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Product ideas come in many forms, but they’re typically tossed into one of two baskets – hardware or software. That’s all about to change.

Now there’s a third basket – the “Internet of things” – and the still-young reality has yet to be filled with new products that the blend digital and physical experiences.

It’s a new marketplace of ideas, driven by the convergence of wireless communication, sensors and the ubiquity of the Internet. The Internet of things (IoT) means any product can have embedded intelligence, or its own unique identifier, to connect the object directly to a network and transfer data without human interference.  It’s a simple concept that envisions a future where everyday objects are connected to the Internet.

Estimates suggest that by 2020, the IoT will number 50 billion separate objects, an explosion that some would say is a long time coming. As far back as 2008, the number of connected objects outpaced the earth’s human population.

Even further back, in 1999, a British tech pioneer named Kevin Ashton gave IoT a name when it was still just a concept. In his presentation to Procter and Gamble, he described how computers, databases, and the Internet itself were all dependent on humans for information – whether it was writing code, taking photos, or scanning bar codes. Information was a one way exchange.  Although the future technologies would change this, information could come from products – in his vision, as smart barcodes (RFID tags) for tracking products.

Fast forward 15 years and now the Internet of things is the Internet of everything. But it’s only recently that the “things” capable of machine-to-machine conversation have moved beyond devices like cell phones. A “thing” has expanded to include heart monitor implants, automobile tire pressure sensors, curling brushes that measure sweeping pressure and much, much more.

Global enterprises and venture capitalists alike are taking notice too, with $3.4 Billion invested in Wireless Smart Object Startups in 2013. A number that is sure to grow even larger in 2014 given Google’s recent purchase of Nest Smart Thermostats for $3.2B in January to control your home temperature via your smartphone and an impressive cloud back office analytic engine that learns from your behavior and makes adjustments for you. Yes the systems are actually getting smart enough where you won’t be constantly frustrated by it doing something we don’t want it to do.

The first wave of products is hitting the market now and the next wave is currently in development spanning a gambit of consumer gadgets, medical devices, home automation, gear for vehicles as well as agriculture opportunities to name a few. Many of these IoT products are coming to fruition with the help of crowd-funding platforms like Kickstarter – that fund and build awareness for new products simultaneously.

But this influx of new products ideas meshing hardware and software has created new challenges for product designers. These include:

Convergence of Hardware and Software Design

But this influx of new products that merge software and hardware into the same development cycle poses new challenges for designers. Hardware and software have inherently different design and development methodologies. One discipline involves aligning atoms and the other arranges bytes.  Both want to deliver simple, easy to use product that people fall in love with.  IoT devices must include both disciplines and this requires innovators to combine and manage these two product development processes together in order to design intelligently connected experiences for people. Things to consider when bringing an IoT Product innovation to life are many and the mantra of design for users is at the core.

The Complexity of  “Simple” Products

Even simple product ideas can be complex. Especially when Hardware, Electronics and Software collide. To create a seamless product experience first pass out of the gate requires expertise in number of areas.  Common questions that should be asked prior the design of an IoT product – no matter the size – include: What elements are useable off the shelf?  What custom parts are needed? What software will need to be written? and What cloud based platform to select to manage my customers and data? Answers to these questions will make sure a new IoT product idea gets off on the right foot.

Connecting Vision to Real Customer Needs:

New product ideas are exciting, but they don’t always connect to consumer demand. Early concept design and testing the product idea with simulation and prototyping techniques allows development teams to get users to verify assumptions and business teams to quantify the demand. With 5 month product cycles, it is impossible to grow the knowledge in house and outsourcing part or all of the one-time design and development effort becomes a lower cost and higher value alternative in many cases.

Challenges aside, it’s an exciting time for companies to refresh old products and to go after new ideas to connect into the Internet of Things that is upon us.  Design 1st plans to be a one of the teams that will help innovators embrace and go after these opportunities ahead.