Starting an Internet of Things Business Blog Series: Five reasons why an IoT start-up may fail

Al Sisto

Blog by: Al Sisto - 15 / Nov / 2017

How’s this for an Internet of Things (IoT) start-up story?

You’ve come up with a compelling product – and you’ve turned that product into a reality. You’ve got a decent marketing strategy in place, and you’ve considered how to finance your business on an ongoing basis. You’ve even evolved the user experience, and thought about security. In short, you’ve followed all the advice in our ongoing blog series on how to launch a brand-new IoT business.

Is that enough? Of course not. Running a business always involves risk, and IoT businesses are operating in a particular dynamic and sometimes even dangerous market. In this blog, then, we’re giving you a run-through of five common reasons why IoT start-ups fail. Don’t make one of them.

Reason 1: Failing to plan

This mistake isn’t just common to IoT start-ups. Any business, small or large, brand-new or old-hat, needs a clear, strategic plan in place for the coming months. It provides a guide and roadmap for business leaders, and is an essential document for raising finance, bringing new partners and investors on-board, and even developing new products. Fail to write a detailed business plan, or fail to keep your existing plan up-to-date and at the centre of your operations, and you are inviting overall business failure from the outset.

Reason 2: Ignoring security

We’ve blogged specifically about the importance of designing and building with security at the forefront when starting a new IoT business – we cannot overstate how crucial this is. In today’s dynamic cyber threat landscape, and with new regulatory frameworks like the GDPR coming into force or being updated almost continuously, neglecting cybersecurity is a recipe for failure. IoT businesses need to not only bake security into everything they do; they need to be able to demonstrate and prove how seriously they take the integrity of their customers’ date. No excuses.

Reason 3: Leading with product, not value

It’s all too easy to get carried away with a vision for a product, and forget that the purpose of that product is to deliver a tangible business or consumer value. That value should be at the heart of everything you do as an IoT business owner. Without it at the forefront of your decisions, you risk creating something that under-delivers – or delivers something that your customers simply don’t want.

Reason 4: Underestimating hardware costs

More IoT start-ups are launched by experts in software development, not hardware manufacture. After all, such developers are more likely to appreciate the intricacies of connected technology, and the potential benefits of harnessing and analysing previously untapped data. 

The trouble is, this can lead to damaging knowledge gaps in terms of everything from the cost of raw materials, to the time taken to build and package the physical product itself. ‘Cost’ covers time as well as money, remember. If you don’t have that knowledge and experience in-house, you need to bring it on board as early as possible.

Reason 5: Lack of focus

The IoT landscape is so dynamic and so full of possibility that many new entrepreneurs in this space fall into the trap of trying to be all things to all people. Or alternatively, of following three or four ideas at the same time. In short, they let excitement and enthusiasm win out against strategy and clear-headedness.

In the early stages of a business’s life, it is more critical than it any other point to have a razor-sharp focus on a core offering. There’s time later on for diversification and experimentation, once you’ve got a winning formula established. But spreading your focus too thin in the early stages is likely to mean that you end up with half a dozen mediocre or unworkable products, and nothing to contribute to your bottom line.

Want to read more in our blog series on starting a brand-new IoT business? Here are the others in the collection:

  1. Developing the initial idea and product design
  2. Marketing and selling the idea
  3. Financing your IoT start-up
  4. Evolving the user experience once your business is up and running
  5. Designing and building with security at the forefront
  6. Preparing your pitch for funding


Topics: IoT, starting a business, IoT failure, IoT project

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