from the outside, I believe, and, and help be an agent of change, and operate at all those levels help to figure out, and then it's not a one size fits all, there's going to be different strategy for every different vertical, and every different player in every different vertical. And it's about assessing where they are finding the right people looking at the how you augment the skills, and then looking at the systems kind of doing an ABC, where are your systems now? Whether they need to be if a is where the systems are now, and B, C. C is the internet of trillions, what do we need to build next to go from A to B to see? So that requires knowing what you've got? It requires building systems. Now, this sounds huge. But I actually think my last point on this is you can start off small you can say, Okay, this crazy guy on the podcast was saying these things. And you know, maybe he's right, maybe it's not, probably not, but let's do some experiments. So I think you can start off small and I think you can start doing some prototypes and pilots and you can start connecting things at a very practical level. And the area where we as a company have focused on is plastic crates, because plastic crates are like the the vascular system that is channeling the lifeblood through the body. If I can put those online and 99% of reusable transport items, pallets, crates, rolling cages are offline, if I knew where those were, then that will be a step, a very pragmatic step to this connected world. And I can start off simply by losing less of them. And we're dealing with a bunch of customers in retail, who are starting to do home deliveries with plastic crates and carriers and cold boxes. And they're losing, not 5%, not 10%. But like 40% of these things every year, you start delivering things to the home, these are kind of attractive things, they tend not to come back people are in a hurry, they kind of the delivery staff very often third parties leave them there, you're losing millions of dollars, that why don't we just connect it. And what we found is as soon as you tell as soon as you start putting that system in together, your losses go down, the leakage of the system goes down. Not just because you know where they are, but because the people that are doing the deliveries know that you know where they are. So the fact that they know that, you know means that you lose less. So there's some things that you can do at a very practical level to start now. But I think the average, the average fortune 500 company is going to need some help. And I think that's a boon for the management consultants, the systems integrators, the industry analysts, the technology companies, this is actually you know, it's like post war, the boom where we have to retool, and so I think this is going to be great for the economy. And I think it's going to be great for a lot of the forward thinking people that decide that they're going to give this a try.
Robert Schmid 29:00
super interesting. We were talking about apparel so much and about some of the harder goods. And I was thinking about food again, right? Because how much food gets thrown out always is mind boggling to me. And then I was going to ask you, and then he started talking about the plastic rates. So you gave me the answer for food in a way where people can start right away by tracking plastic rate. So I love that. And the other thing I wanted to say go ahead.
Steve Statler 29:28
I just want to jump on that. So I kind of told half the story. So yeah, you're using less plastic crates, but I think foods are really important thing. And it's important for a we all eat. And we all appreciate good food and good food is food where hopefully we know where it's coming from. It's safe, but also it's got shelf life and I just can't believe you got to supermarkets and the shelf life without products even from some great store. They were mentioned names tends to be very spotty, very poor. I'm always buying produce And like strawberries, they go off that you get them in the fridge and you open them up and are bad stories. So that's because our supply chain is offline. And yeah, if you connect the crates that deliver those, you're gonna lose less crates. But more importantly, much more importantly, shelf life will increase dramatically. And why is that? Why will the shelf life increase if you start tracking the plastic crates, the reason is plastic, the flow of produce from the farm through the packing shed in the in the big farms to the distribution centers, and then into the stores. This is not a straight path. Very often these crates are sitting for a lot longer than they should be, they get forgotten about their the back of the store the back of the distribution center, the back of the of the packing shed. And it's not a FIFO it's not a first in first out very often, the stuff that gets put at the back is not the first stuff that goes out the door. And very often there's heat variations, you start connecting your crepes and you can spot that. And you don't have to wait for someone in a month's time to come back and braid the farmer, you can actually have like a text message, go to the foreman and say, Hey, this is your your crates are not going out in order. Do that. If you do that, what we're saying is you can add two days of shelf life onto products. Two days of shelf life on two products means a significant waste 30 to 40% of the product for even gets to the plate. So we're not even talking about Johnny not finishing his greens, we're just talking about stuff that gets thrown away because it goes off. If we actually know where the food is, we can put days of shelf life on which means we're throwing away less, which means there's less stuff going into landfills, which means there's less methane and co2 going into the atmosphere, it means the cost goes down. And we can actually afford to do a better job of better quality produce. So I think it's really important that we move to this. And again, the benefits are not that you'll find your benefit in heaven, it's actually less less waste, less loss, less shrink. Less returns more loyalty from customers, why wouldn't you do this?
Robert Schmid 32:25
I'm still laughing about the benefits in heaven comment that made me giggle. Yeah, I mean, I just want to say one thing, and I hope I remember this right. But if I remember our The Future of Food Team, they told me something like Walgreens throws as much food away as Chipotle uses every day. I just put this in perspective, right? There's a company that buys stuff, there's a company that throw stuff away. So anyhow, this, two more thoughts on this. And then I'm good. But I just wanted to say, you talked about, I always have in my signature, I think big start small scale fast. And you were a real proponent of starting small. I love that. And when I think of thinking big around food, I always have this in my mind, you use the Tesla example, which I love, which I think Tesla people forget how actually Tesla isn't an a car company, actually, Tesla owns the supply chain with solar all the way from making the energy to giving it to you at a pump, which it's not a pump, right. But it's a station so they own the whole supply chain. And so I sit then I wonder what would that look like? If someone would own the whole food supply chain? What could you get out of better production through vertical farming faster to the customer me choosing what I want? And so I don't know, that's the thing big and then you've talked about some excellent examples around starting small, but that's the trick, right? Don't forget to think big, but then pick some and start small because if you don't start small, you're never going to start and then there's gonna be the next test line food, whoever that is. So anyhow,
Steve Statler 34:00
I love it. The next
Robert Schmid 34:03
IoT2 the internet of trillions. Thanks for a great conversation. Anything else that I didn't ask about?
Steve Statler 34:12
No, I think we we got to, Robert, thanks for coming over from the Mr. IoT podcast. I love your podcast. I love chatting with you. And this is an important relationship because I think you guys at Deloitte, I've seen you do it. Come in and work at a pragmatic, practical level, but you are able to do things that my company Wiliot can't do. You're able to engage people at all levels and have the business conversation or the technical conversation. I think that's super important if we're going to help people manage this transition, so I appreciate the spotlights. I appreciate the great questions, and I'm looking forward to collaborating with you in In the future and making this thing that we both believe in, actually happen. Thank you. Well, I hope you enjoy that conversation. Thanks again to Robert Mr. IoT. Thanks to you for listening. Please do rank and review on your favorite platform. Tell your friends and until next time again, peace out