5 Strategies for Monetizing Connected Devices

GETTING OUT OF THE SINGLE TRANSACTION MINDSET

I’m a big believer in the future of connected devices and their potential to transform and re-energize our manufacturing sector.

In fact, we’ve moved well beyond the “theory” phase of IoT, and are well into the deployment stage. How can I tell? From all the emails I get that are variations of the same basic question: “I’ve got all the sensors and connectivity in place, I’m excited about creating new revenue streams, now how do I get started?”

The first and most important step is getting out of the single transaction mindset. When you start using connected devices, you’re not simply an equipment manufacturer or a parts vendor anymore. You’re a service provider.

That’s why I always suggest a simple brainstorm exercise to start: What is the real service sitting behind the equipment that your company makes?

So for companies that sell refrigerators, your real service is ensuring that a household always has a fresh supply of healthy food. For companies that make excavators, your real service is helping construction firms complete projects on time and under budget. And for deadbolt manufacturers, you’re helping to keep families safe.

The good news is there are a lot of successful use cases out there!

Here are five popular service opportunities to consider, along with five questions to ask to get your team heading in the right direction.

PROACTIVE CUSTOMER ASSISTANCE

Ever have trouble using a product, and wish you could just push a button for help?

Well, it turns out that GM Onstar has been doing this for decades. It started off in 1996 as a basic road-side assistance program, but today handles hundreds of millions of customer interactions a year. GM Onstar helps drivers plan road trips, get Amazon packages delivered to their car trunk, and even hunt down stolen vehicles. Onstar’s service has expanded enormously over the decades.

Connected devices allow you to establish a direct relationship with your customers — one that doesn’t involve spam or sales pitches, but is directly related to the value they are getting from your product.

Just recently, I was having trouble using an unfamiliar washing machine at an Airbnb. How cool would it have been to press a button, have a remote service agent do a quick remote diagnostic, and tell me I needed to empty one of the water containers?

Essential question for manufacturers: “How do I build customer service right into my connected products?”

“Connected devices allow you to establish a direct relationship with your customers — one that doesn’t involve spam or sales pitches, but is directly related to the value they are getting from your product.”

FLEET EFFICIENCY & PREDICTIVE MAINTENANCE

For any small business, equipment utilization and efficiency can mean the difference between success or failure.

As the designer and maker, your company is in the best position to know how to make the most efficient use of your equipment. Take Wisconsin-based Fortune 1000 company Briggs & Stratton. They make lawnmowers, and a lot of their buyers are commercial landscapers. They recently introduced a new digital service called InfoHub that lets fleet owners monitor their equipment through physical location, fuel level, hours of activity, etc. They can even help plan commutes to work days with multiple locations with the same GPS technology that that rideshare drivers use.

Essential question for manufacturers: “How can we make your small business successful by making sure you get the most out of your equipment?”

END-TO-END PROJECT & BILLING MANAGEMENT

We all know what an app like Amazon or Spotify or Lyft looks like.

If you’re a big industrial manufacturer, what would your consumer-facing app look like? Arrow Electronics is a multi-billion dollar electronics manufacturer, and for decades it operated solely as a parts vendor. But they recognized that they needed to shift their business model from a commodity provider toward value-added services, and now they offer a “Sensor to Sunset” IoT service that is designed to help design, monitor and complete projects, not just provide materials.

Essential question for manufacturers: “How do we help you deliver your projects on-time and under-budget?”

“If you’re a big industrial manufacturer, what would your consumer-facing app look like? ”

CONSUMPTION-BASED PLANS

Connected devices open up all sorts of new opportunities for consumption-based, cell-phone like plans.

For example, ThermoFisher Scientific makes incredibly sophisticated laboratory equipment, which it primarily sells to hospitals and research centers. But they realized they had an enormous opportunity: why not sell the results of all this equipment to smaller practices that might not otherwise be able to afford it? Today they have a thriving cloud-enabled diagnostic services business that allows customers to avoid big up-front equipment investments, and pay only for what they use.

Essential question for manufacturers: “How can our company become more like a utility, and let our customers simply pay based on how much they actually use?”

SALES CHANNEL ENABLEMENT

For many industrial manufacturers, well over 90% of their annual revenue comes from independently operated dealerships.

They need to be successful. So do direct digital services pose a threat to these channels? Not at all. Caterpillar’s customers, for example, purchase and implement all their predictive maintenance Cat Connect services through dealerships. Not only that, but the data gives their dealerships more insight into how and why their customers are using the equipment they sell, so they can become better partners.

Essential question for manufacturers: “How can I give my reseller channel more opportunities to be successful?”

FROM PRODUCTS TO SERVICES

When it comes to IoT, industrial manufacturers understand the technology.

They’ve been digitizing and automating their factories for the last fifty years. But to take advantage of connected devices, you’re no longer simply an equipment manufacturer or a parts vendor anymore. You’re a service provider.

IoT turns product companies into service companies. It allows you to deliver real outcomes and tangible benefits to your customers on an ongoing basis, instead of a finite inventory of assets. So what’s the real outcome your customers are looking for when they buy your products? That answer will set you on your journey.