The Boundaries Around Your Industry Are About to Change
Most obviously, the Internet of Things has the power to profoundly change operations — that’s where much of the coverage of this burgeoning network has focused. But companies should also be preparing for profound shifts in their competitive strategies as the IoT takes off. It will change the category you compete in, the products and services you sell, and how you market them, and even the talent you acquire. These three mini case studies will show you just how profound those shifts will be.
Lowes: Right now, most retail IoT home products — thermostats, security systems, lighting — are singular. The market won’t scale if companies can’t help consumers tie these things together and manage them as a unit easily. Lowe’s, the $53-billion U.S.-based home improvement retailer, has hence developed and is marketing a full home management system, called IRIS. According to Kevin Meagher, vice president and general manager for Smart Home at Lowe’s, “Connected home is the first truly new category that Lowe’s has added in nearly 20 years, because we realize that we can add value by bringing these devices together.”
A new category means new skills: Suddenly, many of Lowe’s 240,000 retail employees must be able to talk software and apps, and know how to connect IRIS to all these other products, so the company is training them. At the same time, with 15 million consumers walking through Lowe’s stores every week, Meagher and his team believe that they can — must — play an important role in educating consumers on smart home technology, ease anxiety around standards and reduce customer confusion while providing that unifying product. If they don’t, Lowe’s can envision a scenario in which customers would buy an IoT device from the retailer, then work directly with manufacturers on future services and products — go right to Google for Nest-related products, say.
Longer-term, Lowe’s needs to reinvent the way it markets and sells to consumers. Lowe’s sees a future in which the company is delivering air filters to customers’ doorsteps because IRIS is providing accurate HVAC usage and customers have enrolled in a filter subscription program. Meagher takes it a step further and imagines that Lowe’s could use energy usage data to inform consumers of programs that would save them money with local energy companies. This will require careful stewardship and permissions around consumer data, and expertise around mining the information for new useful services.
Thermo Fisher Scientific: Medical devices companies suddenly find themselves in the software and subscription services businesses because of the Internet of Things. Thermo Fisher Scientific has developed cloud-based genome-mapping devices that allow scientists to subscribe to the computing power they need at affordable rates. The value for Thermo Fisher Scientific is twofold. First, the company can now identify who the end customers are and how those doctors and researchers are using these devices. Second, this new explosion of analytics on healthcare research has opened a new line of business around aggregating the results and selling access to curated views of large datasets.
Of course, that means that a medical device company that’s used to focusing on procurement groups who bought their devices en masse is now focused on the actual end users of their devices. A company with a strong legacy of device product managers and engineers, Thermo Fisher Scientific had only one software product manager when its new cloud-enabled genome-mapping tools launched. The company is now making considerable investments to bring on additional people in fields and with skill they’d never focused on to expand into the new lines of business. This includes digital product managers and data scientists.
All Traffic Solutions: A traffic sign manufacturer is a natural for Internet of Things adoption. Ten-year old All Traffic Solutions made the strategic shift to put sensors into its products to track traffic flow data. More than 25% of All Traffic Solutions revenue comes from TraffiCloud, a web-based application that uses connected sensors to collect traffic data and transmits that data to a centralized database letting users (often municipalities) generate relevant reports.
Ted Graef, President of All Traffic Solutions, says one of the biggest challenges his company faced was aligning its sales team around the shift from selling hardware to selling hardware bundled with software services. The company conducted a number of experiments with pricing and marketing until they found what made sense to their customers and their sales channels. Ted says, “We learned very quickly that bundling promotional pricing and providing onboarding training sped up adoption of our services.” All Traffic Solutions hired a team to provide introductory training for customers on setting up and using TraffiCloud. The investment in onboarding, a totally new skill for the company, has resulted in 70-80% renewal rates for the service.
Lest you think these companies are just organically building these new skills and entering these new kinds of businesses, that’s not necessarily the case. Huge shifts in strategy and culture like these can be slow, costly, or frankly, too difficult to pull off organically. CEOs and senior executives are looking outside their organizations for help in making the transition. In fact, new businesses are developing to help companies make the leap. They’re turning to startups like Sprosty, which helps companies with market research on consumers’ feelings, business strategy, and product development in IoT technology. Another company, Zuora, has helped companies build and scale subscription businesses, and understand its dynamics like billing, renewal rates, and customer churn.
There is no single path to success with selling and marketing smart, connected devices. This third wave of IT-driven innovation is reshaping industries and redrawing the lines of competitive rivalry. Companies need to identify which skillsets they want to hire, acquire or outsource to partners. The goal is aligning closer to consumers and building ongoing relationships. The distinctions between industries will become less pronounced than the differences between market leaders and laggards within the same categories.
The Boundaries Around Your Industry Are About to Change
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