Learn what it takes to build an IoT Services Business

An idea came about after I co-authored a book on connected products and services last year that flooded my inbox with questions, requests for case studies, emerging IoT business models, IoT platform reviews, security concerns, and “all other things” IoT related.

There are a lot of “moving parts” with IoT adoption, and people need a little help wrapping their arms around how it all fits together.

Essentially, I want to create the “roadmap” to help organizations that are struggling to “put all the pieces together” regarding the opportunity IoT brings to them, and show them a path for bringing it to life and creating a digital transformation.

My goal is to provide well-rounded content with a variety of perspectives and viewpoints from hardware engineers, software engineers, product and technology managers, security experts, connectivity experts, cloud IoT platform vendors, component manufacturers, customer engagement experts etc..

So here, I wanted to begin by shedding some light on my experiences helping organizations launch services on top of connected products.

Part of every product organization’s strategy that offers after-market services to its customers is evaluating opportunities to grow their services business.

Businesses manufacturing and selling appliances, electronics, industrial machinery, automobiles, information technology and more are looking for ways to drive services growth by conducting break-fix repairs; installing hardware and increasingly software upgrades; reconditioning equipment; carrying out inspections and day-to-day maintenance (proactive and reactive); providing technical support, consulting, and training.

Organization growth and profitability goals point to services leading to this growth. Options considered include introducing new service focused business models, tiered service offerings with tiered pricing structures, subscription-based services and even pay per outcome models. The goal is to drive organic services growth with new and existing clients.

Organizations though struggle with putting their arms around how to structure their products and their business to reimagine their services opportunity systematically. 

Part of the reason for their struggles is that these re-imagined service models heavily depend on having a deep understanding of customers' wants and needs which many businesses lack and an operating model to sustainably deliver these services.

These services also require the ability to manage real-time data derived from having to re-engineer existing products or create new connected ones.

In essence, launching these reimagined services is all about being cognizant of customers’ ability to react entirely differently to the value of the services offered than they do today. Also, that customer experience needs to be highly differentiated from what is being provided today or competitors can provide. 

In this fast-paced digital-first environment people don’t just buy the product or service, they also buy the experience you deliver.

Most organizations are good at providing data to their customers. This data is marginally converted to insights and produced in the form of reports or necessary data access APIs, and even those insights are general and absolute. They do not take into account a particular customers' situation nor do they learn about customer-specific events. 

It is then up to the customer to take this data and spend more time turning it into insights. It is not surprising then to see the churn in service contracts and difficulty for sales teams to up-sell or cross-sell to existing clients. That is because the customers have yet to receive the perceived value from their investment in the organizations' services.

The way to deliver the value is through investing in what I am calling “Smart Service Experiences.” These smart services understand the actions customers should perform and drive higher experience value by suggesting next best actions. The higher the degree of impact of these actions the greater the ability to charge higher for these reimagined services.  

To launch these re-imagined smart service experiences the entire organization has to come together. Board level and top-down leadership commitment is required along with change management. Some lines of business that are involved and their challenges include:

• Customer Facing teams need to understand customers wants profoundly and translate them into opportunities
• Strategy and Product Management needs to be able to continually digest voice of the customer and convert them into service offerings, product impact, and pricing strategies
• Product Engineering teams need to re-engineer existing products with new sensors, new processors, security, connectivity, certification and design for manufacturing and assembly in a rapid fashion
• IT needs to come to the table by working with product engineering in enabling these connected products to talk to the cloud, build engaging new experiences as well as provide knowledge of impacted systems and processes
• Field Services needs to re-imagine service delivery, invest in more modern service tools and change the way services are delivered for various tiered service offerings – all while driving down cost of service delivery
• Customer On-boarding needs to ensure installation and configurations will support organizations ability to deliver tiered service offerings
• Customer Service needs to be prepared to deeply understand customer issues and respond with real-time clarity on issues along with potential mitigation
• Accounting and Finance need to support new pricing strategies with potential impact on current systems and processes
• Sales and Marketing need to be able to evolve customer relationships by cross-selling and up-selling to newer service models

The impact of launching new smart service experiences is broad and there are many moving parts that can introduce risk. At hand, there is the role of embedded technology, retrofitting existing products or creating new ones, selecting the right IoT platform, the cloud, ability to interpret data by investing in data science tools and resources and more. The most significant risk is managing the internal change required to deliver the level of transformation that smart service experiences need.

A solution is a methodical approach to organizational transformation driven by customer experience opportunities understood and grounded through research and voice of the customer. Investing in creating a Customer Experience (CX) Center of Excellence benefits the organization by continually providing the right focus for investments. 

Another area of investment is in conducting a Service Design that maps the to-be customer journey to the operating model. A Service Design blueprint provides knowledge of gaps that exist and investments that will be needed in the operating model to deliver on the customer experience. 

Aside from immediately gravitating towards creating prototypes that confirm the inner workings of the technology, the focus should first be on translating customer feedback into sustainable service offerings that have already been vetted by friendly customers. Making the case then to invest in a prototype and move to a production schedule gets much more comfortable and is grounded in facts.

The technology consideration exercise has to take place. Even though technology is making implementing smart solutions easier, the speed of change in this technology itself makes it difficult to pick. 

That’s where partners come in. It is no doubt that the journey involves many partners. Some key areas where partnerships need to be formed: 

• Business Strategy to help define and validate potential business models
• Product Design to envision new products that are the basis for delivering smart service experiences
• Hardware Engineering to work with engineering on mechanical and electrical design for retrofitting existing products or creating new products
• Component Suppliers that supply IoT optimized Multicontrollers (MCU) or Single Board Computers (SBC), gateway devices, specialized sensors, and more
• UX Consultants to conduct customer and industry research, map as-is and to-be customer journey as well as map as-is and to-be operating model
• Cloud Expertise that includes a deep understanding of Internet of Things Platforms
• Data Science to turn data into valuable insights to be monetized through service offerings
• Technology Vendors that provide SaaS and PaaS software for IoT platforms, field service applications, service tools and customer service
• Manufacturing and Assembly to scale 

One potential way of reducing the "managing partners" risk is to reduce the number of potential partners that have to be managed. As noted above, the solution is to bring few partners to the table that can deliver multiple parts of the puzzle and in fact even have one take on the lead very much like how a contractor takes on the job for construction and brings in specialist resources as and when needed. This drives risk down while giving the organization the ability to iterate and execute on the transformation continuously.

I have included much more details in my book "Winning the Digital Gamble" and more to come as I interact with industry experts on these various topics.