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Why so many enterprise IoT projects fail

As the world moves from physical to increasingly virtual with rapid commoditization of technology, customers expect the products they purchase to be smart.

Smart products empower customers and improve satisfaction rates. A one-star product rating from a customer can have a detrimental effect on the future success of that product and its vendor.

Unfortunately, most traditional organizations are unprepared for this new reality and are certainly not equipped for this transition. This can easily be proven through the rise and fall of IoT and digitization projects. For the most unfortunate of these companies, security flaws and capability deficits might result in dramatic news headlines exposing critical product vulnerabilities, hi-jacking, stories of ransomware, or similarly devastating attention.

To ensure success, organizations must understand why so many enterprises fail with their IoT and next generation smart projects:

Fundamental lack of software understanding

It is this simple: a lack of fundamental understanding of software lies at the core of the problem.

A company that for decades has produced a physical product will find it extremely difficult to make the transition to become a software company. It starts with the lack of executive management digital literacy and software competence. The digitization transition represents more than a slight deviation, or enhancement to how things used to be. Without proper and deep understanding at the executive management level, a range of incorrect assumptions will follow. Here are six of the most apparent assumptions and tips to combat them:

1.       Unrealistic timelines

Despite years and years of refining supply chain management, logistics optimization, vendor management and factory outlays, many organizations still believe software is just a simple add-on.

This is a false belief. The software engineering process is probably as advanced these days as any traditional engineering process; therefore, it deserves the same level of respect and resources. The software engineering process, especially in its infancy, needs significant attention to be properly integrated into the overall product development cycle.

Time and again organizations on the verge of launching a new smart product, find that fundamental issues, such as basic device management and security capabilities, have been left unresolved.

Traditional companies should revisit their core engineering process and apply the learning and timeline history from the process into the new software engineering process with the same level of respect and expectations. Software is a core constituent of the product life cycle process.

2.       Lack of executive management competence

IoT leaders have not yet been granted a seat at the executive management team table. When looking at the composition of upper level management, traditional companies may lack experienced individuals with proper software competence. The reason lies in the fundamental lack of software understanding found in most traditional C-suites, hence the need for such a person to join the group.

Traditional companies should look to the profiles of leaders in the most progressive software companies and see how they can learn from their processes and attract some of these talents.

3.       Inexperienced or disempowered people in charge

Due to the lack of strategic understanding at the C-level, critical roles — such as the head of IoT –are often assigned to more inexperienced candidates. They either get the role because they have done a good job in a traditional part of the organization, or they are outsiders who are younger, up and coming candidates with great ambitions and stellar backgrounds combining management and engineering.

Both of these personas will likely fail in their work.

The first type, a star elsewhere in the organization, fails due to lack of software domain knowledge, for the same reason a software person will fail when thrown into a head of logistics role. Decision makers for large software projects might not know the difference between a software package and a container, which illustrates the gravity of the challenge.

The second type, the up and coming MBA management candidate, will fail because he lacks the internal power and backing to drive necessary transformation and change processes.

As a general rule, more traditional companies shouldn’t hire non-software people to lead IoT projects. The right candidates must be empowered to be able to make deep changes by being equipped with the proper budgetary and upper management support. This is critical to a successful outcome. The Innovator’s Dilemma is a great resource for upper executive management on this.

4.       Lack of budget

The promise of IoT projects rests mainly in reduced product lifecycle costs and increased subscription revenues.

Many traditional companies do not embrace this promise, rather they face it through competition. Such an attitude leads to software becoming a necessary evil, which again turns software into a cost center. This becomes obvious when organizations believe that they can develop a proper over-the-air (OTA) software updating solution in-house with just a few developers within a few months.

The main reason for this rather naive attitude is the lack of budget, combined with the requirement to have something to deliver on time. The result can be found in fragile OTA solutions with critical security and operational issues that expose the company to adversaries and potential devastating front page news.

This attitude is something that product leaders are observing and pointing out to the community. For example, Chief Product and Innovation Officer Bjorn Nostdahl from Gunnebo Security Solutions in his blog points out the cost, hassle and time lost when trying to build a homegrown OTA software update solution.

Traditional companies should view software as a source of competitive differentiation, and a blessing to create faster market responses and closer proximity to its customers. Such a view will lead to bigger and more realistic budgets and timelines.

5.       Basic flaws

The overall lack of competence, combined with unrealistic timelines and budgets lead to serious flaws in the design phase of smart products. This unfortunately translates into a failed project in the end.

Some companies who have not thought about how long their warranty to provide software security patches should be; the concept of Role-based access control to ensure proper access rights; device and software compatibility; what continuous iteration/continuous development is; or about the change-process. These are all table-stake issues.

Does the organization grasp product extensibility? Rewind to 2000, Steve Jobs, the iPod, iTunes and the personalized music experience. Creating a physical product, shipping it and forgetting about it differs from building a software-based product that will be maintained for years to come. The difference is fundamental and similar to the difference in meaning between the words “static” and “dynamic”.

Traditional companies should at a minimum embrace the triangle of trust: only allow authorized persons, authorized software and authorized devices interplay. This will ensure that only the right people can deploy the right software to the right set of devices. This simple principle can avoid the most fundamental failures and insecurities.

6.       Poor technological roadmap and strategy

The nature of what actually causes failure is of course technical. However, each of the previous challenges translate into insufficient coverage of critical technological issues such as:

  • Strategy of on-premise self-hosting or public cloud usage,
  • Over-estimation of an organization’s internal IT staff security and operational competence,
  • Clear separation and demarcation of concerns between lines of businesses and corporate wide guidelines,
  • Strategy on platform versus best-of-breed approach and accepted lock-in levels,
  • Homegrown solutions versus licensing software,
  • Maintenance of a product with software updates for multiple years,
  • And in-house management versus outsourcing of the operational services.


To sum up, a lack of fundamental software understanding — its potential and requirements — at upper level management constitutes the single most important reason for failed digitization strategies and IoT projects.

The upper level failings trickle down the organization in different ways. Whether an organization is producing industrial equipment or consumer white labelled goods, upper level management software competence will be required. Continued lack of competence will lead to the eventual downfall of any organization regardless of its history and solidity today.

All IoT Agenda network contributors are responsible for the content and accuracy of their posts. Opinions are of the writers and do not necessarily convey the thoughts of IoT Agenda.

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