“If you look at how digitized are our homes, they fall way short of potential,” says Charlie Peters. “Quite a bit of a homeowner’s investment and risk is in the infrastructure that’s in their basement, but connecting the furnace to the Wi-Fi is quite a challenge. At Emerson, we’ve upgraded the term ‘the last mile’ to ‘the last room.’”
Charlie Peters is senior executive vice president at Emerson, a 125 year-old global manufacturing company with over $24 billion in 2014 revenues. He is a member of the Office of the Chief Executive and also oversees Emerson’s information technology, marketing, and customer support programs. Peters joined Emerson in 1975 as an engineering co-op student and has since served in a variety of strategic planning and executive management roles.
In a wide-ranging phone conversation recently, Peters talked about the potential of the Internet of Things (IoT) and its beneficial impact on productivity and transparency of enterprises. But he also discussed the key barriers to rapid adoption of the IoT, including people and their reluctance to change their habits and existing processes, disruptive changes to industry structure, and lack of standards. This last challenge, in particular, is encapsulated in the problem of the “last room.”
The term “last mile” has been used for years to describe the data speed bottleneck created by the last—and slower—leg of a network connecting to a customer’s premise. Think copper wire lines connecting your telephone to the local telephone exchange or coaxial cable carrying cable television signals from utility poles to subscribers' homes.
“Fiber to the home” investments by your preferred TV, phone and Internet provider(s) may have improved your movies-over-the-Internet consumption experience, but have yet to impact everything else that’s going on in what is probably your largest asset or loan. “Achieving interoperability among various IoT technologies,” says Peters, “will be key to realizing their full potential. The home is way behind because of lack of standards—we once counted 10 connectivity paradigms to the home.”
The huge potential of the Internet of things and its disruptive threat to established businesses and industry structures are undermining cooperation. ”The stakes are so high, no one wants to compromise and cooperate,” says Peters. The Internet of Things increases transparency to the customer, but increasing the buyer’s power encourages a winner-take-all industry structure. (Which reminds me of recent survey findings, showing how Amazon is “eviscerating” other retailers online, according to re/code).
Threats to current structure lead to people behaving rationally and slowing down progress for fear of losing their jobs, according to Peters. But there is also what he calls “natural inertia.” Why change a process or an activity you are familiar with?
Even when people are presented with proof of potential savings, the barriers to adoption don’t necessarily disappear. For example, by directly monitoring the equipment it installs in supermarkets, Emerson can cut equipment service cost by $100,000 annually for a supermarket making $300,000 to $400,000 in profit a year. But the savings are spread across the organization and “you have to go and sell the story to four or five departments,” says Peters, for them to make a collective decision to implement the cost-saving IoT solution.
Even when people are convinced in the merits of the new technology or technology-based service, there are other barriers to adoption. Sometimes the decision to go ahead is based on the conviction that they can do it in-house for less money. Only later they realize that it’s not their core competency. Other times, no matter how much potential for cost savings or increased effectiveness the solution presents, it just can’t compete with other priorities.
People are sometime in the way of progress, but It may well be that another factor that retards the growth of the Internet of Things (or technology-based solutions in general) today, is the absence of people. Peters: “As you go digital, people forget that fighting smaller battles on local turf among local influencers and where people are trusted, is key to winning.” He is working on new marketing models, “using the tools of the modern information world to go back and almost create the direct sales force paradigm of the 20th century. People tend to forget the local dimension.”
With his 40-year perspective, Peters has observed how we moved from a world where the key challenge was lack of opportunity to a world where execution is the key challenge. “We’ve gone from the 20th century where we spent a lot of time searching and thirsting for opportunity,” he says, “to where now the constraint is not lack of opportunity, but lack of understanding, lack of ability to execute on different risks. The potential is overwhelming but industry seems to be dramatically frustrated in terms of being able to execute around these opportunities.”
Forty years ago, he used to tell people “where there is change, there is strategy,” and that’s probably a great summary of his career. “I used to lecture that stability is the enemy of the strategist because there was nothing to lever of off,” Peters says.
Nothing is stable now and Peters feels “surrounded by astounding disruptions that are waiting to happen.” Three and a half years ago he started blogging about these disruptions in The Extra Mile with Charlie, where he posts his observations about the digital world. Fifteen years ago, the CEO wanted him to be the “eBusienss czar,” so he started writing him a report every week about the topic. It became popular inside Emerson and “then we decided that it would be an easy way to share [externally] information about the opportunities of the digital world and Emerson’s intelligent products that will morph into new business models. It gives a different face to Emerson.”
The Extra Mile has become “extraordinarily successful,” says Peters. “When I meet people the first question I ask is what are you working on, an indirect way of saying what do you think is topical. The Extra Mile is a manifestation of this question.”
It’s also a manifestation of Peter’s experience and unique perspective on today’s rapidly changing technology landscape. And a great example of how the Web has brought out into the public sphere thinkers and doers previously hidden inside corporations.
Peters talked about retiring in five years (and not being able to execute on many of the current exciting opportunities), so The Extra Mile looks to me like a great platform to launch him into the next stage of his professional life. But when I asked him what he is going to do after Emerson, he said: “I would like to be the national champion in the 2000 meters steeplechase for 65 and older. I think I got a good shot at that.”
