IoT: from technology to revenue model
Strategic approachIt all starts with a vision. Without C-level engagement, IoT risks being sidelined as ‘just another project’. Each IoT process should start with the following question: 'How can the technology help us to better meet the (future) needs of our customers?'. It should revolve around the added value for the customer rather than the technology itself.
Next, you need a dedicated team comprising a mix of IT and business specialists who can translate the vision into a solution: a lean, hands-on team that can set to work quickly. Agile development plays an important role in this because speed is imperative at various levels – not only in terms of practical testing and timely adjustments, but also in order to obtain a clear view of the feasibility of the project as soon as possible.
Besides the vision, another important key to success is of course the data itself. In the longer term, we may well see connected devices becoming cheaper to buy than non-connected alternatives. The focus is shifting from the device itself to the associated service and the resulting data. The value of that data far exceeds the cost of the electronics needed to make a device intelligent. However, in order to unlock the value of the data, organizations must first do their homework in terms of advanced analytics, real-time data collection, data ownership and privacy. Each of those factors creates extra complexity and challenges, so they need to be carefully considered.
A service-based worldLast but not least, your existing business models must also be aligned with an IoT context. IoT is accelerating the transition from a product-based to a service-based world. Currently, a car can issue a warning about a loss of tire pressure. But in the case of connected tires, that alert would be transmitted directly to the local garage where an appointment to fix it would be scheduled automatically. This completely shifts the focus away from the product and onto the service provided and the customer experience it creates.
In the same way, it is increasingly becoming less about the hardware and more about the software. By running software updates at regular intervals, companies can offer their customers new services while also creating new touchpoints that would not occur in the case of one-off hardware sales. Many disruptive companies have already understood this message loud and clear and have made the customer experience their top priority. Through their software, they not only provide new services that meet their customers’ needs but also have frequent contact with those customers. Look at how Tesla offers its autopilot functionality via a software upgrade.
In order to truly transform business models, companies also need to redesign their approach to invoicing. This implies a shift from traditional billing methods to the use of micro-billing systems for the recurring revenue streams that newly developed services generate.