by Tim Smith, PhD, 15 October 2003

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The wireless telecommunications revolution continues at a fast clip in areas that many of us never notice. We rarely think of the number of machines in our lives until they fail to perform as expected. We think even less about monitoring these machines and adjusting their performance. Yet this is the province of a wireless revolution that will dwarf the consumer market in unit volume terms.

Advances in RF engineering and wireless communication protocols have brought the price-to-quality ratio low enough to make machine-to-machine communication and remote equipment monitoring cost effective. In recent years, ZigBee™ and IEEE 802.15.4 low power wireless networking standards were created (www.zigbee.org). The implementation of this standard potentially shifts the price-to-quality frontier towards even greater value. If customers perceive this shift in value as significant, we should expect dramatic changes in the penetration of the wireless networking technology for machines to machine communication.

Helicomm
Helicomm is a two year old company based in San Diego (www.helicomm.com). They provide wireless data networking solutions for embedded systems and sensory networks in commercial, industrial, and residential industries. Helicomm's solutions are well suited for transmission of short-range communication of machine data up to 300 feet. Longer distance data communication is made possible through mesh-network software that relays signals over thousands of feet.
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Unlike their direct competitors, Helicomm has taken a standards-based approach to wireless data networking. . The use of the ZigBeeTM and IEEE 802.15.4 standards directly improves the price-to-quality ratio by (1) decreasing the complexity of the network and its modules and (2) taking advantage of high-volume semiconductor manufacturing to lower the price.

Machine-to-Machine
The potential value created by wireless data communications has spawned entire industries in residential and office environmental control, industrial equipment monitoring, and utility meter reading (AMR).

In these industries, the focus is on communicating with a machine, not a person. Since there are far more machines and devices than there are people, the market potential for machine-to-machine communication is commensurately larger. For instance, in 2002 roughly 150 million PC-class microprocessors were shipped globally for human use. In that same year, over 8 billion embedded microcontrollers shipped for machine use.

Machine-to-machine communication relies upon collecting and communicating data with between embedded systems, (embedded systems are computer chips with machine devices.) In many remote monitoring applications, wireless data networks are more cost-efficient to deploy and maintain than wired or cable networks.

The source of value in machine-to-machine communication is created by enabling individuals to make decisions about multiple devices at the same time. The decision may be as simple as turning a device on, off, or leaving it as it is, but when the decision must be made with respect to hundreds to millions of devices at a single time, there potential savings through automation are considerable. These savings are created in automating the collection of data from these devices, communicating the device level information to a central repository, and processing the data to uncover areas where a decision is required.

For example, utilities are deploying new methods for environmental control, load management, and dynamic pricing. These methods rely upon embedded systems and wireless data networks for machine-to-machine communication. (Load refers to the amount of power drawn from the utility transmission grid.) In one type of arrangement, a utility may contract with residential customers the right to decrease or interrupt electricity consumption during periods of high demand in exchange for lower overall electric rates. During a heat wave, the utility will then send an electronic command to the contracted residences. This electronic command will alter the thermostat in these homes from 70 to 75 degrees, thus lowering power consumption.

Hypercompetition
Businesses have understood the potential value of machine-to-machine communication since the beginning of the wireless telecom revolution. One area in particular, automatic meter reading (AMR), has become a half a billion dollar industry into itself and is growing at 17% per year. However, widespread industry deployment has been potentially held back by the use of proprietary wireless networks and network communication protocols.

A standards-based approach, such as the ZigBeeTM networking protocol and IEEE 802.15.4 RF requirements, shifts the paradigm away from proprietary solutions. In the technological solution itself, this standard offers both a reduction in network complexity and a potentially lower cost solution as manufacturing volumes increase. For purchasers, the use of standards also shifts the balance of power, as customers are no longer locked into a proprietary, single-vendor solution. Combined, these attributes both improve the price-to-quality ratio in a way that other improvements in machine-to-machine wireless networking cannot.

Hypercompetion by Richard D'Aveni, Professor of Strategic Management at Tuck, discusses the effect of the shifting of the value frontier from one paradigm to another and its resulting market disruption. In this market disruption, the market adapts the new technology and looses interest in the old. Many times, the new technology penetrates the market much deeper than its prior generation. The market disruption is created by shifting the value frontier from one technological paradigm to another.

In the machine-to-machine communication market, Helicomm is shifting the value frontier by approaching the market with a standards-based solution rather than a proprietary solution. In the past, the expansion of the price-to-quality frontier was limited to include proprietary solutions only. The use of a standards based solution opens the possibility of exploring an entirely new value paradigm.

Helicomm is counting on customers to adopt its standards-based value proposition. If the market adopts the ZigBee standards-based solution, a market disruption will occur in which the competitive landscape will quickly and radically change. Potentially, the current industry leaders will quickly become a footnote in the history books.

Critical Success?
At this point in the discussion, Helicomm may appear assured success. The value of machine-to-machine communication is somewhat understood by the market. The ZigBee new generation of technology shifts the value frontier towards a more compelling position. But this doesn't make for an assured success. We also need to examine Helicomm's strategy for competing in this new paradigm.

ZigBee technology may provide a compelling value proposition, but getting it to market is yet another challenge. While Helicomm desires to work through channel partners in a licensing arrangement, creating channel partner relationships is easier said than done. For the short-term, Helicomm is working with end-customers directly to create whole-problem solutions. The value of this approach is in defining the product and developing the solution with direct end-customer feedback. As the whole-problem solution is implemented, Helicomm also benefits by having a demonstrated market demand for their technology.

Standards based technology opens the door for cost competition as customers are no longer locked-into a single solutions provider. Large firms such as TI (www.ti.com) and Invensys (www.invensys.com) are also members of the ZigBee alliance, but have not made announced standards-based products for the utility market to date. However, George Karayannis, VP Sales & Marketing at Helicomm, is well aware of the potential competitive threat. To prepare for price competition, Helicomm's business model includes a Beijing-based sales and development office for access to high volume markets and low cost development and manufacturing resources.

Will their approach work? Current customers include some of the world's largest manufacturers - from home appliances to parking meters to industrial sensors. Helicomm's wireless solution is also being used for equipment condition monitoring at a nuclear power plant, and is being considered for a variety of meter reading and load management applications by utilities. For now, the market appears to be giving them the green light. If so, expect others to join the shifted value line quickly.

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Author
Tim Smith, PhD is a principal at Wiglaf LLC and Adjunct Professor at DePaul's Kellstadt Graduate School of Business. Wiglaf is a Market Research and Sales and Marketing Strategy consultancy serving tech-driven businesses operating in business markets. www.wiglaf.biz.

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