The full stack challenge of most IoT & Industrie 4.0 startups.
Internet of Things and Industrie 4.0 (a German term for the industrialization of manufacturing environments) are hot investment topics these days. Collecting machine data, monitoring production cycles and taking steps towards predictive maintenance all fascinate me.
But there is a big obstacle that most startups face and — when talking to them — a surprising high amount have not even realized: The lack of a technical stack established at their target customers.
A (really) simplified stack looks somewhat like this:
- Sensors
- Data processing & transportation
- IoT cloud
- Software & algorithms
This lack of a technical stack forces startups to offer complete solutions to place their products. Even if your focus is on developing algorithms around predictive maintenance … well, you first need some data to give your algorithms something to work with and most likely your customers do not have the data today and do not want to do all the research which components to get to make your solution work. If your business is selling sensors, your customers most likely have no clue what to do with the data and it is your job to present a compelling use case and solution processing the data.
The situation is somewhat similar to the challenge software companies faced 20 years ago. If your business was document management software you were basically selling the entire stack from scanner, database, servers, storage solutions and yes, your own document management solution. While we have the cloud today, which is a challenge itself since many esp. German customers are still reluctant to put their data in some otherworldly environment, companies in the IoT and Industrie 4.0 space are again forced to sell full stack solutions …
A side effect of this situation is the high-initial setup costs potential buyers face. I see a lot of startups struggling at this stage since this leads to a high bar of value you have to deliver to justify all those investments.
This situation will not prevail, but on short-term most startups are forced to offer full stack solutions and the consequence is high costs to work on topics which are not focus and will quickly become commodity. The chances of your entire stack being top notch are rather slim and the danger is that being forced to work on all topics will result in none of your components standing out.
Startup founders should really be spot on which part of the stack their mid- and long-term focus is on and try to defocus all the other components as early as possible. And if your focus is not contribution significant value to the stack, reconsider what you are doing.
