05 March 2021
How IoT is Simplifying Business Processes
IoT Leaders with Nick Earle, CEO of Eseye and Josef Brunner, CEO of Relayr
05 March 2021
IoT Leaders with Nick Earle, CEO of Eseye and Josef Brunner, CEO of Relayr
There’s a lot of hype around the potential of the IoT market, but a lot of companies focus on the wrong thing.
It’s not just about having the newest technology. It’s about making the end customer more successful through technology.
In this episode of IoT Leaders, Nick Earle sat down for a wide-ranging chat with Josef Brunner, CEO of Relayr about how they are revolutionising the IoT industry by guaranteeing business outcomes, disrupting the insurance industry and shifting the business focus to making the end customer more successful.
Join us on the IoT Leaders Podcast and share your stories about IoT, digital transformation and innovation with host, Nick Earle.Contact us
You’re listening to IoT Leaders, a podcast from Eseye, that shares real IoT stories from the field about digital transformation swings and misses, lessons learned, and innovation strategies that work. In each episode, you’ll hear our conversations with top digitization leaders on how IoT is changing the world for the better. Let IoT leaders be your guide to IoT, digital transformation, and innovation. Let’s get into the show.
Nick Earle (00:31):
Welcome to the latest episode of the IoT Leaders podcast, the podcast where we try and shine insight and light on the issues surrounding the complex world of IoT. I’m absolutely delighted in this episode, to introduce someone who I’ve worked with in a previous life, but we’ll come on to that. The CEO of Relayr, Josef Brunner. Josef, great to see you. How are you keeping?
Josef Brunner (00:55):
Good. And I’m excited to have that discussion with you. I’m always excited to talk to you.
Nick Earle (01:00):
Yeah, who knows where we’re going to go. I have no idea where this is going to go. I did mention in the intro that we’ve worked together. When I’m asked about serial entrepreneurs, I always say, well, A) god dammit “How do they do it? I’m really jealous.” And B) do I know any? And I say, well, I do know one very well, Josef Brunner. So Josef, just for our listeners who perhaps might not be familiar with your global fame and track record. Can you just maybe explain a little bit about your history?
Josef Brunner (01:33):
Yeah, sure. I will keep it short so we can focus on more important topics, because this is not about me. I love building companies. I do it since the age of 16, actually. The interesting thing, and maybe that’s of relevance for the discussion today is the starting point of my career was actually a market transformation. And one not too dissimilar to the one that we’ve seen today. My parents are craftsmen, actually bakers, and we had our own bakery. Back in the days, this is when supermarkets started to bake their own bread and the price point was just going down, and they got disrupted. They didn’t survive financially and economically. So we lost our house and that was my… It’s still my inner pain and my drive and my nucleus. And that’s how I got started. And this was with 16… 18, I could buy them a new house, which is still the biggest thing for me.
Josef Brunner (02:27):
They still live in it in this house. And it’s obviously as you can imagine, the emotional hub for me, and the source of a lot of inspiration and power. But then I didn’t stop. I had fun. And obviously, I have to say I’m a high school dropout, as I started with 16. So there was not another career that I could envision for myself. I stood with it and I love it. It’s my passion.
Nick Earle (02:53):
And how many so far without going through-
Josef Brunner (02:56):
Nick Earle (02:56):
This is number four. I hate you already. I just want to have it for the record. We knew each other when I was at Cisco and Cisco acquired one of your companies, but now Relayr is firmly in the digitization space, of which IoT is a key component. And you guys are really interesting, in that you have, not just what you do and your clients, and you’ve been bought by Munich Re, so congratulations. You sold that one at $300 million, if I recall. Not too shabby, as we say. But you have a very, very interesting USP, and I just have not seen anyone else even attempt this in the market. So what’s Relayr all about? And what’s your USP?
Josef Brunner (03:45):
We are about keeping our customers relevant. So we talked about transformation and how market transformations really killed the business of my parents. That’s not unique to my parents, right? So market transformations are either a huge opportunity or threat. And if you change and you adapt, the opportunity is massive, but you got to change and adapt. And the reason why Relayr exists is we want to keep our customers relevant. That’s our purpose, our vision, our mission, why we get up in the morning.
Josef Brunner (04:18):
How do we do this? We try to understand the opportunity with our customers, try to understand if we can solve it and address it with technology, and what the outcome of that technology deployment would be; the business case, the business outcome, and then we guarantee it. We underwrite it.
Nick Earle (04:41):
And let’s just hit pause because you say it so quickly and like it’s no big deal. But I just want to pause and go, you underwrite, you guarantee a business outcome. Nobody does that. Come on, how do you do that?
Josef Brunner (04:55):
Well, how do we do that is the different question to how do we get there, and maybe we start with the journey, because the journey is, I think, a description of the complexity we see in the market. Because there’s so much complexity in all these different puzzle pieces, right? You want to transform your business digitally, your mining company, or retail. I mean, just name it, every company is impacted by the transformation going on. And it’s so complex, right? You have security, connectivity devices, AI, and you’re just overwhelmed as a business executive. We are a technology company. At the very core of everything we do, we have technology. So we tried to sell technology to our business executives and they were overwhelmed with it. And then during the sales process, we thought, okay, let’s take out the complexity and let’s focus on the outcome, what do we want to achieve when we deploy the technology? What’s the outcome? Why do we do this? What’s the business case?
Josef Brunner (05:57):
And then once we understood this, we said, “Oh, that’s pretty attractive.” We want to piece of the pie, how do we get a piece of the pie whilst also making the customer successful and taking the fear off the table? And we said, you know what, screw this, let’s just guarantee. We take all the risks, we were entrepreneurs. Our business is taking risks, essentially, right? That’s why we get started. And there’s another tribe out there whose business is taking risk. And these are insurance companies, right? That’s also what they do. Underwriting something is taking risk of somebody else’s balance sheet or life, and take it on your balance sheet. So here we are, it’s a perfect match, if you think about it that way, from a 30,000 feet perspective. Which brings me to the how do we do this?
Josef Brunner (06:42):
We use an insurance company, the beginning as a partner, later on as an investor. Now as our holding company, we use their capacity, their balance sheet, their skill set, the data to guarantee the promises that we make to our customers.
Nick Earle (06:58):
It sounds so simple. And yet, it’s clearly not. How did it come about? Did you approach them or did a client sort of… Often a client’s a marriage broker in alliances in tech industry. They bring the partners together. But can you shed any light on how it came about? Did they have this brilliant insight and they found you, or? What’s the story?
Josef Brunner (07:21):
I would love to claim the fame, but I can’t. What we did is obviously, Relayr is a journey. It’s not a company, it’s a journey. When we started off, we had a cloud platform, and we love technology, so we tried to sell technology, and it failed miserably. I call it the death by pilot experience; 100 grand here, 150 there, and you don’t get it to scale. I said, “Man, why can’t I scale the business?” And 1000 reasons; complexity, business cases, politics within companies. I mean, fear, I could just name a trillion reasons. And I’ll fast forwarding on the journey, the outcome is guaranteeing the outcome. But then there were a lot of steps in between. And one of the steps in between was that I said, I need to complement our technology stack. Because we started off as a middleware, so I need an edge capabilities and I needed AI. So I wanted to buy two companies.
Josef Brunner (08:25):
One of the companies that I wanted to buy was a device management company, You know larger than Relayr, more revenues, more people. I said, I need to buy them. But I don’t have the money. So I needed to raise money to buy them. One of the sources that I talked to was Munich Re. So I explained my vision to them and the hypothesis. And then they said, “Did you ever think of underwriting your business?”
Nick Earle (08:57):
Did they just ask that?
Josef Brunner (08:58):
Yeah. And I said, “Can you explain the underwriting process to me?” Because, again, I’m a high school dropout, right? I mean, I know nothing. They explained it to me, and I said, “Holy cow.” That might be the biggest accidental wisdom that somebody’s ever presented to me. I think they didn’t know what they did. I was so pumped and excited afterwards. And I think they were too, because they invested. And then we started to poke around a little bit and play around. In the beginning, we only guaranteed risk worth 500,000 and then a million so we did baby steps, right? We tried to learn, we tried to adapt in the insurance underwriting process, with the promises that we make, the guarantees that we make, because we were very broad in the beginning. Now we are really focused on industrial subscription equipment as a service paper use.
Josef Brunner (09:58):
Now we are laser focused, we do rifle shots. But in the beginning, we were pretty broad. But it was a learning experience. And they as an investment, Munich Re as an investment did a tremendous job educating us and our customers. And it worked so well that they said, “You know what, we need to own you, because we are impacted by market transformations as well. And insurance won’t be the same in five years, but you could be a great future for us. You’re an option.” And that’s how we became part of Munich Re.
Nick Earle (10:31):
I did spend some time talking to the reinsurance companies in the US HSB as well, is part of the Munich Re group. One of the things that they said to me, I started asking them about, how do you price premiums? I just thought it was this fascinating process. I actually thought, and I don’t mean any disrespect to the insurance companies. But I actually thought there was some really smart, complicated algorithms and that they were massive in size, and maps, AI, quants, and you know it’s like financial trading. And it turned out, it wasn’t like that. It was based on asset classes as I’m sure you know. I mean, if you take Boilers, that are 20-years-old, and they’re in buildings, and there’s 20, 30, 40,000 of them out there, they know how many claims they’ve had. So basically, they’ve got a simple risk profile of X% of Boilers make a claim, and the average payout is why. And then they have these huge tables on risk.
Nick Earle (11:35):
But then as each of these products, going back to IoT, as each of these products start becoming smart, and legacy enabled, the amount of data and the granularity that you can get from this data is significantly greater. And so your point about digitization, and it is really important, because what they were saying to me is that them and other reinsurance companies is that the new entrants in their industry are actually going straight for this smart reinsurance market with collecting the data. And so it’s in their interest not just to sell more insurance, but to actually get more data to price that insurance better, isn’t it?
Josef Brunner (12:14):
It is, and there’s a lot of really interesting facets around that story. You’re spot on, so you… Back in the days, people had so much respect for insurance companies, and they thought there was magic happening in the machine room. You’re absolutely right, with data, they become even better. But there’s a different side of the coin. And that is specifically when you think about predictive maintenance. Now, the reason why you need insurance is because you don’t know when your line is going to be when it’s running, when it’s breaking down, you don’t know what outage you’re going to face. But now your customers, insurance customers start to implement predictive maintenance solutions, then they go like, “I know where my line is going to run. And when I will face an issue or an equipment breakdown scenario or something, do I really need that insurance policy? And if I do, how much am I willing to pay for it? Because my risk is getting smaller, because I’m getting smarter.”
Josef Brunner (13:26):
With technology, you’re right, the insurance companies’ become smarter, but the customers as well. So you see almost like a transfer of power. That being said makes it really interesting for insurance companies to do more tech and own a company like we do. But the underwriting process is changing. So what we what we start doing now is crazy stuff, like guaranteeing revenues, insuring companies against market risks and stuff like that. And that’s the next generation. And that’s why it’s so exciting, because it’s so new, and nobody knows where this is going, but it’s certainly an exciting journey.
Nick Earle (14:11):
We’ve talked a lot in this podcast series, and just in general, about nobody knows where it’s going, the analogy being this is even beyond the internet. In ’97, ’98 we knew it could do new things, but we had no idea where it was going and now we look back and think, “Wow, we have no idea these business models would be created and disrupted.” And what you’re talking about here is things like the disintermediation of the supply chain and the transfer of power to the consumer. Because when the consumer has the data, the brand itself of the big companies starts to decline as an asset. I always deal with a certain company because they’re known, they’re trusted, they’re big. But once the customer’s got the data, then the power starts to shift to the customer. And so that will create entrepreneurial opportunities, not for just a whole series of startups, but for big companies.
Nick Earle (15:07):
In the case of Munich Re, I must admit, when I heard about it, I remember I was in an airport when you phoned me and I said, “Munich Re?” All credit to them, is such a big company, to actually be so innovative. So let’s go on, I’m sure people are absolutely fascinated listening to this, because you are the Relayr leaders in this space and we don’t know where it’s going to go, but we know it’s going to be huge. So maybe you can double click and get down into the how, because I was going to say to you, what is the biggest mistake you see? I think you’ve already answered it.
Nick Earle (15:40):
This is not about technology. Technology is down the line, isn’t it? I mean, yes, it results in technology, but technology is down the line. So you have a client and the client wants to either disrupt or protect themselves from disruption or ideas. You’re really starting off at the business level on you. I mean, you’re not a global system integrator, but you’re not an IoT company, you’re kind of in my mind, like a mini McKinsey. But you’re none of these things. You have a very interesting profile of people that work for your company.
Josef Brunner (16:20):
Yeah, and we need that. That profile is so critically important, because while there is great hype and aspiration around the potential of the IoT market, I think there’s also frustration as it didn’t take off as aggressively, as some hoped, and there are reasons for that. For us to focus on business and the business case is so, so important, because at the end of the day, it’s all about the numbers, right? Does it make sense? It’s not a beauty contest in terms of technology. And it’s not not a feasibility test, can I do this? It’s about, does it make sense?
Josef Brunner (17:05):
There’s a few questions that are really, really important. And one is, how can I make my customers more successful? I think everybody totally independent of where you are in the supply chain in the ecosystem, it’s the key question.
Nick Earle (17:19):
And just a clarification, are you talking about your customers’ customers or Relayr’s customers?
Josef Brunner (17:25):
I’m talking about everyone, right? Everyone needs to because we’re all serving our customers, and that’s why we exist. Our customers might change. If you think about very complex production processes or supply chains, you will see you have 10 different project steps for 20 different players in a market from an idea to a product, from an idea to a building, from an idea to a pizza. Delivery, supply chain, production, support, just name it. But there’s one customer. There’s one person, one entity at the end of the line, who pays. Everybody else in between is focused on delivering something to the customer, the end customer, let’s call it the end customer, for the sake of simplicity. But if a supply chain or an ecosystem has 10 different steps, you probably have 80 different customers in between, customer vendor relationships.
Nick Earle (18:30):
Josef Brunner (18:30):
So what you have to do, I think, and you mentioned is to transfer of power. What you have to do is totally independent to where you are in that process chain. It’s like, okay, who is the end customer? The one who is getting the equipment, the gear, the part, the car, the transportation service? Just name it. And what is the problem of that entity and how can I make that entity, that company customer more successful? And then you try to come up with a solution for the problem that the end customer or the customer, I’m not talking about consumers, I’m talking about industrial customers. You’re trying to come up with a solution, and then that’s the business case. And then you go, okay, now I solve it, it’s more efficiently than today by using tools such as technology, such as underwriting, such as finance. And this is where the uniqueness that we have comes in, but I don’t want to talk about us, but about the market, because you need people that understand their business case and how to shape it.
Josef Brunner (19:31):
So we have the business case, and we’re like, okay, we can solve the problem more efficiently for that customer and can make their customer more successful. And this is in the context of equipment as a service, there’s this unknown, or there’s a question that I’m getting asked all the time is, how can you make your customer more successful, the customer view OEMs, as an example more successful? But how at the same time, how can the OEM make more money? It’s because you cut out eight other players off that market, and you eat their lunch. There’s no services companies anymore. There might be different facets of supply chain of other satellite companies that are there to support the process. So you’re trying to identify inefficiencies in a market, come up with a solution that addresses that inefficiency holistically, makes the end customer more successful, shifts power to both the OEM as well as the the end customer.
Josef Brunner (20:30):
I’m finishing my monologue right here by saying, and that’s where it’s interesting, because everybody in that supply chain, everybody that is part of the process can take the lead, but you have to move.
Nick Earle (20:44):
It’s a great monologue, by the way. From my history when I was over in Silicon Valley, when the whole internet broke and lots of people were talking like this, and they were saying it’s totally radical, the disintermediation. The people who weren’t talking about the technology, they were talking about the disintermediation. You can book your own airline ticket, you can buy a book. It started off as a book, you can buy anything that’s digital. Now, it’s anything that’s physical. But it seems to me that that was a pretty simple disintermediation of the supply chain, you were basically disintermediated maybe one or two blockbuster with the shops or whatever. And what you’re really saying now, is that the thing about IoT is one of the enablers and you have a lot of other ones like AI and whatever. But assets, the assets as a service is that it’s actually mass disintermediation.
Nick Earle (21:41):
I mean, your point about there’s no service company, it’s because you are not just disintermediating the supply chain if you sell it to A, maybe a distributor. A sells it to B, B as a resellers. B sells it to C, C is the end user. You sell direct, you also charge for it on a per usage basis. But it’s other things as well. There is no independent service company, because you’re getting the data all the way back as the manufacturing company, you’re getting the data. That means that your supplier can remotely diagnose the device, find out what’s wrong with it before they fix it. I mean, I explained this to my wife, and she says, “Well, why doesn’t that happen here?” We have a contract with British Gas here in the UK, they actually don’t just sell gas, they’ll do maintenance for all your equipment in your house. They advertise that on TV.
Nick Earle (22:35):
But the way the process works is that something breaks, dishwasher say, you phoned them, they send somebody out, scheduling and all that hassle. They then look at it and say, “Yep, it’s broken.” “Absolutely. We know that. That’s why we called you.” And they say, “I think it’s this. Right? I think it’s this. Okay, I’ll be back.” Then you had another appointment, the guy appears maybe two weeks later with a part and you hope he’s got it right. Well, the point about that is that if the device was smart, and our dishwasher has a controller in it, it has lots of electronics in it, you could actually remotely diagnose and actually arrive with the part. And that simple content of taking massive amounts of money out of the warranty process is an adjacent disintermediation of the supply chain.
Nick Earle (23:31):
And as you say, we’re now looking at radically new business processes, simplification of manufacturing, simplification of supply chain, simplification of warranty, simplification of marketing, because if you can get data back from every customer on how they’re using every product, you actually know which features they’re using, which features they’re not using. So you can actually manufacture simpler products, and only sell certain products to certain customers, because you know they’re the only ones who want those features. So it seems like what we’re embarking going back to what you said earlier, we have no idea what’s going to happen, other than it appears to be much bigger than what has happened so far.
Josef Brunner (24:17):
Yeah, and I think that is really, really important because it means that this will impact in some markets pretty significantly. Manufacturing as an example of what you just mentioned; building management, building controls, building maintenance. If you look into these markets, it’s fascinating because you have 20,000 players in these markets. Why? Because the markets are fragmented. Fragmentation leads to inefficiencies. And now you use technology and other means to address the inefficiencies and you do it at scale. You will consolidate these markets. You will see what we saw in tech, the winner takes it all mentality and approaches and results. Because you can do things more efficiently. You will have a better price whilst also having a better service. And it’s impossible for smaller micro players, service companies in that example, to cope.
Josef Brunner (25:22):
So you will see a massive shift in these markets if you deploy your assets wisely and correctly, but you need new assets. Back in the days you had a brand. Back in the days you had a balance sheet. Back in the days you could afford doing things. The enabler that you just talked about earlier, technology is certainly a really important enabler, specifically in the context of IoT. But we should not forget, it’s also about free capital, everything we do around paper, use models, equipment as a service, industrial subscription, whatever the headline is you’re using, it’s only possible because money is for free. Nowadays, we talked about Munich Re before, one of the USPs they had was the balance sheet; 20, 30 billion balance sheet. You can take a lot of risk for that money.
Josef Brunner (26:16):
Look at some of the really aggressive and really large hedge funds. How much do they have under management? You see that USP is starting to become less important. And that is something you see throughout all industries. My biggest concern when I talk to crowd traditional companies is, they don’t understand the shift in value when it comes to the assets that they have. I’m not saying they don’t have value, they have customer, their customers, they have access to customers, knowledge, experience, talent. They have a great starting position, but they focus sometimes on the wrong in brackets, (outdated assets). And this is just talked about your example with your building. A former employee of yours, John Clifford who you know addressed their problems, specifically in the building management with learn. He said,” “Screw this red process that Nick just explained, is inefficient. So I’m introducing Guaranteed Building Performance as a service to the market. And I’m taking out all of these inefficiencies and making my customers more successful.”
Josef Brunner (27:31):
And the power is in the simplicity of the offering. Not in the simplicity of the technology, but the offering.
Nick Earle (27:39):
Exactly. John would be probably a great guy for a future podcast, but maybe give a little preview, perhaps if we can get John on. I did speak to John again and he was part of the Cisco crew back in the day. And I was absolutely fascinated by what he did. It was so elegant in its simplicity, very similar to the way you describe your business. And I think that’s a pattern in general, for successful businesses. They’re just simple, and you just get what they do. Yeah, he said 20,000 people maintain buildings, and what assets do they have? Well, they have customers, but they also have a lot of engineers, field engineers. And it’s inherently inefficient. So by buying a couple of companies, and just putting some smart technology in and connecting the legacy assets, you totally transform the model. You just completely disrupt it. And by the way, you’ve got to feel Salesforce already there. They’re just called engineers.
Nick Earle (28:37):
The other thing I was thinking of, as you were saying it, is this issue of fragmented industries are ripe for disruption. I think that’s always been true. In our own world, in IoT, one of the messages that we give to customers, and you know this because we partner together, but one of the messages is, “Look, the cellular market, the mobile network operator market is actually one of the world’s last great fragmented industries.” I mean, there’s 825 mobile network operators. They all have proprietary sims, they’re all saying, “Put my SIM in. And I can give you a bit of roaming, but not complete roaming.” So basically, it’s an industry that’s built from the players out. But when you look at it from the customer in, the customer just wants connectivity.
Nick Earle (29:28):
And so that was the brilliance of our founders, not me, I came in after this, but the brilliance of our founders to say, the only way to solve that fundamental lack of interoperability, which leads to incomplete connectivity, or added cost because you got to swap sims all the time, is to actually abstract the problem into an independent layer and have like a super aggregator in the cloud, that will bring all the players together. And when you do that, you enable totally new business models the ability to have a global product that has connectivity, which is a completely different concept to which mobile network operators should I choose, and based on a proprietary model.
Nick Earle (30:14):
I think that all all industries, and I’ve said this before, all industries start off, especially tech start off as proprietary. And ultimately, it’s user demand that forces interoperability and standards. And when you get interoperability and standards, that’s actually when the mass adoption occurs, and that’s what disruption is.
Josef Brunner (30:33):
You have a really, really good point here. And I would like to complement what you just said when it comes to the brilliance of your founders. I would like to add one thing. When you talk to the big telcos, you talk about IoT and innovation, you’re right, it’s about selling SIM cards. But what it’s really about is protection. I can’t do this in our own roaming because I make a lot of money with roam. Or, I can’t do this, because it’s a really important revenue stream. Or, I can’t do this, because it’s barrier, a market protection. You asking a different question, it’s like, what do these companies out there need? And then you solve the problem. So if you flip this around, in an ideal world, you and I would not be needed, because the innovation would come from the incumbents.
Josef Brunner (31:23):
That was never the case with a few exceptions, typically younger companies, right? Not companies that are 50, 60 years old, because they think inside out, while innovators think outside in.
Nick Earle (31:38):
Yes. I used to say in the first wave of the innovation, that if you actually want to know how a company will behave, talk to their CFO. People said, “Oh, what do you mean?” Because it’s the point that you’re making. If you look at when the first wave of the internet happened, and using this as a story to reaffirm what’s what’s happening, or not happening now. When the first wave of the internet happened, certain companies embraced the cloud, and certain companies didn’t. And actually, interestingly, certain tech companies went to cloud and certain tech companies didn’t, and there was a complete change in the pecking order of those that didn’t. And you think, why did certain really big tech companies not embrace the cloud, internet, et cetera, because they were in that business anyway? And the answer is because their current revenue was coming from the legacy products.
Nick Earle (32:35):
And so all the behavior, all the management systems, all of the controls, all of the incentives, all of the Commission, was all geared around the revenue flow from existing products. When you and I were at Cisco, that was called boxes, and it was really hard to do change management, to go from products to annuities. And even though everybody intuitively, of course, they got it, they’re all smart, and smart as hell. But it’s really, really difficult, which gives the startups an inherent advantage, because they don’t have a legacy. God built the world in seven days, but he didn’t have an installed base to begin with. And that’s why again, going I think Munich Re have actually brilliance, because they are very big. I mean, there are huge, top five, I believe.
Josef Brunner (33:30):
They’re massive. But what they did, I think, brilliantly is they were and are aware of their strength, of course, but they also know who they are and who they are culturally. So it was not the only acquisition offer that we have, but what was really attractive to me was that they said from the get go, “If we buy you, we are not going to integrate you. I mean, you would die, right? I mean, if we integrate you in some of the oldest company in the world, you would die a terrible death.” Their understanding and that self reflection, I have a lot of respect for, because I mean, absolutely, be aware of your strength. But be aware of your weaknesses as well, then you make the best choices.
Josef Brunner (34:24):
That self reflection is something that is extremely healthy when it comes to business questions in general. And as you just said, intrinsically, a lot of the executives know what the right thing would be. And that’s why I’m so excited about the market transformation in general, because there’s a lot of reasons why they can’t do it. It’s as simple as a paycheck. I mean, you incentivize your people to do certain things. This starts with the board, the board incentivize the executive team and then it flows down. Changing a system like this will take years. And in years, you can build pretty successful, massive, disruptive companies.
Nick Earle (35:04):
Yeah, and in this business, you can go out of business in months.
Josef Brunner (35:08):
Nick Earle (35:09):
I always enjoy chatting to Josef and we could go on for hours, but why don’t we sort of bring this to a conclusion by a couple of questions, I really wanted to ask you. Where’s all this going to go? I mean, let’s get the crystal ball out and stare at it. I mean, the obvious answer is, we don’t know. But if we had to guess, the disruption that we’re seeing is huge. We’ve talked about the fact that it’s actually many times bigger than the first level of disruption that we saw, that’s just using the internet as the trigger for that. That itself is kind of scary. We talked about companies going out of business and new companies rising up. And we talked about the inability of big companies to embrace the change and fragmented industries that need to be drive interoperability and standards, particularly in regard to IoT. What’s your view of, other than the fact that it’s a huge market opportunity for companies that are in this space, what’s your view of where this all could go?
Nick Earle (36:16):
Do you see radical disruption and new companies rising to the fore as leaders attacking the large incumbents? Or do you believe that the large incumbents are absurdly a percentage of them, can embrace this and thrive?
Josef Brunner (36:36):
The way I see this is almost like a waterfall. I think the driving force is vertical integration, simplifying the process chain that we just discussed. 10 players today, two players in the future. Easier way of describing vertical integration. The vertical integration will lead to consolidation of hugely fragmented market until winner takes it all mentality. So where you have 20,000 players, 10,000 players, you might have 10 in the future. Where you have 200 OEMs, you might have three, all of them offering outcome based services, paper use, paper part, just name it. That will change the landscape pretty significantly. It will have a huge impact on the GDP of industrial countries such as UK, France, Germany, Switzerland, Italy. Companies with a strong industrial manufacturing backbone will either win and strife or suffer.
Josef Brunner (37:40):
I think some of them will suffer because they don’t move quickly enough, which will lead to a shift of wealth to fewer companies. The general wealth of, specifically in Europe or very wealthy countries such as Germany, the average wealth will go down. We will have significantly more unemployment. As we’re not moving, we’re fat. We’re lazy. We’re chief worry offices, we’re not moving quickly enough. And that’s true for Europe, in general, I think. To summarize that statement, it’s not a surprise because it happens constantly. 500 years ago, China was the global market leader, they were the marine leaders of the world. And then the Netherlands and the UK started to build ships for global trade. And then the Chinese said, “These ships are too expensive.” And they became fat and lazy. And then 100 years later, they were broke.
Josef Brunner (38:41):
Now fast forward in 400 years, they’re hungry again, they’re aggressive again. We’re lazy, we’re fat. So it’s a back and forth. We shouldn’t be surprised because it happens in history all the time. But the human race is interesting, because we don’t believe what we don’t like, even if there’s evidence. That’s how I see it.
Nick Earle (39:03):
Nobody likes change. Wow, that’s a big subject to finish on. That sounds like we’ve got two or three future podcasts there. And we’re not talking about disruption of supply chains. We’re talking about disruptions of companies, disruptions of industries, and potential disruption of countries to do with their attitude of the who the winners are going to be in the future and the whole issue of the emergence of Asia. And that’s something which we’re very aware of, we’re doing a lot of work in Asia. It is incredible what they’re doing and the insight that they have out there. They’re already thinking about what this is going to mean, especially as all the products are made out there.
Nick Earle (39:45):
From an IoT point of view the embedding of the connectivity in the product as a feature, not a SIM card, which, as you know, with the iCM is going to go into the module, there isn’t going to be a SIM card in the future. That is going to happen, and they’re putting that module onto the PCB of an IoT product. That isn’t going to happen in the West. That’s going to happen in the East, the low cost manufacturing, which is an incredible asset that they bring to bear on this whole issue, because inherently the products that they’re making, they’re the ones that are recapturing the data and transmitting the data. So lots of issues there in the future, and some very, very innovative business models coming out of these. But unfortunately, Josef, we have to leave it there. I normally ask people for, who else you could recommend for the podcast? But you’ve already said around John at Learnd around the facilities, buildings management. So I think we’ll probably pick up on that.
Nick Earle (40:43):
I also sometimes say, “Tell me one thing about you that people don’t know,” and you opened with that, ruined my ending, because for all the years I’ve known you, I didn’t know the story about your parents and the bakery. And that is such a nice story. So if I have to ask you, how the hell did you earn enough money in two years, if I got it right? Quit school at 16, became an entrepreneur, bakery, dumbass, price of bread dropped. Your first experience with disintermediation and managed by a house in two years, if I’ve got that right?
Josef Brunner (41:17):
Nick Earle (41:17):
What did you do?
Josef Brunner (41:20):
Trying to focus on an offering that the market needed at that time. And this is going back a few years now. This is the time of UUNet, if you remember them.
Nick Earle (41:31):
Josef Brunner (41:32):
And security was not a topic back in the days, right? Peoples were connecting networks and systems. And they did not introduce various or security mechanisms into these systems. So even a person who had as little talent as I could add value when it came to security. My first two companies were security companies. And the first one was a service company. That’s where that subsidized the house, so to speak. And the next one was a security product company. I was just lucky enough, that timing was my friend. Let’s put it that way.
Nick Earle (42:08):
It’s amazing how many really, really successful people are humble and claim that it was luck and timing. I don’t think the rest of us know that there’s probably another ingredient as well. But I won’t embarrass you by focusing on that. Instead, I’ll finish here. Thank you so much, Josef, for your insights and your vision. Congratulations on your model, and of course, selling the company, and the disruption that you are now driving as part of the Munich Re Group as CEO of Relayr.
Nick Earle (42:39):
For our listeners, I hope you enjoyed this episode. Certainly, I did. I thought it was absolutely tremendous. There’s so much we could unpack for future episodes there. But in the meantime, tune in again for the IoT leaders podcast, we will have more guests on sharing their insights, their experiences, and their stories indeed, of their life and what they’ve learned around digitization and IoT.
Nick Earle (43:08):
Josef, thanks again, and I’ll talk to you soon. Thank you very much.
Josef Brunner (43:11):
It was a pleasure. Thank you, Nick.
Nick Earle (43:14):
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