There has been some excitement in the media these days about the Internet of Things (IoT) and the promise it creates for businesses, consumers, and governments. John Chambers, the CEO of Cisco, said on CNN’s GPS with Fareed Zakaria that IoT will create approximately $19 Trillion in economic value over the next 5 years. As an example of the opportunities that are possible, Chambers points to the fact that the city of Barcelona created 40,000 new jobs through its connected city initiative.
While the upside potential is great, there are still many who believe that the disruptive force of IoT will have a negative impact on certain industries; eliminating jobs and destroying businesses instead of creating them. The proponents of IoT remind us that similar claims were made about the internet in its early days. However, according to a 2014 study by McKinsey and Company, 2.6 new jobs were created by the internet for every 1 job it eliminated. Will the same be true for IoT?
To answer this question, I think we have to look at how IoT will impact specific industries. For example, let’s look at five (5) new opportunities that IoT creates for the High-Technology Service & Support Industry and the challenges they present.
- Facilitation of Remote Monitoring & Diagnostics: IoT makes it possible for manufacturers to implement remote monitoring and diagnostics solutions on a low cost and rapid basis. Of course, these solutions are as effective as the knowledge management tools behind them. Nevertheless, remote diagnostics can eliminate the number of emergency dispatches which in turn could have an impact on Field Service Engineer staffing levels. On the other hand, it is likely that new jobs will be created to monitor and analyze the data collected by these solutions as well as respond to the actions that are generated by this analysis.
- Greater integration with the supply chain: One the largest beneficiaries of IoT will be the service supply chain. By monitoring service related events, the service supply chain can have more visibility into the demand for spare parts and be more effective in planning and forecasting inventory stock levels. In addition, supply chain mangers can be more proactive in anticipating demands on forward stocking locations and depot repair & refurbishment centers. The net impact of IoT on the supply chain is an enhanced level of productivity and efficiency which is great for profits and job creation.
- Creation of barriers to entry: It is very possible that IoT will create new barriers to entry for service competitors. That is because once you control access to a device, you control the device itself. Manufacturers will need to think through how their channel partners participate in IoT solutions. Will channel partners participate in the revenue stream that comes from managing connected networks or will they simply resell the solution on behalf of the OEM? What options will be available when it comes to service & support? Will manufacturers implement open systems which make it possible for anyone to service the network or will be a closed solution keeping out competition?
- Collaboration between business partners: It is also likely that IoT solutions will be comprised of products and components from multiple suppliers. This will require greater collaboration between business partners. Manufacturers will need to establish new business protocols and rules of engagement when it comes to supporting IoT solutions involving third party products. This is likely to result in new job creation.
- Need for new business models: IoT makes it possible for manufacturers to offer new added value services to their customers. At issue, these services are most likely to be monetized through subscription based models. New financial KPIs will be needed to manage these models. Instead of focusing on attach rates and gross margins, manufacturers will need to pay attention to monthly recurring revenue (MRR) and customer churn rates. Revenue ramps up slowly under these scenarios and customer attrition rates are high so manufacturers will need to create marketing and onboarding programs to facilitate growth of MRR and reduce churn.
In summary, IoT will have a positive impact on the High Tech Service & Support Industry in terms of job creation and financial returns. Indeed, IoT is likely to create multiple new jobs and businesses for everyone that it replaces. While some companies and individuals may be at risk, they can mitigate the downside by taking a proactive approach to strategic planning. Furthermore, companies who stand to benefit from IoT the most can ensure maximum returns, and thus double down on their investment, by incorporating fundamental strategic design principles into the development of IoT solutions. To learn more, schedule a free consultation.