In the first part of this series on the Business of IoT, we looked at how IoT can drive business benefits through a solid understanding of a client’s business while using a before and after analysis – leveraging the client’s goals, performance metrics, or pain points to be addressed. We focused on two examples: the transportation industry and infrastructure management. The value driver in these scenarios was a direct consumption of new data transformed into new insights for better decision-making.
In this second part of the series, we’ll look at two examples that will illustrate IoT’s potential to create new business models.
New Business Models
Let’s look at two examples related to the fire and safety infrastructure provider we discussed last time.
- Transformation from Product Manufacturer to an “As a Service” Provider: Assume our fire and safety systems manufacturer is a market leader in the quality of their products. Their current model could continue as is, which would be to increase revenue through higher volume sales and unparalleled service of its systems. This model, however, relies on reactive service after something breaks, so customer satisfaction remains high as long as things work. But what if this manufacturer IoT-ized its offerings by transforming its systems to be “connected systems” as they are manufactured and installed? Then, the real-time benefits we discussed earlier can be offered as a service, garnering a premium monthly subscription which drives OpEx revenue streams incremental to the CapEx sale of the equipment itself. In essence, a fire and safety equipment manufacturer can transform itself into a service provider with “fire and safety prevention as a service.” New acronym alert – “FSPaaS.”
- Monetizing Data: Now, the newly transformed FSPaaS provider is signing up customers like gangbusters. Before they know it, they have some BIG DATA about who in the Global 2000 customer base has garnered real-time protection from its service. So they ask the question: who else would be interested in this data? How about insurance companies that cover large corporations for fire and safety liability? Insurance companies are always trying to mitigate risk, and knowing that large facilities have maximum protection through real-time monitoring is an attractive value proposition.
The FSPaaS provider enters into a conversation with “BIG INDEMNITY” insurance company to walk them through the associated data they collect to monitor facilities and manage risk. The basic data set maps to the minimum standard of safety connections required, based on regulations from local, state and federal authorities. BIG INDEMNITY is willing to pay for this data because it will fortify them with a superior risk to premium profile, and they’ll be able to pass related discounts on to corporate customers. Many have labeled such scenarios as “Connected Insurance.”
As you can see, our theme of business conversations continues. These use cases are C-level oriented and validate business drivers before a single sensor, gateway, or security protocol is mentioned.
What’s in it for IoT-related vendors?
Another mindset that exacerbates this IoT-IT-centric slant is the one that sees IoT capabilities as “endpoint” solutions. This is natural, given that a number of the IoT channel players – carriers, OEM’s, asset manufacturers, and others – have had historical “IT tower” relationships with customers. With decades of such history, it can be difficult to get yourself out of that box.
Once you change the conversation to business-outcomes and understand the “why?,” then you can also ensure that the “how?” is strategically oriented, in turn driving greater revenue streams for a vendor or systems integrator. Specifically, IoT should be leveraged as an enabler of strategic business transformation, yielding a multiplier effect. There’s a saying that, “a dollar of IoT solution revenue can yield a million dollars in strategic services revenue.” For example, connecting 100,000 electric meters, vending machines, turbines, MRI machines, or copiers, can yield greater demand for network capacity, storage, computing power, application performance, analytical power, new applications, BI dashboards, cloud capacity, and more. In addition, the advisory and delivery expertise needed to integrate all of these capabilities drives a multiplier in consulting and lifecycle management revenues.
What about IoT, CX and B2C?
Finally, while we’ve looked at everything from a B2B perspective so far, there is an entire set of business outcomes and benefits for Customer Experience (CX) for consumers (B2C). Areas of personalization, automation (removing friction from processes), predicting behavior (giving the consumer what they want or need before they even think of it), are all capabilities enabled by IoT and at the heart of many digital transformations. The emphasis here is that IoT affords connections between things and people, not just things to things. Understanding the business impact of those connections is paramount.
For example, you’re in the mood for your favorite ice-cream and search for it in the mobile app of your trusted retailer. The app tells you that the store does carry this product, but nothing else. Is that good enough to make you want to drive 5 miles, hoping your ice cream is in stock? Wouldn’t you prefer that your retailer also show you the count? And since you’re a valued customer, wouldn’t it be nice if they offered you a 10% discount? This is a simple contrast between an IT effort to standup an ecommerce portal, versus optimizing the CX. That extra emphasis on CX, enabled by connecting the store shelves to the supply chain to the customer profile, could result in that worthwhile drive to the store to find the ice cream waiting at a nice discount. You win and the retailer wins too.
Or loses.. In the “before IoT” scenario here, when you show up to the store and the ice cream is stocked out, your current retailer loses the product sale once. But, if you go across the street and the competitor retailer does have your favorite treat, you might go to that new retailer every time afterwards. Your previous retailer has now lost a customer for life. According to many studies, stockouts can cost retailers billions, and the loss of customers for life is probably on par!
By the way, IoT-based predictive maintenance of refrigeration assets in your grocery store will help ensure your ice cream is never melted because that is NOT good CX!
Creating a Business through IoT
So, what new business models are you considering for IoT? Can you monetize your IoT data? Which stakeholders are you planning to connect things to – employees, business partners, consumers or all of the above? What will be your key performance indicators for success? Who are the business decision makers you’ll need to champion your cause? The discussion points are as ample as the potential. Let the dialogue continue!