Navigant Research Blog

Cashing In on Blockchain

— January 23, 2018

The 325 initial coin offering (ICO) events in 2017, as tracked by CoinSchedule.com, raised a combined $3.7 billion that the Securities and Exchange Commission is still working out how to define and regulate. Surging cryptocurrency market capital is drawing huge numbers of new players into the market—some are pioneers, some are sheep, and some are going to jail for using ICOs to make a quick buck.

It is not just ICOs and greenhorn startups that dangle blockchain as a shiny object in front of investors. The combination of uncertainty, novelty, and potential for wealth has created an environment where a finance firm’s stock price can grow by 2,000% just by acquiring a blockchain company that has yet to post revenue. Seekingalpha.com put together a graphic showing how non-alcoholic beverage company, Long Island Ice Tea, boosted its stock value 183% in one day just by changing its name to Long Blockchain and by making vague promises about experimenting with the technology. Similarly, Kodak’s share prices doubled after it announced a blockchain-based photo licensing platform.

Something Is Rotten in the State of Blockchain

It is tempting to look at the explosion of blockchain projects in 2016 and 2017 as an encouraging sign that blockchain has earned its way into the mainstream as a powerful and innovative technology. Surely the diversity of companies announcing pilot currencies and proofs of concept can only be good for R&D, right?

The answer is that a yawning gap exists between announcing a project and treating the underlying technology seriously, just as there is a gap between announcing an ICO and having a real and sustainable product. Projects like this only help blockchain progress if the companies behind the announcements have a legitimate purpose beyond capitalizing on the world’s blockchain fever.

Where We Are Headed

It is possible—maybe even likely—that fraud, exploitation, and publicity stunts are a natural part of blockchain’s growing pains. And it is true that for the strong applications and business models to rise to the top, the weaker applications must drop out, one way or another.

We should not be afraid of projects and experiments failing. But is a cause for concern that blockchain has become a talisman, drawing in everyone from first-time investors to established companies, few of whom seem aware that most will fail. When the hype dies down, share values will drop with it—blockchain’s status as a magic word simply cannot last.

It is not just the opportunists that benefit from all the hype. Developers of serious blockchain solutions need to work doubly hard to separate themselves from the chaff, and they have an obligation not to let the investment flowing their way go to waste. The question is not whether the crash will come, but, as the creator of the joke turned billion dollar reality, Dogecoin, asks, “will there be enough magic left to build something real once it does?”

 

CES 2018: The Year of Behind-the-Scenes Innovation

— January 23, 2018

A year ago at CES, the event belonged to Amazon’s Alexa, with vendors touting Alexa integrations and displaying Echo devices prominently at their respective booths. At CES 2018, however, a single showstopper failed to materialize—unless one includes the power outage at the Las Vegas Convention Center, which was the biggest surprise (and I was there). In lieu of one standout product, I noted several key trends, including the ever-popular artificial intelligence (AI), a growing number of home healthcare offerings, an aggressive push from Google, and an expanding presence of French startups.

Everybody Is Doing AI

This year, much of the innovation is taking place in the backend software of smart products: the AI world. Nearly every company I spoke with flaunted the use of deep learning and AI. While the term AI was used loosely to describe algorithms and machine learning, this behind-the-scenes technology is progressing, which enables more advanced functionality for smart products. There are new and better algorithms, such as those used in Philips’ Hue Sync, which enables multiple connected lights to respond in sync to movies, video games, and music in real time. Advancements in machine learning are enabling digital assistants to recognize the voices of individual people and understand conversational context.

Home Healthcare Edges its Way into the Spotlight

Home healthcare continues to edge its way into more connected products, and this was underscored as I made my way around the crowded show floors. Offerings varied from elderly care solutions, to products for promoting better sleep, to services for people to better connect with their doctors. While propositions such as security, energy, and convenience are largely driving smart home adoption, healthcare solutions can provide enhanced value on a more personal or familial level. Health-focused products can help users better track their own health or the health of loved ones, and can help prevent unexpected illnesses and diseases.

Google Starts Taking CES and the Smart Home Seriously

Google’s presence was everywhere at CES 2018. The search giant’s messaging took over the Monorail, the Aria hotel’s display featured “Hey, Google” ads, and a giant Google gumball-style machine dispensed Homes and Minis to lucky CES attendees. Amazon took a lighter approach by booking ballrooms dedicated to business meetings with various Amazon business groups, including Alexa. This increased presence not only shows that these two companies are taking their engagement in the smart home market more seriously, but it also highlights the absence of Apple. Apple is being left behind in the smart home space, especially with the delay of its HomePod speaker and a continuous lack of traction with HomeKit.

The French Are Innovating

France’s efforts to become the startup capital of Europe were made obvious at CES by the sheer number of French startups present during CES 2018. From companies demonstrating software for making bathroom mirrors smart to Li-Fi-based IoT platform providers, the French are innovating and becoming a hotbed of opportunity for stakeholders across smart industries.

A World in Transition

Though CES 2018 did not have one major theme like that of past shows, the trends I observed fell in line with the progression of digitization that Navigant Research is seeing. Companies are transitioning from deploying hardware devices to enhancing their existing solutions through data and backend software. Large tech incumbents are recognizing the power of the smart home and investing heavily. New value propositions for this tech are emerging and providing more convincing use cases for consumers; new markets are growing from this opportunity. To learn more about these trends, see Navigant Research’s white paper on IoT and the Future of Networked Energy.

 

Detroit Auto Show Stars Fund Future Promised at CES

— January 18, 2018

For many of us that keep tabs on the automotive industry for a living, the first 2 weeks of January are among the most grueling of the year. The North American International Auto Show in Detroit has kicked off the year for several decades. And in the past 10 years, International CES in Las Vegas has become an increasingly important addition to our schedule as the two events run back to back. The announcements at 2018’s shows illustrated some of the crucial interconnections between the growth of technology and the transportation business.

For automakers, CES has largely been a place where they talk about future technologies and try to shift the media’s perception of them from being old-fashioned metal benders to forward-thinking visionaries. They rarely show actual new products, instead focusing on automated and connected concept vehicles. The Detroit show, like most other auto shows, targets consumers that are buying vehicles in the coming year.

For an industry that is facing the biggest transformation in more than 100 years, this is a crucial time. While many recent auto shows have highlighted new plug-in and hybrid vehicles, there were almost none in Detroit this year. Instead, the biggest announcements came from the Detroit-area manufacturers, and they were all pickup trucks—mostly full-size. Fiat Chrysler unveiled the redesigned 2019 Ram 1500. Chevrolet brought out a new from the ground up Silverado, and Ford launched a diesel version of the F-150 and a midsize Ranger pickup.

Profit in Pickups

Pickups are a segment that is likely to be among the last to gain highly automated driving capabilities, as discussed in Navigant Research’s Market Data: Automated Driving Vehicles forecast and its Leaderboard reports. However, those automation technologies were a major topic of conversation in Las Vegas, particularly in the context of whether manufacturers will build new business models around these costly, complicated, support-intensive vehicles.

That’s why pickups are so important to Detroit. They are the profit engines that keep this industry humming along while indirectly funding R&D efforts that will create the next big things. Part of why Ford is bringing the Ranger back to North America is that the average selling price of an F-150 is now more than $58,000. Pickups and large SUVs generate far more profit per vehicle than any small car and they sell in far larger volumes than any other segment in the American market. Ford is projected to make a full-year 2017 profit of more than $9 billion, largely thanks to sales of nearly 900,000 F-series trucks. Even the third place Fiat Chrysler sold more than 500,000 Ram pickups in 2017.

All three manufacturers are adopting fuel efficiency technologies such as 48 V mild-hybrids, dynamic cylinder deactivation, diesel and active aerodynamics in order to meet fuel economy requirements, as discussed in Navigant Research’s Automotive Fuel Efficiency Strategies report. However, until they all figure out how to make sustainable profits in the new age of mobility, we can rest assured that they will continue pressing ahead with enhancing the customer appeal of these trucks in order to keep the cash flowing to develop the promises made at CES.

 

Speculation Over Smart Home Technology

— January 18, 2018

Over the holidays, I received my first personal assistant. Her name is Alexa, and despite the latest hype and commercial appeal, my virtual assistant remains in her box, lifeless and unused. I have reservations about engaging with a smart device that was programmed to listen, track, and record my personal habits in the privacy of my own home. According to recent consumer reports, these misgivings are common. In fact, over a third of Americans are uncomfortable using smart technology as privacy policies fail to address ongoing security issues. For some users, the convenience of voice-controlled devices, like the Amazon Echo and Google Home, is shadowed by security concerns. Data leaks and recent reports of hackers gaining access to home devices and speakers have not helped matters, begging the question, what do consumers stand to gain from smart home technology?

An Ecosystem of Connectivity

For starters, the ease of access to information and remote-control capabilities of home appliances have helped users save a lot of time and money. Energy efficient solutions like smart thermostats and internet-connected lights paired with other smart devices have helped consumers reduce monthly energy bills. Products like Amazon Echo act as a smart home platform for connecting various Internet of Things-enabled devices, like security cameras and remote-controlled cooking gadgets. Consumers already using some of these devices are more likely to install additional ones as they discover new tasks for machines to handle. Throw in the added convenience of a voice-activated assistant and the benefits of connected home technology start to become more convincing for even the biggest skeptic. Yet the real risk of hackers taking advantage of these features remains as the growing transfer of control from homeowners to smart devices is left unprotected.

A Silver Lining

Despite ongoing security concerns, smart technology offers consumers the opportunity to lead more efficient lives. Yet for users to reap the full benefits of these devices, privacy and security concerns must be addressed. Doing so attracts long-term buyers, securing data and customers in one fell swoop. Since innovation leads regulation, privacy policies for this technology will require continuous revitalizing. Proposals like the European Union’s cybersecurity certification framework represent steps legislators are taking to confront these issues. Vendors can also play a role by being more transparent about their offerings and educating consumers on where risks lie and how best to avoid them. Understanding how the tech works and where faults exist may convince hesitant consumers, like myself, to give it a go and take advantage of what these smart devices have to offer. For more information about smart home technology, check out Navigant Research’s Digital Assistants and AI in the Home.

 

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