How and Why Traditional Companies Are Investing in IoT
Product purchasing used to be static; customers would buy an item and maintain it to the best of their abilities for optimal performance and longevity. IoT and cloud-based services, however, are now extending a product’s capabilities, augmenting its services, and enhancing its intelligence. Companies have started creating dynamic services rather than simple products. The value is no longer just the product itself; it also includes the services wrapped around it.
As the Internet of Things (IoT) grows into a $267 billion market by 2020, many organizations are trying to figure out how to parlay IoT pilots into connected services that can create tangible value and profit. Executives have moved away from merely trying to figure out what IoT is, and are now asking a much bigger, broader question: What services can we create, data can we produce, and value can we realize?
As we uncover the business and economic factors driving the investment in IoT, traditional, nontechnology-based companies seem to be poised for growth. To see this growth through to fruition, nontechnology-based companies must be ready for a digital journey filled with continuous learning.
In order for companies to invest in IoT, they must be ready to jump in, learn by doing, and execute on these key tactics.
1. Create a Vision
It's best practice to take small planning and execution steps. First, create an executive vision backed by the commitment to fund and transform the company over time. Be sure to clearly and strategically communicate that vision to all stakeholders. Companies must approach IoT methodically and temper ambitions to avoid making poor investments.
2. Focus on Value
A major trap to avoid on the road to creating and delivering beneficial IoT services is crafting value propositions based on vague or future promises. It’s hard to get buy-in with benefits that cannot be demonstrated. The key is to focus on delivering immediate value. The path to monetization becomes much clearer when driving tangible benefits. This, of course, requires some preliminary work on needs analysis, opportunity selection, and capability building.
3. Choose Service Providers
Companies need to decide whether to build their own IoT platforms or take advantage of currently available tools and technologies. Save for technology-oriented companies and large organizations with deep pockets, most will opt for the latter. Thankfully, the choice of services available for IoT implementations is growing by the day.
4. Solidify Data Analytics
Businesses must develop IT operations and strategies that build the organizational capacity needed to leverage data collected through sensors, cameras, monitors, and more. Leading companies use these capabilities to capture and analyze user and device data, and gain invaluable insights into product performance and evolving customer needs. Effective analytics uses IoT data to identify problems, pinpoint causes, and inform solutions in various industries. For example, data-driven insights can determine:
- If field service vehicles are sitting idle for too long or spending too much time in traffic.
- If patients are returning for repeat treatments due to ignoring caregivers’ instructions.
- Whether users are causing industrial equipment to break down through operational errors.
- Why patrons are spending little time in retail stores.
Organizations can also use continuous data collection to update geolocation and mapping services with newly built roads and addresses. Equipment maintenance companies can alert clients when service is needed based on actual data showing wear patterns and usage history, rather than on a preset schedule—the options are seemingly endless.
5. Test Out Initiatives
Finally, companies should test out a single product or step in a supply chain—either in a manufacturing operation, a shipping operation, or a retail chain store—to see how it works, make the necessary tweaks, and absorb the lessons. Businesses must use data insights to inform the next step, and the next, and so on, in order to build value, transform the company, and bring profound change.
Early adopters are already fundamentally changing how they operate by applying newly gained IoT insights. Some products now come with connected software that adds increasing value. A great example is Tesla vehicles. Carmaker Tesla continuously monitors vehicle torque to fine-tune motor performance. As a result, the next vehicle software update may make the car fractions of a second faster. By setting this precedent, consumers will increasingly expect the products they buy today to get better over time.
As vexing as the challenge of monetizing IoT may appear, it still signifies progress when considering not long ago the pressing question was: What is IoT? We have moved forward, but there is still a long way to go before most companies truly benefit from IoT. Either way, it's clear connected services create tangible value and profit.
Interested in learning more about how Frank is helping companies build strategies to monetize their IoT investments? Check out our expert page.