When I wrote “Welcome to the first” Selling IoT “Master Class“, I expected the post was read by many CEOs. It has not been a bestseller but I have received many positive comments and congratulations. Thank you.
I have been talking to many CEOs and Board members of non-technology companies to explain, if this is possible J, what is The Internet of Things (IoT), how the IoT will impact their business and the risk of not have an IoT strategy to transform their business.
The conclusions of these meetings regardless of the sector or the country or the size were very similar. The priorities of the CEOs can be summarized in the following points:
Grow the Business
How does my company grow from a $Xmillion/billion to a $Y million/billion organization and increase market share? Who needs my new products or services?.
My company has many different expenses. There are operating expenses such as employee salaries and infrastructure costs, underwriting expenses, and commission payouts. But by far the biggest expense within my company is customer service. How we can reduce expenses?
My company is facing a host of new regulations and we need to ensure compliance. We need to deal with FCC compliance with and EU regulations (eg Smart Meters, eCall, Data Privacy…). Is IoT a new source of regulations?. Given that most Internet of Things devices do not disclose where they send collected data, let alone what data is collected in the first place, IoT is also bound to make compliance management even more difficult.
We hear almost every day about breaches in IoT devices and cyber physical attacks. Worth the risk to expose my physical asset to Internet? More entry points into my network and lax security measures from manufacturers is a concern for my organization looking to tap the power of the IoT.
Our current products/services are the core component of my company’s business. We are encouraging innovation in our organization and use of tech advancements that will enable us to survive long term.
“The only way transformational innovation will happen is if a company’s leaders want transformational change, and if they are willing to take the steps and the risks necessary to move beyond tweaks to transformation.”
New Business Models
Why we should explore new business models? We are content with our current one. We do not view IoT new business models as a threat. Many people talking about obsolete Product Centric business model but are value proposition is a bundle of product and services. Why IoT can help my company struggle to find the next big thing before new competitors do?
Can IoT help CEOs sleep well?
In today’s highly competitive market, it is vital for companies to minimize inefficiencies and reduce losses to protect profitability. By using IoT, CEOs more easily achieve their objectives and sleep at night. See below some examples how:
Grow the Business with IoT – New revenue streams
Insurance companies are turning to IoT to improve pricing accuracy, create new products and enhance customer experience; for instance new policies for the shipping industry that is using sensors to monitor everything from vessel location and speed to the status and temperature of refrigerated cargo containers, giving shipping companies and producers real-time information on their goods.
While State Farm will provide discounts on rates of up to 50 percent for the safest, lowest-mileage consumers, In-Drive also represents an opportunity for new, recurring revenue streams. The service offers four subscription levels with additional services like stolen vehicle assistance, emergency calling and alerts for events like speeding, with subscription fees from $7 to $22 per month.
CLAAS Farmers can operate CLAAS equipment on autopilot, receive advice on how to improve crop flow and minimize grain losses, or automatically optimize equipment performance. The company is now partnering with other organizations to provide information services to growers via a marketplace called 365FarmNet.
Virtual Radiologic vRad began life as an X-ray interpretation service. It has since expanded into the IT services business, offering software services business and more recently an analytics service.
Source: Company websites.
Low oil prices mean petroleum producers need to spend and invest more carefully than ever, and the “Internet of Things” is helping. Last year, Royal Dutch Shell realized a $1 million return on an $87,000 investment in digital technology to monitor oilfields in some of Nigeria’s toughest terrain.
Adding IoT in some business processes can deliver a measurable ROI with cost savings and increased profits; for instance, in Insurance just a 1 percent improvement in the claims ratio for a $1 billion insurer is worth more than $7 million on the bottom line.
Michelin is helping truck fleet managers reduce fuel consumption and costs and allowing them to pay for tires on a kilometers-driven basis.
Source: Company websites.
According to Jennifer Tharp, a security compliance analyst at OpenDNS, the world of compliance can be a labyrinthine of rules and guidelines, and regulations vary widely depending on the country.
Construction is a business that carries inherent risks, especially when your teams are working in one of the most remote regions of the world. Operating in the Australian outback, where heatstroke can injure or even kill workers in hours with little warning, engineering firm Laing O’Rourke uses the power of the Internet of Things to keep its workers safe.
The Open Web Application Security Project’s (OWASP) Internet of Things Top 10 Project aims to educate users on the main facets of IoT security and help vendors make common appliances and gadgets network- and Internet-accessible. The project walks through the top 10 security problems that are seen with IoT devices and discusses how to prevent them.
These types of projects are just the beginning of the future security standards that must be developed to create a network of devices that benefits users in a secure environment.
Bosch CEO Remakes Company Around ‘Internet of Things’. Mr. Denner is betting that the future of his company—one of the world’s largest private conglomerates, with products spanning home appliances to auto parts and industrial tools to monitoring systems—depends on the “Internet of Things. As Bosch, many companies are investing heavily in IoT startup organizations, and also creating accelerators and incubators, to try and create new environments, new ways, to help innovations flourish, giving them a little bit of capital, giving them the mentoring they need to help them nurture new ideas, and then take those into an environment where they can be capitalized and grow.
New Business Models
I remember when I talked some years ago with Insurance companies about Pay-as-you-drive solutions and Pay-how-you-drive schemes. Usage Based Insurance (UBI) is a way to price insurance. With UBI, how you drive affects your premium. The more safely you drive, the less you pay. The manage-how-you-drive model drivers get feedback that helps them improve and potentially lower their rates
Harbor Research´s“ Smart Services and Internet of Things Business Model Innovation” The research underscores the fact that there are nearly infinite opportunities for manufacturers to develop innovative connected product business models.
The ability to track products in use makes it possible to respond to customer behavior. And of course, products can now be connected with other products, leading to new analytics and new services for more effective forecasting, process optimization, and customer service experiences. A variety of consumer products and services, from Nest thermostats to Philips Hue lightbulbs to If This Then That (IFTTT), highlight these new possibilities for IoT-based value creation. Read more at: https://hbr.org/2014/07/how-the-internet-of-things-changes-business-models
Is Your CEO Serious About Internet of Things?
To be honest I have been not able yet to convince many CEOs to embrace transformational innovation through Internet of Things. I agree with many of them that transformational innovation goes beyond use new technologies that allow develop new products, reduce cost or improve customer experience.
Business model innovation implies entirely new ways to create, deliver, and capture value and many areas in the organization are reluctant.
The Internet of Things will crown new Kings, my advice for CEOs is that they need prepare the organization for the disruption that will come with the Internet of Things and they need to have a vision for how the company will play in a connected world because their current business model will be threatened, squashed, cannibalized.
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