The IoT is bringing about new ways of living and working that will stay with us for years to come. Companies are working hard to produce connected products that consumers will purchase and find long-term value in.
Equally important as the consumer value is the benefits a connected device will bring to the business itself. Increased revenue is surely one of the more attractive benefits, but it goes much beyond that. Data produced by connected products can provide guidance to help companies build better, more appealing products, can help support teams understand issues to provide quick remediation, and can help the sales organisation identify how customers are using the product — increasing cross-sell and upsell opportunities.
The advantages of jumping on the IoT bandwagon can be innumerable – that is as long as companies think about their business model long term. Still too often, the focus is solely on the act of getting a connected product to market and not about the longer term responsibilities and benefits having a connected business, says Ryan Lester, director of IoT Strategy, Xively by LogMeIn.
In order to have staying power in this already crowded market, product companies need to ensure that their business model is durable enough to support the long-term IoT journey. Here are a few tips:
Think beyond the one-time sale
For many traditional product companies once a product has left the store shelves, it’s game over from a revenue perspective. Hopefully the customer likes the product enough to continue to upgrade over time, but the main focus is on the initial sale. The IoT changes all of that. It opens up opportunity for recurring revenue streams based on subscription models, replenishables, and much more.
This new shift makes upsell, cross-sell and regular and repeated revenue opportunities much more available than ever before. For example, if you are in the connected printer business – the object may not be to sell the printer itself.
It may be to sell a regular printing service where you promise the customer they will always be able to print for a regular fee (i.e. you provide them a printer, take care of maintenance, paper refills, ink cartridge replacements, etc.). Or if you are in the business of actually selling the printer, a connected version can tell you when it will need maintenance or refills so you can cross-sell service contracts or regular delivery of printer ink and paper. Planning for how you can make money after the original deal should have a principal place in the overall business plan.
Be driven by efficiencies, not entirely by revenue
A recent study we commissioned with Harbor Research found that around a third (34%) of product companies reported that business efficiencies are the number one justification when selling IoT projects internally. Only 6% anticipated revenue would be the top benefit of implementation, yet 87% of those who have developed a connected product are seeing revenue improvements.
Put simply, to put revenue improvement as the main reason for embarking on a connected product journey would be equivalent to putting the cart before the horse. IoT is at its best when it is used to improve relationships and processes. Once that is in place, the other benefits will surely follow.
Security by Design; Not as an Afterthought
The IoT offers a brand new way to engage with your customers. You are creating a real-time connection with them and if they don’t feel confident in that connection, they will go somewhere else. It’s important to protect the data coming from IoT devices just as you would any other personal information. The challenge comes in how best to approach it. The Internet of Things comes with a whole new set of security hurdles – many of which most traditional product companies never had to tackle before.
Security should be purpose-built for the IoT and entrenched in every aspect from the infrastructure itself and the apps, to connections and integrations and beyond. Taking security shortcuts can be tempting to help speed up the development phase, but history shows us that it will only cause pain down the road and could ultimately damage consumer confidence in the long term.
Now that it is becoming increasingly clear that IoT is here to stay, businesses must approach it with this reality in mind. As IoT transitions from the possible to an actuality, companies must make sure that they are appropriately positioned to make the most of what lies ahead. Adopting a durable business model puts you in the best position to come out of the gate strong and stay competitive.
The author of this blog is Ryan Lester, director of IoT Strategy, Xively by LogMeIn
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