Approach IoT value this way.
A two-part question business leaders often have about pursuing digital transformation initiatives that involve IoT typically will go like this:
- What will this effort cost us?
- What is our return on this investment?
These are the foundational questions to ask – and we do address them as part of determining what deserves to be built. But while they are important short-term questions, it can often be too narrow of a lens to determine the full impact of an IoT initiative.
The question business leaders should be asking is this one:
- What business value does this digital solution present for the company?
This gets back to solving the pain points and figuring out what deserves to be built. The emphasis is on value creation versus procuring plug-and-play solutions with minimal investment. Value creation can come from three different components: desirability (will this be desirable to the key stakeholders?); technical feasibility (can we build what is desired and at what cost?); and business viability (can we see how this will be valuable to the business?).
Business value looks different at every company
We recently engaged a client on a unique digital opportunity. Before going through the strategic process to figure out what was desirable to the users and the technical feasibility of how it would be developed, it started with a solid understanding of their customer and business. . For this particular client, they knew their customer’s buying preferences, had built long-standing trust with them, and recognized their growth levers were in service and support of the parts and solutions they offer. It afforded them to look at the digital transformation project in a more complete lens of a total return, as the actual product sales was not the main source of revenue. The value wasn’t in the product itself, it was in investing in relevant technologies that could provide the service that leads to future growth.
Three ways we see clients defining business value
Some leaders will have a growth and innovation mindset whereas other maintain a lean, efficiencies-driven approach. These two approaches speak to the “either/or” mindset. But it is the third way listed below that speaks to a “both/and” understanding of what IoT and digital transformation can reveal in the short and long term.
- Revenue growth and new opportunities
By taking clients through a strategic process to discover what to build, many clients realize business value through:
- Product differentiation that adds value and creates separation from competitors
- Subscription services for users to easily access data, see trends, and order additional services or components
- Predictive maintenance or scheduled replacement parts that are woven into digital solution notifications; this simplifies the ordering and parts replacement process and retains sales
- Lower operating costs for the end user (would be willing to pay a premium to unlock recurring savings and drive down total cost of ownership)
- Share and/or sell of specific data so that partners and unrelated companies (non-competitors) can gain insights.
- Increased efficiencies & cost containment
Leaders who have been trained in and operate with lean principles also see the value in IoT and digital transformation for the efficiencies that are gained:
- Access to real-time data that leads to proactive management before issues become costly problems to fix
- Predictive, traceable, and preventative maintenance that reduces downtime and limits warranty payments (ability to see if product was properly maintained or if there is evidence of mistreatment or poor upkeep).
- Freeing up of time and talent as a result of IoT solutions, data management and edge devices; affords redeployment of talent to address other mission-critical work
- Significant time and travel savings with remote access and connectivity to the cloud
- Rethinking product and service lifecycles
When the two value propositions of innovative growth and greater efficiency converge through digital transformation, a renewed vision of the product lifecycle –and the total business – becomes clear, repeatable, and recurring.. . The transformational process and thinking looks like this:
- A desirable and improved product differentiates itself from competitors.
- The total solution can be sold at a higher price point.
- Customers experience the benefits of increased and intelligent data collection through a digital solution that create efficiencies and cost savings, driving brand loyalty.
- Data and insights can be leveraged to make improvements and enhancements to the next generation, or even the current product, to further differentiate and add value.
What we have learned in two decades of doing IoT and digital transformation work, and helping clients discover solutions that have business viability, is that realizing the total return on investment of an IoT project requires a deep knowledge of the end customer, a complete view of the product lifecycle, and expertise in the technical effort. We can get you there.