How did most of us learn about the advent of the “Internet of Things” (IoT)? Perhaps we read about fitness trackers you wear on your wrist? Or maybe about self-driving cars?
Today, everything seems to be digitally connected. Moreover, the expansion of the internet’s network of people and devices is changing the way the world operates and does business — in both B2C and B2B contexts. IoT encompasses a new era for business in the B2B sector known as Industry 4.0, in which devices within and across enterprises are connected. They communicate with each other through a versatile network of machines and production environments, resulting in increasingly automated processes.
As businesses want to be part of the Industry 4.0 wave, they need to embrace the shifting landscape that the IoT is about to bring. Moreover, they need innovation in order to make the most of it and deliver the respective business value.
In with the New, Out with the Old (Business Models)
The IoT can generate new value for businesses by utilizing Big Data, improving automation and cognitive analysis to ultimately enhance processes and products. These technologies can help to create advanced products and better customer experiences for both the B2B and the B2C sector. But in order to generate value from data and automation, new business models have to be developed and new processes need to be designed.
The development of smart devices alone cannot make this change happen. Instead, both the right strategy and an adapted way of working need to go hand in hand. The new value chain within the IoT is more complex than previous models as it needs to consider networked devices, connected products and new living services alike.
A completely new infrastructure is needed if companies want to fully leverage the possibilities of the IoT. An increased focus on partnerships with product and service providers is essential to fulfill all the new IoT functions. Companies have to plan ahead to utilize gathered information and new forms of automation to not only streamline processes, but also to deliver value to corporate clients and end customers.
Complex challenges with rewarding benefits
Let’s take the agriculture sector as an example: Today, there are many external factors that impact the agricultural industry. By supplying farmers and agricultural corporations with the respective information, they will be able to adjust their production and supply chains accordingly, enabling them to improve net profit.
Processes like fertilization are automated and performed more efficiently. Arrays of sensors used throughout the agricultural lifecycle communicate with each other. The gathered data is enriched by external information such as weather and GPS location based information, allowing to adjust schedules for fertilization. With fewer unknown influencing factors, agricultural businesses can forecast growth, processing, and distribution of products more effectively.
The value for farming businesses and their commercial partners comes in the form of fewer resources wasted, more efficient processes, and the ability to ultimately deliver better products. These improvements, in concert with partners in the crop producing industry that create highly effective fertilizers, extend the value chain and deliver new services such as the “intelligent farming”.
Ceaseless development and transformation
According to McKinsey Quarterly, new business models in the automotive industry involve devices and services that gather data about customer usage and continue to develop the product after it has been sold and delivered. For instance, if features like heated seats are shown to be underutilized by car owners, they can be given a more prominent and easy-to-use position on the dashboard’s touchscreen.
Adjustments like that will transform products into living and service-providing assets. And today’s customers are developing even higher expectations towards networked products. A recent study shows that 48% of car buyers would walk away from a car they liked if its tech features were difficult to use.
Intelligently designed products that are easy to use and continue to improve along its actual usage provide the highest value to the customer. Subsequently, products — whether they are cars, clothes, washing machines, or fitness trackers — will turn into enhanced services and assets!
The Value Impact of the IoT: Products Evolving into Services
The IoT transforms internal processes, as well as interactions among customers, partners, and businesses by the use of information. But how does this change the way we understand value?
Instead of just offering products with customer service support, companies can offer products that become services (e.g. Intelligent Farming) when embedded in an overall service experience. This business model is what Jennifer Fraser calls “a dynamic eco-system.” Instead of encounters with B2C and B2B customers that might lead to an actual purchase, companies follow customers on their everyday customer journeys [link to previous article on Bohé website], equally before and after the purchase, adjusting at each stage to better serve their individual needs and building valuable, long lasting relationships. This flexible and dynamic model will therefore have the potential to generate new and additional revenue streams while new needs are identified and met.
Value is measured not only in terms of products sold, but also in terms of creating and maintaining profitable customer relationships.. Whereas companies may have just sold products in the past, they will now need to go beyond product development and sales. They will need to plan which services they offer into which markets and what kind of partner eco-system can create the most value.
The Wild, Wild West of the Internet of Things and Industry 4.0
The many opportunities to generate value through the still-evolving IoT also pose risks for many enterprises. A lack of coordination between IT and operations, sales, and marketing may lead to lost potential benefits from new technologies. If the IT department has to change — it needs to do more than just specialize in managing software, infrastructure and platforms.
The IT expert’s work is now embedded and valuable part of the core strategies of a company. And it’s not enough to just have smart devices and amounts of information. Given the large and equally complex industrial systems, big data analytics and coordination between connected devices are just as important. Production and other processes have to be designed alongside the “new way of working” and subsequently automated. Once data has been gathered, it needs to be managed and used to develop and gain the most effective and efficient strategies.
Working with Personal Data is a Delicate Task
The requirements of data security and privacy have never been more crucial and need to be dealt with sensitively. As Ari Amster puts it, “Many companies have the attitude of creating and releasing the product first and foremost, then worrying about adding security features later through patches and updates.”
This is just another example of why IT needs to be a strategic partner within the IoT and Industry 4.0 scenarios. Along with this changing environment comes responsibility for businesses to be circumspect and ethical while at the same time staying on top of the latest developments in technology and security.
The Upshot: Innovate to Stay in the Game
IoT and Industry 4.0 are the new reality for businesses. As the world is becoming digitally connected, consumers, partners and customers expect to have access to responsive technology that makes using products and services easier. Businesses must join in on the IoT intelligently, otherwise they’ll lose rather than gain value.
It’s simply not enough to just adopt the technology. For example, although the oil drilling industry was an early innovator of the IoT technology, McKinsey found that only 1 percent of the data gathered by 30,000 sensors on a typical oil rig is used to adjust processes and strategy and generate value.
Making It All a Successful Reality: People and Culture
Digital culture is an essential part of successfully implementing IoT and Industry 4.0 business processes. Unfortunately this reality is often neglected. It is about blending values, leadership, behaviours and experiences to help an organization leverage all the opportunities that lie ahead. Creating this culture is inseparable from maximizing the value of your technology investments and realizing the full value of your new business models, products and operations.
