One thing that became abundantly clear while speaking at and attending the CONNECTIONS event put on by Parks Associates in San Francisco last month, is that product manufacturers are starting to ‘get it’ when it comes to smart, connected devices.
By that, I mean: gone are the ‘fire and forget’ days whereby you could ship a products for distribution to your end customers with almost no further interaction with those customers. The essence of IoT is that products are evolving to become ‘service portals’, and the delivery of the product to market is only the start of an on-going customer relationship. Some manufacturers are still daunted by the enormity of this sea change, but more are beginning to appreciate the tremendous opportunities this represents.
For example, many products include consumables, like filters, brushes and detergents. It’s far easier to sell genuine OEM replenishments to connected customers rather than losing that sale to an after market knock off, or worse a counterfeit, as is often the case today. In fact, one company with which I’m familiar has justified their entire investment in connectivity through the sale of a single replenishment purchase, and the product in question averages over 10 such purchases in its lifespan. Pretty easy math.
Other service opportunities abound. Connectivity means you know who your customer is and how your product is being used. This information can be leveraged to, for example, set the price for an extended warranty; upsell newer models of the same product, or cross sell complementary products. Clearly, this is only the tip of the iceberg.
Speaking of services, CONNECTIONS was one of the first large events to bring into focus the emerging role of service providers in the connected home. It seems that everyone from utilities to insurance companies to cable operators have realized that connected products will dramatically impact their future; whether positively or negatively is very much to be determined.
Take property insurance, for example. This industry has operated on pretty much the same principle for the past six thousand years, namely an indemnification service correlated to the risk being covered. But the actual assessment of that risk has been a very imperfect science at best. With IoT and connectivity, all of the guesswork goes away.
An insurance carrier can now know exactly where your water is leaking, when the leak started, and most importantly will be able to take a variety of actions to stop the leak. This is a dramatic change in their role as a service provider. Rather than simply indemnifying the loss due to water damage, they can prevent the damage from occurring in the first place. And, because their risk is lower, the property owner can probably expect a lower premium. It’s the definition of a ‘win win’ scenario.
Bringing these propositions will require close partnerships between those who build products and those who offer services (enabled and tied together by those like EVRYTHNG that provide cloud-based digital identity and data management). Manufacturers of physical products must embrace a new component of smart
connectivity and deliver software and analytics services to compete. Both manufacturers and service providers have to develop new types of collaborations powered by connected data. A global Accenture survey of 2000 executives found leading firms using digital connectivity to move from silos to smart ecosystems, creating new value by combining with new partners and data services. Such partnerships aren’t entirely new, of course, but their importance to both businesses and consumers will take on far more significance in a smart, connected world.
Ps. You can download our free whitepaper “The Insurance of Things” here.