People may be the driving force behind the economy, but the rise of new technologies such as IoT, blockchain and AI, is creating a new category of economic activities that doesn’t require direct human interaction at all: the machine economy.
What is the Machine Economy?
The machine economy is a term that encompasses all economic activities that take place between devices, sensors or machines, ultimately delivering products and services to humans without requiring their interaction in the process. Economic transactions are enabled by three growing types of technology that are already gradually disrupting industries, from insurance to housing:
Machine learning (as part of artificial intelligence)
IoT technology, which refers to all the products that provide functionality through constant connectivity to the web, enables machine-to-machine communication. When you have multiple products that connect to the web, the next natural step is for them to connect to each other and communicate. Consumers and businesses are on the path to owning over 75 billion IoT devices by 2025, many of which already provide connectivity with each other.
IoT devices can “talk” to each other, so to speak, but that’s not the same as being able to hand over money to each other. That’s where blockchain comes in. Blockchain is a distributed ledger, or a database of sorts, that enables synchronized transactions across nodes connected to the network. While blockchain has a number of use cases, the main way the tech has been deployed is for creating currencies and powering economic transactions, thereby creating new marketplaces and industries. Combine blockchain with IoT, and you have a way for machines to complete transactions with one another on a distributed marketplace.
Why would you trust machines to make economic transactions on their own, knowing a person or business will be expected to foot the bill? Any product designed to participate in machine-to-machine (M2M) transactions can be programmable to make purchases based on your needs. And thanks to machine learning technology, these products are getting smarter day by day. They can be trained to recognize needs, and anticipate the appropriate purchases at the right moment.
The Benefits of the Machine Economy
The benefits which the machine economy offers to businesses are grouped into two overarching categories:
Development of new products and services
Leverage operational efficiencies in business processes
Both categories hold opportunities for entrepreneurs and corporates alike, to innovate and create more profitable and sustainable businesses.
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How the Machine Economy Creates Product Opportunities
M2M technology has already helped create new products and services, and allowed businesses to add value to existing products by making them work in tandem with other devices. As an example, consider Amazon’s smart “speakers” (and virtual assistant) Alexa, that controlled by voice commands, can communicate and power other smart devices, such as appliances, heating systems and lighting. On top of this capability, it is for instance possible to develop (premium) services such as “predictive lighting”, whereby the light is automatically dimmed in the evening.
Adding the possibility of automated economic transactions into the mix presents even greater opportunities to ultimately enable the machine economy. On the consumer side, a customer could purchase a smart refrigerator that automatically tracks when certain items get low and orders replacements (we’re not quite there yet, but close). No one would need to go to a computer screen to make an order, or pull out a credit card—all that would be set up in advance. In the context of this smart refrigerator, machine learning would mean that if the fridge is a little late buying milk that first time, it will notice and learn from that feedback for next time.
In the commercial world, the options are similarly vast. Companies like Weeve (an NBT venture), offer technology that aids companies in using and securing M2M communication to improve supply chain visibility. Using sensors and smart contracts, companies can automate the process of tracking inventory levels and the shipping status of products. The tech knows when supply for a product reaches the threshold where more inventory should be ordered. And as with our refrigerator example, with machine learning, it will get more precise over time at identifying the exact moment to invest in new inventory in order to keep products in stock, while reducing storage costs.
That adds up to increased efficiency and reduced costs. While it is hard to measure the exact amount of benefits corporations reap from making use of this interconnected technology stack, in the case of sensory-based logistics for instance, Deloitte found that 74% of companies saw an increase in revenue. Other industry specific examples in insurance and proptech, will also offer new business opportunities as blockchain, IoT and machine learning will enable new products and services, and coincidentally untapped marketplaces and industries.
How the Machine Economy Improves Operational Efficiency
The machine economy leads to more efficient systems and processes in a number of ways. For one thing, IoT devices collect extensive amounts of data. Combine that data with machine learning technology, and the data insights help businesses spot opportunities to improve operational processes. A better understanding of how a complex business works leads to knowledge of unnecessary steps and bottlenecks in current processes you can eliminate.
Take the healthcare sector, in which all the technologies mentioned earlier find applications that will ultimately greatly improve efficiencies: blockchain is used to keep medical records secure, IoT can increase operational efficiencies in managing hospital inventories, and machine learning is starting to replace radiologists.
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Just as importantly, the machine economy presents many opportunities for automating tasks that were formerly performed by human labor. This is another area Weeve operates in, providing technology that helps companies track when machines require maintenance work. That saves companies the cost of hiring human labor to monitor the systems and means attention to maintenance needs before they become a problem. And in instances where the fix is something the technology can take care of without human intervention, it’s one less thing employees or outside contractors have to deal with.
NBT’s PropTech venture METR is making use of predictive maintenance in a similar fashion as their second product, the Anlagenwächter, allows monitoring devices such as elevators and doors via one central gateway, the M-Gate. Monitoring these devices allows predictive maintenance without entering a situation in which an elevator is broken for longer than it necessary.
METR's engineers (sitting) showcasing their tech to NBT's engineers and CTO Jasmin (far right)
Reap the Benefits of the Machine Economy
The machine economy is here, but it’s still in its early stages. Now is the best time for savvy opportunists to dive in and make their mark. All you need is a great idea to get started. NBT can help supply the technical know-how and startup infrastructure you need to turn your idea into a profitable business.