Many industrial and commercial product manufacturers, both established players and new entrants, are realizing the potential of the Internet of Things (IoT). According to a recent Business Insider survey, 62% of technology executives said that they had already adopted IoT-based systems or had plans to do so. Simply put, Internet connectivity can provide businesses with a multitude of revenue-enhancing benefits and drive greater utility, value and relevance to their products.
Should your business consider an IoT strategy? The short answer is, “Yes.” In this Internet connected world if you don’t keep up, you will soon be at a competitive disadvantage and left behind. However, before you dive in with both feet, consider that the IoT is more than just adding connectivity to a device. You need to think through your goals, capabilities, and potential areas of differentiation. When you ask the right questions, you minimize the risks down the road and benefit from less organizational friction, closer relationships with customers and new revenue opportunities to get the most out of the IoT.
Here are some questions to start with:
- How will connectivity allow us to build significant incremental value?
- What capabilities do we need? Which of those capabilities do we have internally, and which do we need to acquire?
- What technical infrastructure do we need to enable connectivity? Should we build or buy it?
Choosing a Business Model
The IoT introduces new business models, most notably recurring revenue opportunities and the ability to add value by bringing in new partners. Connectivity also enables much greater customer insight and cost reduction opportunities. Companies that lack significant experience with connected products often aggressively discount these benefits because they only see the ongoing costs, and do not have the history and experience of perpetual revenue streams and increased value that is created.
This often prevents businesses that live quarter-to-quarter or those that operate in very lean environments to experiment with the IoT. What these companies should recognize is that even when IoT projects provide no immediate incremental revenue stream that covers the cost of connectivity in the first couple months, other benefits can be realized. IoT projects may bring in new partners, create more customer intimacy, or directly translate to future sales.
Once your product is on the market, you must be prepared to maintain user experience, connectivity, security, and software and firmware updates throughout its life cycle. In this scenario, you will need to have in place an infrastructure and platform to connect the product to the Internet, as well as committed resources and headcount to manage its ongoing support.
If you evaluate progress of a new IoT initiative the same way you manage existing projects, you’ll likely hold it to unrealistic time frames. Many companies will deny follow-on funding to an IoT initiative that doesn’t increase sales immediately. But to give the IoT a fair shake, you must do your homework. Before you embark on a project, understand whether your company is able to make a product development paradigm shift and give new projects the time they need to mature.
Determine the Right Skills and Resources
Platform
Some manufacturers find that when they build connectivity into one product, very little can be ported to another product. For example, it took two years for a manufacturer of a successful connected thermostat to release a digital smoke detector. In this case, the power and connectivity requirements for the thermostat were significantly different than those of the smoke detector.
Support
You may currently lack an internal customer support organization and, instead, rely on a network of authorized service specialists. Connectivity throws a wrench into this scenario since your customers now require service on a 24/7 basis. Most manufacturers hire their own service specialists and give them both technical training and continuous software updates.
Outsource Non-Critical Technology
Your company’s technical skills and capabilities will make or break its IoT strategy. Just as many businesses utilize AWS for their server needs, you’ll likely want to outsource anything that doesn’t create product differentiation, such as technology that makes your product more scalable, flexible, and reduces your time to market.
Find the Right Partner
An option to consider is outsourcing platform components such as connectivity, data analytics and CRM, which allow you to concentrate on product design and development instead of worrying about maintaining an infrastructure.
Though you’ll see other manufacturers, maybe even your competitors, attack the IoT on their own, it’s a very challenging and resource-intensive road to go down. However, when you outsource various components of the connectivity infrastructure, you have more time to focus your domain expertise on your product.
But find the right partner. They don’t need to have all the answers but should help you lower your risk and even offer some advantages. For instance, a good platform partner will have network security experts, not just people familiar with the topic.
Additionally, many people under-appreciate the ongoing innovation – it’s not a seven, five or even two year cycle. Software and connectivity is changing much, much faster than that; it’s changing weekly. A great partner will keep you abreast of technology changes and do the heavy lifting so you can focus on what you do well.
The IoT will fundamentally change the marketplace and your business and products. Are you ready? If you can confidently answer all of these questions, it’s time to get started.