New business models for the connected world – exclusive interview with Josef Brunner, CEO, Relayr extracted from our IoT Special Report.
How is IoT disrupting business models?
IoT is creating whole new ways of thinking for those who manufacture products, enabling them to change
how they sell in a way that works better for them and their customers.
This is often talked about as moving from selling products to selling services. We’d go further and say that at its best, IoT is about selling outcomes. Rather than charging an hourly or monthly subscription, the manufacturer can sell the value that is delivered.
Can you give an example of how a company is changing?
Yes. In the old days, a coffee shop might buy an espresso machine and use it until it broke, or a better version came out. A newer service model might see them agreeing to rent a service – including machine, coffee supply, maintenance – for a monthly fee.
An outcome model might see them pay for ‘cup as a service’. This simplifies what they are buying and gives them much more certainty. It removes the risk of capital outlay. And because they have eliminated risk, they are actually happy to pay more per cup.
So the IoT espresso machine manufacturer generates more overall revenue as long as they manage demand right – which becomes easier with detailed data on usage.
But it also opens opportunities to build a more direct relationship with the buyer. They can start selling the coffee beans and maintenance services directly, which are perfectly aligned to demand, since these services are now based on data that other sellers don’t have. And by adding the convenience of automatic reordering to their service, they save the customer pain and lock them into bigger contracts where few others can compete on convenience.
They transform how they sell, increase revenue, create new revenue streams, and reduce backend costs, all whilst delivering a more personalised service to their customer.
The same is true for many industries, from printers to automotive assembly machines. With more detailed data, they can sell based on value, which differentiates their offer and allows then to upsell other services based on a data-driven understanding of what their customers need.
How can manufacturers start deploying IoT and moving to value-based models?
The main mistake companies make it to think of IoT as a technology project, looking at what tech is available and working out where to deploy it. Instead, they should start with the business problem.
Start by looking at what assets you have, and how they could be used to deliver a better experience for customers. Put the customer need at the centre of that offer. Then look at how tech can enable it.