Imagine that a new washing machine is delivered and installed in your home for free. You never again have to pay for repairs or even a replacement — you simply pay for each load of laundry, thanks to an Internet-enabled pay-per-wash model.
One Dutch startup is doing just that. Using the Internet of Things (IoT), Bundles has created a new business model that allows customers to pay for the performance, not the product. And it’s a good example of how IoT has the potential to move beyond automation to change traditional business models (or, shall we say, put them through the spin cycle).
In a recent webinar, Forrester analysts Frank Gillett and Paul Miller explained how IoT will extend beyond cost savings to not only automate manual activities and create business agility, but to increase customer engagement through personalized experiences and transform products that will disrupt existing markets and create new ones.
A lot of existing IoT deployments consist of sticking a sensor on a ‘thing’ to monitor or control an existing workflow. “Completely rethinking workflow is less common at the moment but where we see a lot of the opportunity down the road,” said Miller.
Most companies start with asset monitoring and control, such as putting sensors onto something they already own, like a delivery truck or a wind farm. The second phase, he says, gets more interesting, where you use the data produced by ‘things’ to predict what might happen — say, for predictive maintenance on a train or airplane.
The third phase is where a company like Bundles fits in: using this data to deliver an entirely new business model. And that begins at the design stage. If you’re in the business of selling washing machines, you want the equipment to fail after about five years so customers have to buy a new machine. But if you’re giving it to them for free, you want that machine to last a lot longer.
“You use better parts, you build a more expensive machine,” said Miller. “It really does change everything.”
The evolution of IoT will involve a shift from simply building the product you’ve always built to thinking about what the outcome or experience will look like for the customer. As Forrester points out, it’s a shift from transactions to relationships.
“It’s not just about sticking a sensor onto a thing — that basic asset monitoring piece gets you so far, but it’s about thinking broader than that,” said Miller. “The washing machine or jet engine you’ve been selling for 100 years may not be the way forward anymore.”
Even for companies focused on industrial applications or operations, IoT offers more than cost savings. Gillette says any time companies can change the way their operations affect customers beyond price, they have an opportunity to improve engagement.
Italy’s primary rail company Trenitalia, for example, is using smart sensors for predictive maintenance and service, resulting in savings of about 10 per cent of its annual maintenance budget.
“But the bigger value is that passenger standing on the platform on a freezing cold morning and the train doesn’t arrive,” said Miller. “By moving to predictive maintenance, you almost cut that out so the customer experience is more valuable to them than saving 10 per cent on the maintenance budget.”
So you’ve got IoT in your organization (or plan to deploy it) but don’t know how to start thinking beyond automation? Forrester points out three business outcomes for IoT:
- Design: transforming existing or new business models with a connected product to improve the customer experience
- Operate: enhancing physical processes to create efficiencies or enhance the customer experience, such as predictive maintenance
- Consume: improving products or services with IoT data from third parties, such as weather or traffic information
“IoT on its own is not the point — it’s thinking about the shift to outcomes and experiences, it’s thinking about touching that customer,” said Miller. “IoT and its deployment is part of a broader picture, rethinking the organization to focus on the customer rather than the product.”