Top 10 Considerations for Succeeding with IoT

Many global manufacturing companies have plans in place to create a connected product system by connecting products, building applications, and collecting data. IoT is the technology that will enable this.

The initial ROI justification for connecting products has been to improve product quality and provide full-service lifecycle support. This is significant, but not the complete picture. The larger value opportunity is to redefine your business model: to completely evolve the way you sell your product and manage “connected” customer relationships.

Transitioning to an IoT world

The heart of this transition is the shift from just selling physical products to selling products as a service or solution. The result is that, in an IoT world, the product itself is sold as a package made up of the physical product, software solutions, training, consumables, support and service packages, and more. This is happening across all industries, and creating a multitude of opportunities.

But with these great opportunities come great changes and great challenges. And, unfortunately, most companies trying to make this shift haven’t fully assessed the potential challenges of this evolution.

IoT is driven by relationships

To succeed with IoT, you must have a smart connected product strategy. At the core of this strategy are your end users, and the relationship you have with them. Commerce in an IoT world requires a different user experience. The customer is now in charge, empowered to purchase and self-manage their products and services. Putting the customer first is powerful in terms of improving the customer experience, but it puts tremendous pressure on the systems and teams that support customer relationships.

You can properly prepare to launch smart connected products and subscriptions services by considering the following…

10 Considerations for IoT

• 1. Dynamic pricing. In the world of IoT, pricing is dynamic. Every customer should be priced according to their solution. So IoT companies need the ability to control pricing scenarios without having to customize a system or create additional SKUs. Flexibility is key when you’re talking about changing pricing in days or weeks versus months or years.
• 2. Payments (including global payments). Is your system set up for regional and international pricing and payments? Supporting global commerce is critical in a world where a single service can scale globally. Rapid deployment and management of global pricing, currencies, and collections is pivotal to rapid global expansion so you need a flexible subscription payment system.
• 3. Customer support. Don’t underestimate the impact on your customer support organization in this world of more customer-centric, complex transactions. What is your plan for helping customers with their subscriptions, product usage, service questions, billing concerns, etc.?
• 4. Usage data. IoT enables product systems to generate usage data. But what good is this data if you don’t have systems to capture it and process it. You need to be able to collect, manage, and leverage this usage data in order to provide customer-specific solutions and improve user experience. Traditional commerce and billing systems simply don’t handle the kind of outcome-based complexities that markets are demanding.
• 5. New sales and distribution processes. Sales plays a big role as part of the overall customer experience. With the customer making decisions, your sales process will have to change. Since the number of transactions in a subscription world is far higher than in a pure product world (which is characterized by single transactions), many IoT businesses are moving from a traditional configure, quote, negotiate, price, and order to cash system to more of a self-service solution. This reduces the cost of the sale and the need to scale your sales team. Also, if you sell through distribution channels, those resellers will need to be a part of the entire customer lifecycle. How will they sell the subscriptions? Who will handle collections, pricing, support? And, what about sales commissions and royalties?
• 6. Billing. When every bill is personalized for a given subscriber—by service, by term, by usage—you need to automate your billing process for greater efficiency and greater accuracy. Also customers will be continually interacting with your commerce and billing system as they make ongoing decisions about their subscriptions, so you need a subscription billing system that can support this.
• 7. Financial systems. Finance organizations need automated transactions to support all the complexities of subscription billing. And financial reporting is different when a product moves to a service: what was an upfront sale is now a series of payments over time, i.e. recurring revenue. Managing and recognizing recurring revenue (and explaining this to shareholders) requires a systematic approach.
• 8.Connecting to ERP. Core accounting and inventory systems in your ERP will need to be connected, not replaced. Out-of-the box connectivity and optimization is a real challenge for enabling commerce options.
• 9. Customer analytics. If you are ready to track customer analytics, you’re at a great advantage. The inability to track analytics will hinder your ability to get close to your customers and successfully run your business. You need to integrate your subscriptions with analytics for deep customer insight.
• 10. Monetization. Yes, the “M” word. With all this talk about IoT, ultimately if you’re not effectively monetizing your offering, what’s the point? And remember, we’re not just talking about charging for the product—the larger question is how do you monetize (and optimize) the subscriber relationship?

Creating a business case for IoT

Before shifting to an IoT subscription business model, you need to create a strong business case. Sure, IoT can drive sales, reduce customer churn, and increase revenue, but only if you have buy-in and the systems to support this model. We’re headed for a brand new world dominated by smart connected products and product systems—are you ready?