The 6 Things CES Taught Us About The Internet of Things

fortune.com
Here’s what we learned about how the emerging Internet of things market will shape up in 2016.

Automotive technology and drones made a huge splash at the CES technology show in Las Vegas last week. But there still thousands of square feet devoted to connected gadgets like Wi-Fi enabled TVs and lightbulbs you can control from your phone. Amid the connected chaos there were some clear trends. Here are some of them that highlight where the still emerging Internet of things is heading and how its underlying business is evolving.

The Amazon Echo was a breakout hit: There were at least a dozen announcements from companies integrating their technology with Amazon’s voice activated speaker that also controls your lights, answers questions and has other skills. Ford unveiled a plan to tie its automotive software to Amazon Echo so that car owners can control their home lighting and other services while driving. Other big announcements include home security companies Alarm.com and Vivint letting their users control their security systems by voice using Echo. We also saw the launch of Triby, a $200 kitchen radio that used the Amazon Alexa voice services application programming interface to create an Amazon Echo-like device except it’s linked to different services including music streaming service Spotify. So for CES 2016, Amazon Echo was like the Nest Thermostat was last year—everybody’s hot integration partner.

The Internet of things is about services not devices: This year, there was a subtle shift from building the device to designing services. A number of larger companies showed off connected products including Procter & Gamble with its Internet-connected air freshener that ties in to connected Nest Thermostat to spray air freshener to the optimal time to take advantage of your AC fans blowing air around your home. Whirlpool’s new connected kitchen suite includes an oven, fridge, and a washer and dryer that is working with both the Nest and IBM’s Watson to share information. Whirlpool also talked about partnering with Amazon on its Dash button to let customers automatically re-order laundry detergent from a connected washer when the washer estimates the laundry pods will have run out. Lowe’s, the hardware retailer, has taken its Iris DIY smart home hub and devices and connected them to a 24-7 monitored home security system that it sells. Under Armor, Medronic, and SoftBank are also working with IBM to integrate services from Watson as well.

WATCH: For more on this CES see our Fortune video.

No one is talking about obsolescence and refresh cycles: Between the Samsung refrigerator with what looked like a giant Android phone in the door and a demonstration of a concept car with 3D street view delivered on-demand while driving, I realized that few people were talking about how to swap out or fix the techno-heavy innards of these connected devices without having to replace the entire product. When it came to connected cars, Ricky Hudi, executive vice president for electronic development at Audi AG, said he anticipated changing the radios and brains that make the car smart every three years. A Whirlpool spokesperson showing off a connected Jenn-Air oven had no idea how the touch screen and computing elements, which take into account what is in the oven and how you liked it cooked, might be replaced if they failed. But given that an oven is designed to last a decade or more, and the average age of cars on the road today is 11.5 years, having a plan to upgrade the electronics components and upgrade the software in our long-lived connected devices seems necessary.

Big companies are stealing the ideas from startups: Marketers would call this the year of maturity for the Internet of things. But really this year is about all the cool ideas adopted by various Kickstarter projects in recent years finally making their way into the mainstream with big-name companies. The connected air freshener from Procter & Gamble is a great example. Maturity is good as long as big name brands emphasize quality and think through the security and privacy issues that startups haven’t. What’s less great is that most big-name brands are still leaving the big questions about establishing an ecosystem of standards and data ownership models unanswered. This means consumers might buy a few connected products that won’t ever be connected to each other. So while a Whirlpool washing machine might communicate with a Nest Thermostat to sense when a homeowner is Away and keep tumbling a load of clothing in a dryer around to prevent wrinkles until a person gets home, someone with a Samsung dryer that doesn’t work with Nest doesn’t have that same advantage. This adds a lot of complexity for the average consumer

We’re getting closer on business models: We’re finally seeing business models emerge that move beyond the one-time purchase of devices. Instead, we’re seeing add-on services like Lowe’s or SmartThings selling monthly home security monitoring that customers can turn on an off as needed. Another example is Whirlpool making it easy for customers of its laundry appliances to order laundry detergent and negotiating for a cut of the revenue (that is not happening now). Those kinds of conversations between potential partners are happening while the technology is being developed.

We’ve punted on data ownership and privacy: Data is the end game for the Internet of things manufacturers. Selling devices is how they get access to it. Connected ovens send error codes back to the manufacturer while Under Armour’s running shoes sending data back to IBM’s Watson. But there wasn’t a lot of talk on the CES show floor or behind the scenes about the ramifications of all of this data or the need for any related rules. The Federal Trade Commission Chairwoman Edith Ramirez did admit that she doesn’t use a connected fitness tracker because of data concerns. She also warned companies not to “collect information that they truly don’t need” because it exposes those companies to unnecessary risk. It wasn’t that companies weren’t listening to her, it was more that many just decided not to think about that issue at all.