Communicating and controlling physical components through a wireless online connection – that’s what Internet of Things is all about. Academic researches and consultancy firms say that Internet of Things will create totally new business opportunities and change the society we live in. But how?
Internet Of Things:
Your Business’ Hero…or Murderer?
The hype of Internet of Things is huge, but what is the actual impact? For a manufacturing firm with a service business, Internet of Things can enable huge cost savings as well as creating new value offerings to customers! However, if the offered value and the revenue streams are not aligned, introducing Internet of Things might kill the entire business!
IoT
Hero?
The concrete impact of Internet of Things in a business can been exemplified by a study of a manufacturing firm with a service business, conducted by Dahlin & Lindgren (2016); connecting physical components online will make it possible to monitor the status of the product and make it possible to predict when an error will occur. If you know this information it is much easier to plan when the product will need service. Some service activities will even be possible to perform remotely and therefore reduce service visits. Doing these changes in the service business can reduce yearly service costs with up to 17 %!
Cost savings are not the only benefit with introducing Internet of Things in a service business. If errors can be predicted and avoided, the companies’ customers will always have well-operating products. That will increase the perceived customer value, since well-functioning products are what every buyer wants. Internet of Things will also make it possible to offer completely new product functions and features to the customers. Internet of Things seems like a real business hero, right?
Consequently, implementing Internet of Things in a business with aligned value proposition and revenue streams can result in great benefits, making Internet of Things become the hero of the business! But if value proposition and revenue streams are not align, Internet of Things might become the business’
murderer!
It is common among manufacturing firms with a service business that customers are charged when products are not working and need to be repaired or maintained. The car industry is a perfect example of that. But Implementing Internet of Things can reduce the need of service and thus destroy the source of revenue in such cases. If the revenue streams are cut off, the business will die no matter how much beneficial cost savings Internet of Things will help you achieve.
Murderer?
If all products are connected to Internet, you can gather a lot of information. One type of information that is crucial for service organizations is usage pattern. The more a product is being used, the more service is required. Usage patterns can therefore be utilized to customize service offerings and price settings to make sure that the customers only pay for exactly the amount of service that their products are in need of. The more a customer uses a product, the more service is required, and the more the customer has to pay for the customized service offer.
Internet of Thing can thus help companies to achieve well-operating products to a larger extent than before, creating more value to the customer. It is then crucial that customers are actually charged for that value. If the revenue streams are not aligned with the offered value, the implementation of Internet of Things can backfire and ravage the entire business! Internet of Things will then become the business’ murderer.
But! If the service organization makes sure to charge the customer for well-operating products, the revenues can be secured and increased with Internet of Things. For example, the customer can be charged a monthly fee, based on the uptime of the product, and then be compensated if the company fails to fulfil the promised uptime.
