By 2020, there will be 50 billion connected devices. And a recent Gartner forecast predicts that by 2020 there will be $309 billion in incremental revenue opportunity for IoT suppliers, mostly in services. With numbers like these, it’s clear IoT is not just another trend. It’s the future.
But what’s often left out of the discussion is how to make sure your company is developing a recurring revenue model that will allow you to stay agile, respond to your market, and scale your connected products successfully.
First let’s talk a bit about what IoT is, and the impact it’s having on business today.
The term “Internet of Things” was coined by researchers at MIT in the 90s. It describes an environment where everyday devices are connected to the Internet, as well as one another (this second aspect is frequently overlooked). IoT represents a seismic shift for businesses, because a connected device is a significant learning and revenue opportunity.
Integrating products and services isn’t a new concept. There have always been after-market maintenance solutions, and, at a very basic level, IoT could be considered a virtual break/fix plan.
The first wave of IoT consisted of devices that could diagnose their own problems and schedule their own field technician calls. But things have been getting much more interesting. IoT is moving beyond efficiency and into possibility.
Here as we see it are the core challenges facing the nascent IoT market today:
Though the traditional ways of doing business may be evolving, it’s important to remember that the way to succeed in IoT is the same as it ever was: building solid recurring relationships with your customers.
As we move at warp speed into an ever-more digitized world, concentrating on connections—wireless, virtual or otherwise—and a solid business model will ensure you’re business is on the right track.
Ultimately, we think IoT is about enabling companies to meet the demands of today’s changing consumer.
Consumers today are more informed and demanding than they were ten years ago by an order of magnitude. 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 outcomes.
Stand-alone products don’t cut it anymore. Other than picking a color or slapping a monogram on it, a stand-alone product can’t be personalized. A product can’t learn your behavior and preferences. A product can’t be constantly upgraded, so that it gets better and better — instead, it simply gets obsolete.
People increasingly view owning something as simply managing the decline of a physical asset.
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 behavior. Services that can improve themselves autonomously. Services that can be truly customized.
Sure, there will always be an actual physical object involved, but the point isn’t to ask “What can an Internet-enabled device do?” but rather “What do customers really want, and how can I deliver that as an intuitive service, rather than a stand-alone product?”
Nest isn’t just a thermostat remembers your heating patterns after a week, it’s a central nervous system for your house that tells you when particulates are in your air, or raccoons are in your yard. An Autonet Mobile connected car isn’t just a vehicle with a 4G connection and a map (something you can get with your phone, anyway). It’s a diagnostic system on wheels that tells your garage to schedule an emissions-level check or lets you know when your teenager is driving too fast.
We predict that we are facing a tectonic consumer shift towards connected devices, from automobiles to homes to wearables. Because ultimately IoT is not just about extending a product’s capabilities. It’s about creating a world where a product is not a product — it’s a service.
To meet the demands of today’s consumer, companies will need a clean break from their old product-based business models. They will need to reinvent themselves as subscription-based platforms.
Are you ready for IoT?
Here are 7 key questions to consider as your business moves into the world of connected services: