The Internet of Things will be the largest transformational force in the coming years. Entirely new business models are needed to stay ahead of the competition.
IoT: a short abbreviation with a huge impact. With many opportunities for resourceful companies – but major challenges as well. Technical possibilities and customer expectations are changing at ever higher speeds. Startups are revolutionizing the business world with their novel, digital business models. A recent study by the Global Center for Digital Business Transformation (DBT), for example, predicts that digital transformation will drive four in ten established companies from the market within the next five years. Yet not many businesses seem disturbed by it: 43 percent said they don't see any risk or have not even thought about it. And only 25 percent are tackling digitization proactively.
Standing still means falling back
This is a serious mistake. Companies that turn a blind eye to the changes that the digital transformation will inevitably bring won't just miss an opportunity for growth – they put their existence at risk in the medium term. New market players and innovative traditional companies that are already engaging with the Internet of Things are generating enormous pressure. Past success is no guarantee that things will remain as they are. Wait-and-see is not an option; companies need a digital strategy to take advantage of the opportunities that the Internet of Things is creating.
Welcome to the age of the customer
This does not just apply to the implementation of new digital technologies, either. The relationship between companies and their customers will change even more dramatically. Customers no longer simply want new products. Instead, they are looking for an uncomplicated, end-to-end service experience. The connected features of the IoT helps users access all kinds of information in real time, which also affects their demands of their service providers: flexible, custom, situational solutions around the clock. Loyalty to established providers and traditional usage models is declining at an equal pace.
Achieving success in the age of the IoT means more than just being technically innovative. A cultural transformation is needed – away from linear sales processes where the relationship ends when the cash drawer closes. The "age of the customer" has been declared, in which companies must focus on service, not products.
Why? Because customers can compare better and easier than ever before. Companies which offer products and services have good chances, for example, if they can upgrade products with IoT technology that are otherwise largely identical. This kind of service-centric approach requires greater knowledge of the target audience, however. What needs do they have? How can they be met? And how can companies achieve critical mass in market penetration? Winning the IoT revolution will only be possible with a comprehensive, user-centric service concept.
Adapt business models logically
In a recent IoT study, the analysts at Machina Research found that the most innovative companies are adapting to the Internet of Things with a full transformation: from product vendor to service provider. A prerequisite for this is the establishment of a service mentality in every department – from sales and marketing to product development. This is where the profits will be made in the age of the internet: with technology as a precursor to a shift in thinking.
As a result, the structures and borders in entire industries are in a state of flux. Where manufacturers, distribution partners and service providers used to be clearly separated, everything now comes from a single source. Machine tool and equipment manufacturers sell IoT-connected products, including remote and preventive maintenance, sometimes in collaboration with reliable IT partners. As a result, they are in constant contact with their customers throughout the useful life of their product. The result: dependency on distributors is reduced, customer loyalty is increased and manufacturers gain additional, useful information – both about their customers and about the long-term usage behavior of their products under real conditions.
The challenge of big data
Turning all this information into valuable knowledge for product adjustment and development requires the real-time analysis of large, unstructured datasets (big data). Many companies lack expertise in this area. Moreover, the collected data has to be processed and saved according to data privacy and data security laws, which are highly specific and strict in Germany in particular. Companies that want to play it safe here should turn into professional service providers.
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