It’s not a question that the Internet of Things will upend the way companies do business. How quickly this will happen, how widespread the disruption will occur, new models will emerge, and who will be most affected by this is up for debate.
“How we run a company is going to change, very dramatically. How we organize ourselves as companies is going to be changing because of the impact of smart, connected products on the nature of work, on the nature of what companies have to do,” said Harvard Business School Professor Michael E. Porter, speaking at the LiveWorx15, a conference held last month in Boston, MA, that examined the business implications of the Internet of Things.
IoT promises to turn virtually every product-based company into a service organization. With sensors embedded into products, the relationship between companies and customers changes, opening up the ability (if it hadn’t existed before) of an ongoing service relationship. Said Porter, “We now have to take ownership of this product forever. We can’t just sell it and say, ‘We’re done.’ We’re responsible for how it works.” This follows the already burgeoning trend of “servitization,” but ups the stakes as smart connected products pump out data in real-time or near real-time. Here are some of the ways service organizations and manufacturers will be affected.
Shifting from Product Manufacturers to Product as Service Providers
According to Porter, manufacturers stand to feel the hardest impact as products get smart. Currently, manufacturers design, build, and sell products. Consumers buy these products and own them, with the understanding that when they break down they must get them fixed. To hedge against unknown costs of repair and for convenience, consumers buy a service contract that covers the product when problems occur. But with monitors embedded inside, manufacturers now have access to product data and the ability to anticipate, reduce, and repair failures. Indeed, by looping back this information to product design, manufacturers have the ability to fix the design fault and optimize performance. This, however, would eat into their business of selling spare parts and service contracts. Manufacturers — especially consumer products companies — may evolve to offer their products as a service, though the challenge will be to figure out the pricing model.
Service Departments Must Shift to Being Proactive, Rather Than Reactive
It’s a catchphrase that’s common in field service, but as more products have embedded sensors monitoring their performance, service departments will need to respond much more quickly. It’s not just about sending out a technician, but as technology improves, it will be about anticipating and correcting predicted failures.
Big Data and Its Analysis Will Be More Important Than Ever
The shift to “proactive” will put the onus on service departments not just to capture and manage data, but to fully understand the data and put it to work. To move towards a proactive organization, companies will need to install analytics platforms, including platforms to tell them in real-time what’s happening to their products, descriptive analytics to help them make sense of data, diagnostic analytics to help them understand why products are behaving the way they do, predictive analytics to tell them what might happen next, and prescriptive analytics to help prevent problems from occurring.
The Evolving Role of Service Employees
As products become smarter, expect the role of field service techs to be shaken up. Some of the roles currently filled by humans will be replaced by the products themselves. Instead of humans gathering data on how a product performs, the data will be automatically captured. Human workers can be responsible for more products or a fleet of products, rather than individual units. Service organizations will also need to expand whom they hire. They will need to increase employees in software development, data science, and systems integration. Porter said this would be one of the greatest challenges for companies - finding the right employees with the right skills.
Increased, Yes, Increased Customer Expectations
Customer expectations are already thought to be through the roof, but when products become connected, those expectations will only ratchet up even more. While smart connected devices or equipment will allow companies to better monitor and respond to glitches or breakdowns, it will also put companies under the spotlight like never before. Porter said, “We’re going to have an opportunity for differentiation, but we’re going to be held accountable in ways we’ve never been held accountable before.”