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Connected Marketplaces for the Internet of Things

Posted on by Gerd Kortuem

A while back I asked: Can market-based mechanisms encourage user innovation in the IOT? My answer is yes, even though we have not yet seen many examples. Details can be found in a recent paper:

Gerd Kortuem and Fahim Kawsar. Market-based User Innovation for the Internet of Things. Internet of Things 2010 Conference (IoT-2010) Nov 29 - Dec 1, Tokyo, Japan. (A corresponding presentation is available on slideshare or as pdf.)

Here the gist of the argument: the iPhone powerfully demonstrates how user innovation can be fostered by open markets and market-based mechanism. By combining programming tools, application platform and distribution channel, Apple has created an environment that effectively supports user innovation networks in the sense of von Hippel*, in which innovation development, production, distribution and consumption are performed by users (or more precisely by user/developers and micro software firms). The user innovation network supported by the iPhone ecosystem is horizontal, where innovation – in the form of iPhone apps – is created by and for users. In contrast to von Hippel’s original notion, which refers to open-source development and the ability to replicate and adapt a product, the iPhone innovation network does not compel users to make their innovations openly accessible to other users. Instead, transfer of innovation among users is facilitated by a two-sided market (realized by the App Store), with user/developers on the one side and users-only on the other. 

However unlike the iPhone ecosystem, the Internet of Things cannot be confined to a single device platform and a unified distribution channel. Instead, the IoT ecosystem will necessarily consist of a heterogeneous collection of hardware, software and data components. This greatly complicates user innovation as it introduces dependencies and compatibility issues, which make it harder to share and reuse artifacts. Thus in order to foster user led innovation in the IoT space I argue for a connected set of marketplaces, each one addressing a particular innovation touchpoint. I define marketplaces as connected if products of one marketplace can be used to enhance, control or interact with products of another marketplace.

A simple example of this concept is www.liquidware.com, an online shop for open-source DIY hardware. Liquidware not only sells hardware but also offers an App Store for software that runs on this hardware. Following our definition, the Liquidware hardware store and the Liquidware App Store are connected. In order to be traded in connected marketplaces, products need to be compatible: in this example software in the one marketplace needs to be compatible to the hardware in the other. Another form of connection can be envisioned between a marketplace for sensor devices and a marketplace for sensor data produced by these devices. However, there is no example yet for such a link (even though simple forms of data marketplaces exist, for example as part of Pachube). Connection is a one-way relationship and connections between three or more marketplaces can be complex. For example, two sensor device marketplaces could be linked to the same data marketplace. Marketplaces may also be chained: a marketplace for electronics components may be connected with a marketplace for sensor devices built from these components, which in turn could be connected with a data marketplace.   Connected Marketplaces for the Internet of Things

Applying the concept of connected marketplaces to a future smart buildings ecosystem we can envision a set of connected marketplaces as follows: 

  1. Smart Object Marketplace
  2. Application Marketplace
  3. Configuration Marketplace
  4. Data Marketplace
  5. Data Manipulator Marketplace

The details of these marketplaces are described in a recent paper: Gerd Kortuem and Fahim Kawsar. Market-based User Innovation for the Internet of Things. Internet of Things 2010 Conference (IoT-2010) Nov 29 - Dec 1, Tokyo, Japan. 

 A corresponding presentation is available on slideshare or as pdf.  Connected marketplaces create an open ecosystem that supports innovation and diffusion across multiple levels of complexity.  An innovator can use lower-level marketplace to acquire devices and tools to build something more complex and use higher-level marketplace to share (or sell) his/her creations with others, who in turn can use them as a starting point their for their own innovations. This mechanism not only supports an innovation chain from low complexity to high complexity, it also allows for a distribution of ownership and control of marketplaces. 


*von Hippel, E. (2002). Open Source Projects as Horizontal Innovation Networks - By and For Users (June 2002). MIT Sloan Working Paper No. 4366-02)