As many of you know, I am an inveterate consumer of IoT white papers. It’s rapidly becoming a huge part of our business here at Zuora.
The latest IoT study from Tata Consultancy has a great section on how companies with the greatest revenue increases from IoT initiatives differ in seven key ways from firms with the lowest gains.
I’m offering the highlights, along with my own comments, but please download the entire study here.
“First, the early IoT leaders are more likely to digitally re-imagine their businesses and produce substantial value for customers – not just value for themselves.”
I totally agree. Most companies are built backwards. They’re usually organized around product lines. This contributes to a myopic mindset that blindsides management to sudden changes in the marketplace. And consumers now have the ability to price, critique and purchase anytime, anywhere. They increasingly value access, not ownership. Enterprises need to re-organize themselves to reflect those changes.
“Second, they deliver that value through new business models, product and service offerings, product bundles, and data.”
As my CEO Tien Tzuo put it succinctly in his LinkedIn post on the topic, IoT turns products into services. You’re not shifting widgets anymore. You’re engaging in long-term relationships. That means your entire business model needs to react accordingly. Your finance department is going to have to start thinking as creatively as your R&D department!
“Third, they appear more likely to see the breakthrough potential of the IoT: getting the ultimate truth on how their products and services are performing for customers, as well as actual usage patterns.”
Tata has a great quote from Caterpillar CEO Leroy Holt on this point: “We have slightly over three million machines running somewhere in the world every day. What we don’t have today is all those machines hooked into a system that can predict failures.” Not surprisingly, Caterpillar is currently making big investments in IoT technology, and offering a lot of helpful thought leadership on the topic as well.
“Fourth, IoT leaders organize themselves to act rapidly based on this performance and customer usage data.”
This is why customer service departments are getting replaced by customer success departments – proactive, usage-based SWAT teams versus reactive complaint departments.
“Fifth, they are better at dealing with internal resistance to hearing the truth that IoT technologies reveal about product and service performance.”
The truth hurts! As the disposable, sell-it-and-forget-it economy transitions towards the subscription economy, manufacturers are getting a clear-eyed X-Ray of just how dependable their products are in the field. Except this time their hearing it from sensors, not irate customers. That makes a better argument in the board room.
“Sixth, they make IoT reliable in the field, especially to reduce the risks of security breaches.”
Fiat-Chrysler just recalled 1.4 million Jeep Cherokees. Faulty airbags? Steering issues? Nope. They got hacked!
“Seventh, they make small test investments before making broader and bigger ones.”
Most enterprises we deal with are taking this exact approach. Many of them are running pilots in specific regions and are aiming for recurring IoT revenue targets of 10% to 20% within the next several years.
Thanks Tata! Again, please download the study here.