Vernon Turner is the Founder and Chief Strategist at Causeway Connections, an information and communications technology research firm. For nearly a decade, he’s been serving on global, national, and state steering committees, advising governments, businesses, and communities on IoT-based solution implementation. He recently talked with us about the importance of distinguishing between IoT hype and reality, and identifies three steps businesses need to take to make a successful digital transformation.
What is the promise of IoT?
The promise of more and more data from more and more connected sensors boils down to unprecedented insights and efficiencies. Businesses get more visibility into their operations, a better understanding of their customers, and the ability to personalize offerings and experiences like never before, as well as the ability to cut operational costs via automation and business-process efficiencies.
But just dabbling with IoT won’t unlock real business value. To do that, companies need to change everything, how they make products, how they go to market, their strategy, and their organizational structure. They need to really transform. And to do that, they need to do three things, lead with the customer experience, migrate to offering subscription-based IoT-enabled services, and have a voice in an emergent ecosystem of partners related to their business.
Why is the customer experience so important to fulfilling the promise of IoT?
There can be a lot of hype around IoT-enabled offerings.
I recently toured several so-called smart buildings with a friend in the construction industry. He showed me that just filling a building with IoT-enabled gadgets doesn’t make it smart. A truly smart building goes beyond connected features and addresses the specific, real-world needs of tenants, leaseholders, and building managers.
If it doesn’t radically change the customer experience, it doesn’t fulfill the promise of IoT.
What’s the disconnect? Why aren’t “smart” solution vendors delivering what customers want?
Frankly, it’s easier to sell a product than an experience.
Customer experience should be at the center of the pitch for IoT, because IoT enables customers to have much more information about the product, in real-time, across the product lifecycle. But putting customer experience first requires making hard changes. It means adopting new strategies, business models, and organization charts, as well as new approaches to product development, sales and marketing, and talent management. And it means asking suppliers to create new business models to support sharing data across the product lifecycle.
Why is the second step to digital transformation, migrating to offering subscription-based, IoT-enabled services, so important?
To survive in our digitally transforming economy, it’s essential for businesses and their suppliers, to move from selling static products to a subscription-based services business model.
As sensors and other connected devices become increasingly omnipresent, customers see more real-time data showing them exactly what they’re consuming, and how the providers of the services they’re consuming are performing. By moving to a subscription (or “X as a service”) model, businesses can provide more tailored offerings, grow their customer base, and position themselves for success in the digital age.
When companies embrace transformation, it can have a ripple effect across their operations. Business units can respond to market needs to create a new service by combining microservices using the rapid software development techniques of DevOps. These services drive a shift from infrequent, low-business-value interactions with customers to continuous engagement between customers and companies’ sales and business units. This improves customer relationships, staving off competition, and introducing new sales opportunities.
What challenges should companies be prepared for as they migrate to offering subscription services?
For a subscription-based services model to work, most companies need to make significant changes to their culture and organizational structure.
Financial planning needs to stop reviewing past financial statements and start focusing on future recurring revenue. Instead of concentrating on margin-based products, sales should start selling outcomes that add value for customers. Marketing must be driven by data about the customer experience and what the customer needs, rather than what serves the branding campaign.
From now on, rapid change, responsiveness to the customer, and the ability to customize and scale services are going to be the norm in business.
You mentioned the importance of participating in an emergent ecosystem of partners. What does that mean? Why does it matter?
As digital business processes mature and subscription models become the standard, customers will demand ways to integrate their relationships with IT and business vendors in an ecosystem connected by a single platform.
Early results show that vendors who actively participate in their solution platform’s ecosystem enjoy a higher net promoter score (NPS). In the short term, they gain stickiness with customers. And in the long run, they become more relevant across their ecosystem, gain a competitive advantage over peers inside and outside their ecosystem, and deliver more value to customers.
How does ecosystem participation increase the value delivered to customers?
Because everyone’s using the same platform, customers get transparency into the performance of suppliers. Service-level management becomes the first point of contact between businesses and suppliers. Key performance indicators trigger automatic responses to customer experiences. Response times to resolve issues are mediated by the platform.
These tasks and functions are carried out within the ecosystem and orchestrated by third-party service management companies. But that’s not to say businesses in the ecosystem don’t still have an individual, separate relationship with their customers. Rather, the ecosystem acts as a gateway for IT and business suppliers to integrate their offerings into customer services. Business and product outcomes from the ecosystem feed research and development, product design, and manufacturing, leading to continual improvement in services delivery and customer experience.
To conclude, let’s go back to something we talked about earlier. For builders, a truly smart building is one that does more than just keep the right temperature. It also monitors and secures wireless networks, optimizes lighting based on tenants’ specific needs, manages energy use, and so on to deliver comfortable, customized work, living, or shopping environments. To deliver that kind of customer experience takes an ecosystem of partners, all working in concert. For companies to unlock the value of IoT, they need to participate actively in that ecosystem.
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