Of all of the influences on how we live and work, the one that’s having the greatest effect is undoubtedly the Internet of Things (IoT). From controlling our home appliances with a smartphone, to tools that make simple tasks more efficient in the workplace, the IoT is revolutionizing just about every aspect of our lives. But while it’s certainly impressive to be able to control the temperature of your home while you’re still commuting home from work, it’s important to recognize that the IoT is actually, in many ways, changing the way we do business. The very models on which businesses are built upon are becoming more dynamic and more connected within an ecosystem of the business, the product, and the consumer. What does this mean specifically? Let’s take a look.
Changes to value creation
It’s no longer enough for a product to simply meet a customer’s short-term needs. Today’s customers are demanding more, from the very functionality of the product to the availability of continual service. Value is often created after the initial transaction, with businesses maintaining customer relationships by providing both service and enhancements. The IoT will allow technology resellers, for example, to have a long-lasting, more systematic relationship between their customers and the vendors, allowing for stronger technology solutions with better continued service and solutions.
The IoT is changing the methods of value creation from a process of solving existing needs through a single product that remains the same over time into a more predictive process in which businesses must be more agile and able to address emergent needs, while also providing real-time updates and using information to consistently improve the service and function of their products.
Changes to the buyer journey
Understanding the buyer’s journey – the process that customers go though in making the decision to buy – has long been an important part of any business strategy. While the buyer’s journey will continue to follow the same general pattern at the highest levels (awareness, consideration, etc.) the IoT has expanded that journey to include new phases of usage and the acceptance of new services.
The purchase is no longer the end of the buyer’s journey, but the beginning of an ongoing relationship in which the customer gains value from the connected features of the product while the business gains value from the data collected about the customer’s usage of the product, which is used to develop new products, services, and functions. This can effectively restart the buyer’s journey, wherein the customer travels through the awareness, consideration, and purchase phases again, creating a more cyclical process. Businesses need to understand this new paradigm and develop methods of building relationships that remain strong throughout multiple cycles.
Changes to pricing structures
Older business models are built on a path to profit that relies on selling products. More products sold equals more profit. Thanks to the IoT, profits are more heavily reliant on recurring income. The business model needs to be based upon how the products and the data they produce can generate additional income streams. Personalization, additional services, and usage-based pricing are all becoming the norm, as is understanding how the additional partners in the ecosystem make money and support each other’s efforts. The IoT has the potential to increase revenue, but only when businesses are willing to embrace a new way of thinking and look at new options for income generation.
The Internet of Things will definitely continue to be a force for change in many aspects of our lives, not the least of which is the way that businesses operate and plan for the future. By understanding the impact that connected devices can have on a business, you’ll be better positioned for higher profits and a more successful enterprise.