The Internet of things is here, and both Best Buy and Flextronics are trying to adapt to this shift, their CEOs said onstage at Fortune's Brainstorm Tech event in Aspen on Monday.
Hubert Joly, Chairman and CEO of Best Buy, is taking a page from IBM and emphasizing services instead of just retail sales. He offered examples of the Internet of things invading consumers' homes in the form of streaming media on televisions and over connected speakers such as Sonos systems. Connected alarms and home automation also ranked high on his list.
He discussed how Best Buy is trying to revamp its business to emphasize the service component provided by the Geek Squad as a competitive advantage that the retailer has over competitors. Joly sees the tangle of confusing technology and networking as a golden opportunity that will help keep the retailer relevant over Amazon or other brick and mortar rivals.
Meanwhile, Mike McNamara CEO of contract manufacturer Flextronics, is eying all of the startups (and larger companies) building connected products and looking at ways to work with them from "sketch to scale." He's positioning his company as a source of expertise and connections in global manufacturing and supply chain as well as a helping hand in designing a connected product.
As Alan Murray, the editor of Fortune and the interviewer, pointed out, much of the innovation from the Internet of things is coming from smaller companies. Both Joly and McNamara agreed that small companies have an important role to play. McNamara said we need both large and small companies.
"Big companies have the scale and the channel but they don't always have the desire to disrupt their own business model," McNamara said. However, in some cases he said the industry needs startups to completely bypass the established industry because otherwise nothing would change. Ride hailing app Uber is an example of that.
The rest of the panel covered the typical elements often covered at these events. McNamara agreed that at the high end, the Internet of things will be an $11 trillion business, according to a recent McKinsey report. But to get to that value we're going to have to figure out a few things, including cybersecurity, data privacy and even how to build business models that work.
The McKinsey report said it would take 10 years to reach that huge size, which is still pretty daunting. McNamara suggests that we might see faster adoption in other countries where there is less infrastructure, much like we have seen China and Africa adopt mobile broadband faster because they didn't have legacy wireline broadband networks to hold them back.