For many companies, the internet of things has suddenly become the thing: a techno-competitive mega-trend that can no longer be ignored. However, creating an effective IoT strategy — and carrying it out with excellence — can be difficult and confusing.
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In a recent survey, all CEOs in the Fortune 500 were asked, “What is your company’s greatest challenge?” The top answer was, “The rapid pace of technological evolution.” IoT is a prime example of the rapidity of this technological evolution. The methodology for companies to stay abreast of this pace and meet it with the talent required to navigate it is no small undertaking, but success in the process will define the parameters of technology competition over the coming decade.
Innovation programs are historically the vehicle that protects against internal stagnation and external irrelevance. However, the larger an organization gets, the more difficult it becomes to innovate outside of historical core competencies and market-facing product lines, both of which are common with IoT.
The global trend of the increasing need for smart connected products and services poses a number of challenges to traditional internal corporate innovation programs. These include:
- An unprecedented competitive landscape. With the rapid pace of technological change, it’s never been easier to create a technology startup company that anticipates user needs before they are well-articulated and disrupts an established market player. If you don’t understand the why, then the how doesn’t matter. With the internet of things, often the why — and the corresponding response behavior of the competitive landscape — is elusive.
- A heavy dependency on cross-divisional collaboration. The internet of things requires cross-divisional collaboration that many companies are not used to. By definition, developing a connected product implies an ongoing service that requires support, manufacturing integration, and a new sales and marketing strategy that transcends traditional corporate walls. Often this cross-divisional collaboration results in the formation of several new ecosystems in what had been a traditionally laid out corporate ecosystem.
- A rapidly-expanding digital ecosystem of products, services and data. Creating value with internet of things technologies often involves creating new products (e.g., a smart connected version of a legacy product), a new service (e.g., a predictive maintenance service for connected industrial assets) or new data streams (e.g., environmental condition data that can be consumed by an adjacent product or service). This rapidly expanding digital ecosystem is causing companies to innovate outside their comfort zones into new areas including data science, information security, outcome-based business models and enterprise software integrations.
- A knowledge deficit of IoT technologies, business models and market needs. Companies that stand to benefit the most from deploying IoT technologies and business models are the least prepared to do so. It is not uncommon for a durable goods manufacturer to have historical expertise in materials science, mechanical/chemical engineering or metal bending. These types of companies have historically faced challenges in being able to develop adaptive user experiences, integrate products in the field with enterprise IT services, sell recurring subscription contracts or monetize the value of data. The challenges are often due to a knowledge deficit that can easily hinder the effectiveness of any corporate IoT innovation program and obscure the success of the undertaking.
An evolutionary perspective
Many companies already have innovation programs in place. Adding an internet of things focus, although a revolutionary trend in thinking, usually requires surgical evolutionary adjustments in the following five areas:
- Clarity of strategic direction. IoT innovation program participants must know why the internet of things is important to the competitive success of the company. A lack of clarity or outlined, forward-looking goals that include a designated timeline can be detrimental to success. For example, having a vision that an enterprise needs to become known as a software and data company by 2025 in order to remain competitive helps drive critical direction, focus and momentum.
- Emphasis on cross-departmental collaboration. Product innovation historically focuses on the products themselves. However, smart connected products usually also include IT. The blending of operational technology (the physical products themselves) and information technology requires a new type of cross-departmental collaboration, introducing new people and roles to the entire innovation process itself.
- Identification of reusable technology, business models and processes. Companies often have multiple product lines, business units and/or market segments. Companies can get an edge in the competitive landscape by intelligently understanding how to reuse not just technology components, but also business models and process improvements. All components should be included as part of the innovation process.
- Adaptation of business processes to data and services. Many companies have business processes (e.g., order fulfillment and billing) that center on the manufacturing, distribution and sale of physical products. However, with the advent of smart sensors and data, new business models are possible by selling services (which may include a product or consumable), or by selling the data stream itself. Leading innovation programs lead participants to think outside the box of traditional product features and business processes, and expand the scope of thinking to data and services.
- Revised approach for capturing and acting on market feedback. Product companies usually have a new product introduction (NPI) process for ensuring a high-quality and normalized market launch. Although releasing software and products early to gain market feedback is a best-in-class approach, doing so prematurely can be detrimental to building a long-term trusted brand. Adapting existing NPI processes to gather critical market feedback while at the same time supporting and building a high-quality connected brand is a critical success factor for IoT innovation programs.
Change: The new competitive advantage
Leading organizations that have become the key innovators in this process got there by harnessing the reins of IoT innovation and focusing on early success with a small number of projects. Only after that do they then accelerate upon that success through the creation and establishment of corporate-sponsored IoT funding. This process naturally helps subsidize bright new ideas that help the company achieve its long-term vision.
Once the pace of IoT innovation is moving, the momentum continues to be driven by many forces: things like effective training, support readiness, manufacturing integration, adaption to business process changes, thoughtful talent acquisition and pricing calibration. While there is a tapestry of the aforementioned pieces to weave together, by fostering a culture of technology innovation and cross-divisional collaboration along with a keen focus on services and data, organizations can turn their ability to change into a competitive advantage for long-term success.
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