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The Most Important Question in IoT

April 30, 2020
41.6 billion—This is IDC’s estimate of the number of devices that will be connected to the internet by 2025.

While it’s no secret that Industry 4.0 is transforming the manufacturing sector, this number represents an incredible opportunity for industrial and automotive manufacturers to scale their businesses and truly monetize the Internet of Things (IoT). How? By modeling their businesses into platforms for services, and moving away from a focus on stagnant product sales.

Of course, a number of manufacturers—from those producing large scale machinery like Caterpillar or power equipment like Briggs & Stratton to those producing best-in-class automobiles like Kia— have already recognized the need to transform into service providers. However, others are still struggling to understand the new imperative to evolve their businesses in today’s Subscription Economy, and why this move is critical to long-term stability and scale.

The truth is, services are the lifeblood of connected machines and devices and open up new revenue streams for manufacturers while meeting the needs of a new generation of customers. In fact, our latest Subscription Economy Index (SEI), designed to measure the health and growth of subscription businesses across various industries, found that industrial organizations are exceeding S&P 500 industrial revenue growth rates by more than 5x with a shift to digital services (26.0% vs 5.0%).

The opportunity for massive growth is clear, but for those still eager to transform their businesses, you need to answer one very important question: “What is the real service that sits behind the equipment (or devices) that my company is making?" Once you’ve figured that out, then your next challenge is to deliver that outcome as a service.

For instance, take a company that sells refrigerators. The real service behind the refrigerator is ensuring that a household always has a fresh supply of healthy food. For companies that make excavators, the real service is helping construction firms complete projects on time and under budget. And for deadbolt manufacturers, the real service is helping to keep families safe.

The great news is that there are a number of successful industrial and automotive IoT use cases for manufacturers to consider. Let’s take a look at some of the most successful transformations across the manufacturing sector.

Briggs & Stratton Provides Valuable Utilization Metrics

Since its beginnings in the early 1900s as a producer of lawnmower engines, Briggs & Stratton has become a prime example of understanding the opportunity to provide value beyond physical products, shifting its focus to digital services in order to better serve their customers and expand into new revenue streams.

One of the first things that come to mind when thinking about equipment is the idea of utilization and efficiency. After all, this can certainly mean the difference between success or failure across any business. With its brand-agnostic InfoHub IoT solution, Briggs & Stratton enables commercial landscapers to monitor equipment through a physical location, fuel level, hours of activity, and more, helping to reduce downtime and to better manage overall labor costs (which can represent up to 40% of a cutter’s expenses, according to the company).

The question Briggs asked: “How can we make your small business successful by making sure you get the most out of your equipment?”

GM Becomes a Trusted Customer Assistant

Most of us, at one point or another, have experienced challenges using a product, wishing for a simple help button to guide us through any issues. It turns out that GM OnStar has been engaging with customers like this for decades. Beginning in the mid-1990s as a basic road-side assistance program, GM Onstar now handles hundreds of millions of customer interactions per year. In fact, the company reported that it receives an average of nearly 200,000 calls per day, or more than 2 calls every second. That’s an incredible stat!

But GM OnStar is no longer limited to roadside assistance. Today it helps drivers plan road trips, get Amazon packages delivered to their car trunk, and even hunt down stolen vehicles.

Manufacturers should be asking the question: “How do I build customer service right into my connected products?”

Arrow Electronics Evolves Into a Project Management Solution

It’s easy to see why consumer apps like Pandora, Uber, and Amazon are so popular. They’re easy to use and the user interface is quite simple. But if you’re a large-scale industrial manufacturer, could you imagine how your consumer app might look?

Enter Arrow Electronics, a Fortune 500 electronics manufacturer. Arrow Electronics started in 1935 by selling radio sets. For decades, the company was a straightforward and extremely profitable parts warehouse business. But, the company recognized that it needed to shift its business model from a commodity provider towards value-added services.

The company now offers its Sensor to Sunset IoT service which is built to help design, monitor, and complete projects, rather than simply providing materials.

Arrow’s service question: “How do we help you deliver your projects on-time and under-budget?”

At the end of the day, manufacturers of all sizes with very different customers must begin to think beyond products sold in order to truly monetize on Industry 4.0 technologies like IoT. Those that truly unleash the value of IoT throughout their organizations are no longer parts vendors or equipment manufacturers—they’re service providers and must approach their commitment to customers as such.

But again, it all starts with answering that basic question: What’s the real outcome your customers are looking for when they buy your products?