Riddle: When is a Product not a Product? When it’s a Service!
Interest in the “Internet of Things”, or IoT is exploding! What is it? In brief it is the growing network of physical objects (“things“) that companies are embedding with sensors, software and connectivity in order to exchange data with the manufacturer, an operator or other connected devices. And it’s a hot market that Deloitte predicts will grow to an installed base of 2.8 million devices in 2015, representing a mind-blowing growth of 60 percent from 2014.
Industry is moving quickly to capitalize on the new connectivity technologies that enable IoT because the payoff for them is huge. In fact the ROI for industry is generally much greater than the payoff for consumers, and this is reflected in the anticipated growth of the industrial versus the consumer market. As an example, smart meters were installed in homes to provide homeowners peak period usage data on their utilities, which in turn could enable them to monitor their power usage and reap financial savings from this info. However human behavior around technology adoption has shown that people don’t like having to change their habits, and if we do the financial savings have to be significant. Utilities companies who attempted to show consumers that they could save money on energy each month by logging online to see their account to view usage learned that today’s consumers couldn’t be troubled to log online and didn’t find the potential savings attractive enough to make the effort. In contrast, the value of usage data to utilities companies is a different story – and quite substantial. There are labour cost savings from automating the meter-reading task, and better real-time diagnosis of power outages. Additionally there are savings in new plant construction available from understanding the analytics behind consumer demand around peak power periods and more optimally managing existing power infrastructure. So you can see from this one example that the opportunity IoT technologies can offer industry can not only have a much more attractive potential ROI, as compared to ROI available to the consumer, but has the power to drive a restructuring of some industries.
The Product Reborn as a Service
An IoT-connected product is no longer just a product; it can be a service! For example, imagine an IoT-connected electric automobile. In addition to providing its owner with transportation, it becomes for the manufacturer an insights tool for usage, recharging habits, diagnostic profiling to optimize uptime, and recharging station chain development. Imagine this scenario: An imminent technical issue on is flagged at the central office through its online access to an automobile’s diagnostics which triggers the deployment of a technician with a loaner automobile. They arrive at the owner’s location prior to the car failing. The car is taken away and returned fully operational with no inconvenience to the owner. In this world the buyer purchased 100% uptime transportation, rather than an automobile.
Big Benefits for Brands Who Take Heed
There is a shifting business model unfolding with these new technologies, which will take time and testing to develop and fully understand. In the meantime, companies wanting to explore IoT may want to find the single biggest pain point or revenue opportunity, and roll out an inexpensive solution, such as a sensor network, which will simplify the ROI justification. From there further inroads can be made in the product and consumer lifecycle. An excellent example is found in the retail sector. In the UK a retailer used their loyalty club card to track customer visits, buying behavior, payment modes, and inventory. By paying close attention to customers and product sales, the retailer was able to adjust merchandise dynamically to suit local tastes, customize offers to customers, manage inventory volume based on purchases, and plan inventory refresh as needed. In recognition for their IoT-enabled efforts, the retailer saw increase in sales, customer loyalty and coupon redemption! The ROI enabled further investment in these technologies.
While the guidelines and regulation around consumer privacy issues develops, enterprise is well advised to operate in a fully transparent manner in order to not undermine trust in this exciting and emergent world of the Internet of Things.
 Deloitte 2015 Predictions Report, http://en.wikipedia.org/wiki/Internet_of_Things, http://blog.tellient.com/internet-of-things-analytics, http://blog.smartthings.com/