Servitisation heralds greater importance for M2M and a more fraught decision-making process

Today, Vodafone publishes its annual M2M Barometer, supported by Circle Research, which undertook the surveying, and Machina Research, which provided market insight on the results. The overall thread of the findings was very positive: adoption is growing and barriers are being overcome. One specific set of findings really jumped out at me, and which I think have interesting implications for the development of the market, related to motivations.

Matt Hatton
Matt Hatton – Director, Machina Research

There are a relatively small number of motivations for implementing M2M. As one industry veteran once put it to me, you’re either trying to “make money, save money, or stay out of jail”, and that is more-or-less true. The earliest telematics solutions were, and still are, aimed principally at efficiency-savings. They relate to things like streamlining supply chains, reducing down-time in manufacturing facilities, and stopping unnecessary visits to remote sites. Alongside that has been an increasing number of regulatory initiatives that implicitly or explicitly require M2M connectivity. These include Swedish regulations on meter reading, EU rulings on sex discrimination in car insurance, and Brazilian requirements for vehicle tracking, amongst others. A third motivation has been the desire to add cool features to a product, with the aim of generating more money. Examples of the latter might include a connected Playstation Vita, or live navigation services for a car.

However, what increasingly becomes apparent, and which is hinted at by the M2M Barometer research, is that there is another motivating factor which goes way beyond these three simple drivers: servitisation. By this I mean the change of business model from one based on capex, i.e. selling a hunk of metal, to one based on opex, i.e. selling a service. A good example would be to compare any automotive OEM with Zipcar. One sells a piece of metal, the other provides (for want of a better term) Car-as-a-Service. M2M connectivity is generally implicit in adopting this servitisation model.

All this has big implications for how companies do business, and the seriousness with which they take M2M. The “make money, save money, stay out of jail” motivations that historically dominated might have been a bit tricky to implement. However, they had simple decision-making processes within companies. For instance, efficiency-saving applications just needed a quantifiable ROI and sign-off from the CFO. The shift to servitisation is much more fundamental to how companies do business. Sure, BMW can move to offer its own car service (as it does in the form of DriveNow) but what happens when that becomes the majority of the company’s business? They will have effectively disrupted their own established business model. However, it’s maybe better to do that than let someone else disrupt it for you.

Servitisation means fundamental change to how companies do business, and M2M is implicit in that. So we as an industry can expect the decision-making process to change, and possibly become more painful. What is for certain is that any decision-making process will not be a simple rubber-stamp from the CFO. Because servitisation will result in tremendous opportunities and threats, M2M will become a critical part of the way that most organisations do business.

You can download the 2014 M2M Barometer here:

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