The emergence of IoT technologies has disrupted solution vendors across multiple industries, from financial services and manufacturing to the technology, agricultural and retail sectors. These vendors are hence shifting from traditional products to digital (or smart) offerings and outcome-based deliverables.
Amazon's ‘Alexa' has paved a future for smart home devices for example, as refrigerators, TVs, air conditioners and lighting become attuned to households' needs. With 275 million voice assistant devices predicted to infiltrate our homes by 2023, up from an estimated 25 million this year, smart devices are here to stay – and create a seamless user experience.
With a simultaneous shift in consumer preferences away from traditional ownership and towards product and service offerings based on ‘usage', there are now many opportunities for the monetisation of IoT. A common opportunity today is offering “IoT as a Service” in the form of a subscription model.
Creating value for businesses and consumers through data-driven insights
As with all new innovations, business leaders must ensure they're not investing in technology that doesn't add value. Especially if it doesn't have any foreseeable and measurable ROI. IoT will enable – and in some cases force – new business models.
As businesses transition from selling physical products to selling products as a solution or service, suppliers are better positioned to anticipate the needs of their customers and build personal relationships that competitors would struggle to match.
For example, heavy equipment manufacturer, Caterpillar utilises IoT technologies to analyse machine performance data at its customers' job sites.
This offers a more complete overview of when and how its machinery is being operated, along with metric tonnes of earth moved, which in turn enables the company to charge by usage. Performance from the machinery can also inform the design of new models and help the manufacturer cross-sell additional products and services.
For business leaders, understanding what makes a savvy investment in a tech-forward product is arguably a difficult task. If they want to get ahead of their competitors or drive cost efficiencies, they don't always have the luxury to wait for the investment to be tried and tested.
The best way to determine the potential ROI up-front before making significant investments of time or money is by asking what data is being collected through the IoT technology, how it can be used to generate insights, and whether the right processes are in place to act on this intelligence.
Companies are seeing the potential for subscription as a means of recurring revenue -- monetising contextual sharing, storage, usage and the data that IoT connectivity enables. This means that increasingly, businesses are moving away from the traditional ‘configure, quote, negotiate, price and order' billing of the past in favour of self-automated payment systems.
Investment in infrastructure is a must
Customers today are more informed and demanding than ever before. They have the world's store of knowledge at their fingertips. They expect ongoing value and unique experiences. And they're not as interested in methods as they are in outcomes. Businesses will need to determine and forecast the ROI and ensure they are using the data collected responsibly to generate actionable insights which can have a real impact on business outcomes.
Standalone products just don't cut it anymore. Products are now being sold in packages comprising the physical product, training resources, software solutions as well as ongoing customer support. To meet the expectations of today's customer, companies must move beyond products into services — from a product experience to a subscription experience. They have to create services that can learn and adapt based on behaviour. Services that can improve themselves autonomously. Services that can be truly customised.
At the core of any successful business strategy are the end users and the relationships the business has with them. CRM systems must be configured to track customer and channel entitlements of what levels of services are offered and to whom. Management reporting systems must also be reconfigured to measure the new metrics of success for IoT subscription models.
These include churn, monthly recurring revenue, customer acquisition costs and lifetime value, at a minimum. Companies are opting for subscription-based billing platforms as they realise the benefit of not only a convenience to customers (and repeat business) but also the added flexibility of financial systems that were built with outcome-based complexities in mind.
As products themselves become an ancillary means to an end, businesses now more than ever need to reinvent themselves with subscription-based offerings. In an IoT world, businesses can no longer just focus on the physical.
They must channel their resources into building long-term service relationships with an ever-changing, ever-evolving consumer base. Leveraging customer data to make more informed business decisions, facilitate flexible pricing and increase brand loyalty, IoT-as-a-service enables businesses to give customers what they actually want. And that's a personalised experience, not a product.