For many solution providers, the cost-saving implications of the Internet of Things are what resonates with their customers. Generally, the decision maker is the CIO, and a big selling point of IoT solutions is their ability to cut costs. But for a solution to truly be transformative, it can’t merely be subtractive in nature — It needs to be additive also. In other words, it has to bring something to the table that adds value.
Sure, saving money is important: Profligate spending has doomed many companies to the bankruptcy courts. But there will come a time in every IoT solution’s life cycle when cost savings will slow, and the CIO will want to know how that solution will help grow revenue. The answer lies in data analytics.
Much of the reporting on IoT solutions spotlights consumer applications, the big impact will be business-apps based, in areas such as industry or the construction of smart buildings. Consumer applications really provide convenience, rather than time or money savings. For example, a remotely controlled washing machine offers the convenience of activating a load while the user is elsewhere and then notifying that user when the cleaning cycle is done.
But many washers can be programmed to turn on at a preset time, so the added ability to send a text notification that the wash load is done is relatively unimpressive when the clothes still need quite a bit of human attention. After all, they can’t put themselves into the dryer.
Other times, the cost for the consumer to employ an IoT solution is prohibitive: Lighting systems with controllers, bulbs and a dimmer switch can cost close to $500 for a connected living room. The return on investment on such a solution will take a long time to realize.
Business Can Profit From Consumer Use
Still, consumers will want to have IoT solutions, for their convenience as well as for the coolness factor. For instance, having a home security system that can be turned on remotely may not save money, but it saves the customer time (because he or she does not have to schlep back home to set it).
For businesses that support those IoT-aware consumers, however, the earnings potential is enormous:
- The manufacturer will receive information about reliability and advance warning of when a failure is about to occur.
- Real‐time information on which features are actually being used and how they are being used will be gathered. The insights revealed by that data could be worth hundreds of dollars per machine during its lifespan.
- The gathered information can be used in marketing outreach to current and potential customers, boosting brand loyalty and attracting new ones.
- New corporate partnerships with complementary products could be forged. For example, washing machines can send consumers coupons for laundry products.
- The brand extension opportunities will recoup the cost of making IoT‐enabled washing machine tens of times over.
It’s About the Customers’ Customer
Solution providers should recognize that servicing their customers, such as the electric company or the washing machine manufacturer, in ways that assist those users is where IoT solutions can be very lucrative. It’s not just about selling a climate control system to a corporation. It’s more about selling solutions that connect those corporations to their customers.
A report from Deloitte explained:
Connecting devices that were unconnected before creates opportunities, but also requires a fundamental shift in business model. A connected product is no longer just a product; it is a service. For example, a connected coffee machine is an insights tool for restocking and usage profiling to optimize coffee pods supply chain and increase customer lifetime value.
CIOs are typically focused on containing costs, which is important but solution providers must not lose sight of the growth opportunities provided by the IoT technology. By reaching out to CMOs, CFOs, major line managers, and CEOs, companies can employ connected solutions to achieve sales growth goals and create innovative products — while benefitting from streamlined and efficient systems.