The Internet of Things (IoT) has been a daily topic for business and technology professionals for over five years now. The dialogue has matured from “what is the IoT” to “how does one make money with the IoT,” and is now the focus of business consultants and operational leaders. They focus on two big promises of IoT: cost reduction through automation and better asset management. Both are delivered and propagated by the analysis of data that IoT edge devices generate from the value chains of enterprise operations.
But this view has a pronounced blind spot — the fact that IoT success will be driven by dramatic demographic shifts.
The importance of design relative to the technology of IoT solutions has been discussed here before, but this was a more individual, user-centric view important to application developers. IoT business leaders must understand that success will be driven by people, the people who developed it and more importantly the people who will use it. Today the only time people are part of the discussion is when the promise of cost reduction is delivered by the removal of people from operations. People are viewed as part of the cost problem, not a key to success. Indeed, recent discussions about the job losses due to Artificial Intelligence have gone so far as suggest that this will be problem for society as a whole.
A more wholistic, demographic view tells a different story. The demographic view considers how important people are to the value propositions and considers both their capability and availability. People are users who determine adoption. People are installers and operators necessary to deploy and maintain a successful business proposition. People are customers who pay for the applications. This is the world of demographers. Demographers are well known to consumer product strategists and marketing teams but are unknown to the average IoT strategist or consultant. IoT and AI promise to make people irrelevant. A wholistic view says the opposite.
Demographers will tell you, as a business leader, that three generations are going to make or break your future: the Baby Boomers (born 1945-1964), Generation X (born 1965-1984) and Generation Y also known as the Millennials (born 1985-2004). The number of people in these generations matter because they are not evenly distributed over time, have very different lifestyle preferences, and will impact all parts of an IoT business cycle over the next two decades.
The consumer IoT space today is dominated by two applications: home automation and self-driving cars.
The big tech brands such as Amazon, Google, Tesla and Apple are all heavily engaged in these applications because the 88 million Millennials, currently 16 to 35 years old, were raised with technology and will engage the IoT at levels that previous generations cannot comprehend. Their lifestyle is defined by technology — mobile, social, cloud, and IoT. As Gen Y moves into the buying ages for homes and automobiles two things happen. First, the sheer number of customers increases by over 30% as the tail end of the 69 million Gen Xers is replaced by the peak of Gen Y. Add to that a 5X penchant to spend and a laissez faire attitude towards privacy and security learned from Facebook and you have the makings of a perfect storm for homes that listen to everything you say and cars that decide for you how to get where you’re going.
But what about Uber and the sharing economy? Yes, Gen Y currently tends to shrink from the need to own, but that is likely a product of their present age, student loan debt, and station in life. Will they take Uber everywhere forever? Growing up, getting married, and having kids tends to reshape one’s priorities and thinking. The jury is still out on Gen Y’s adult behavior. Gen Y would love convenience of cars and trucks that drive themselves, but transportation industry experts and policy makers continue to caution that this IoT influence on conveyance is not ready for prime time. IoT innovators have much to gain if they can bridge the gaps.
Industrial IoT or IIoT, as we discussed above, appears to be all about getting rid of people — automation reduces labor costs. But Product-as-a-Service (PaaS) offerings still need people to install the service and maintain the equipment. In the world of durable equipment, PaaS providers will have to retrofit their services to the last ten years of installed equipment and that means roll trucks. Mechanical equipment and skills are replaced by smart equipment defined by the software skills of the provider’s field team. Welcome to the IIoT demographic crisis of Boomer-techs retiring, not having enough Gen X’ers to replace them, and no Millennials interested in Vo-tech jobs.
Sure robots and AI are supposed to replace labor, but they haven’t. Indeed, if you’re planning to connect 100,000 rooftop chillers, neither robots nor AI are even in your field-of-view today. Certainly manufacturing has benefited from automation and IoT, but human labor and cognition are still a must have for IoT deployments. Boomer-techs aged 56 to 75 are exiting the labor force, but 9 million fewer Gen Y workers cannot replace them much less meet a growing need for the truck rolls necessary to deploy and serve predictive maintenance offerings on the installed base. Further, most industrial equipment manufacturers are totally unprepared for the loss of domain knowledge and expertise that comes with the retirement of a skilled tech workforce. Baby Boomers are retiring at the rate of one every eight seconds. Digital transformation will implode without trained people to provide the necessary services. Some forward-thinking service organizations are already working to attract and train Gen Y to fill the gap and augment the service with their tech savvy. But they are smaller, highly fragmented operations, so IIoT will only blossom if these few visionaries become the norm.
Smart Cities is one of the great promises and hot topics of the IoT. Smart City systems promise to make dense urban environments more livable, convenient, and sustainable. Smart Cities are supposed to make the incoming wave of Gen Y comfortable in the urban environment. The question for Smart City developers is will the behavioral characteristics of the big generations, Gen Y and Boomers, support the cost of deploying these systems, i.e. will they stick with densification and will they pay for IoT based livability? The real question here is will Gen Y choose to live in cities through their high-earning, child-raising years, ages 35-55. Cities are a great place to live if you don’t have to educate children. Baby Boomers favored cities until their second child and then they flooded the suburbs. Urban public schools historically underperform by most standards and private schools are too expensive. Smart cities are inevitable, but demographics say their costs will be borne by the wealthy.
Recent Baby Boomers may find their way back to cities to enjoy urban IoT benefits. Will they/can they pay for it? Smart Cities companies are counting on it.
Healthcare is the single biggest expense in our GDP today and the Boomers are just beginning to enter the most expensive, comorbidity age groups. The only way to reduce the cost of chronic care is to help patients be more effective and accountable in their own return to wellness. This is the promise of digital health. Many tech developers say that “the elderly will not adopt new technologies like mobile and IoT. But this is where the parent-child relationship of the big generations, Gen Y and the Boomers, will pay dividends. Boomers will be waltzed into IoT technology as it relates to healthcare by their tech-savvy kids. They will have no choice. Boomers, because they are a huge generation and are living longer, will double the U.S. healthcare burden. A generational analysis of hearing aids use, for example, predict a nearly 50% increase in the next decade. Digital health innovators can help the Baby Boomer elderly adopt new technology and manage the increased expense by integrating new devices with mobile and cloud-based platforms that connect them to their care-giver children’s iPhones.
Millennials expect any information they want at their fingertips, literally, whenever they want. This is a good thing. IoT delivers this and the biggest generation demands it. The Millennial/Baby Boomer economy will facilitate any expense IoT can muster — if developers turn their attention to people. Boomers will continue to finance the U.S. economy for the next 20 years. They have $10 trillion in savings and $20 trillion in the stock market. The additional financial contribution of Gen Y will be more than significant.
Money is not the problem. If IoT developers turn their attention to the people, the generations of people, they will find both the customer demand and financial wherewithal to turn IoT innovations into record-breaking business success. Demographics precipitates economics, not the other way around.