IoT businesses that successfully build digital revenue streams have a few distinctive traits in common. The core of their success is placing the customer at the center of everything. Device manufacturers that lead the way in IoT utilize software and services-driven business models that offer continuous value through opportunities provided by device connectivity and monetization. They use monetization models with data-driven insights to help them make the right business decisions quickly.
A decade ago, successful digital monetization meant focusing on licensing, compliance and protecting your IP. Today, the proper focus is on earning the satisfaction of your customers to ensure recurring revenue. Taking a 360-degree view of their businesses provides manufacturers and OEMs with the perspective they need to improve process efficiencies, manage entitlements, ensure the health of their business and, most importantly, understand customers’ needs. This holistic view delivers the insights necessary to recognize pain points in two critical areas.
First, an all-encompassing view provides the manufacturer with insights that can eliminate the product silos and disjointed data solutions that lead to inefficiencies, duplicate efforts and missed opportunities. This knowledge is required in order for a manufacturer in any sector — such as buildings, energy, healthcare, industrial, retail or transport — to effectively navigate digital transformation. It provides insight that can support business growth, expansion into new markets — such as leading a hardware company into sales of usage-based or subscription service models — and create fresh offerings, like data AI or data analytics that provide additional value for customers.
Second, this all-encompassing approach supports the customer relationship. It identifies where a more seamless and transparent process would make it simpler for customers to buy and buy again. A service model’s success depends on an ongoing and actively-managed customer relationship driven by customer satisfaction.
Considerations for digital transformation
If you’re a device manufacturer or OEM seeking to distinguish your IoT business as a leading enterprise, consider adopting the following comprehensive approach to transformation:
- Prepare for change. Change isn’t easy. Reorienting a business to deliver and support digital products can be a Herculean task for an organization if leaders don’t champion change and do some transitional groundwork first. For a successful switch to digital, prepare by paying special attention to what the change will mean to your sales department, product development teams and financial systems and processes. One powerful technique is to begin the transition with a single product line or single business region, making it possible to learn and improve the transitional process rather than throwing the entire business into the deep end at once.
- Know your market. In the shift to digital-based products, knowing your market is essential. This knowledge leads to informed offerings that provide clear value to your customers, enabling your organization to establish and expand profitable lines of business. When it comes to building monetization models around digital offerings, it is essential to align pricing with each customer’s perception of the value. In the same vein, the entire organization should align every business effort with the intention of ultimately delivering greater value to the customer.
- See your products through your customers’ eyes. In order to offer products your customers value and to improve upon that value, it’s crucial to understand the precise ways your customers use your products. Gathering usage data about the products and features that customers use most frequently will provide insight about how to align price to value. Once you know what product aspects your customers like, don’t like, love or hate, you can design new pricing and product packages that accentuate the positive and convert digital customers.
- Offer data-driven insights. While the traditional hardware side of the IoT business is quickly becoming commoditized with margins shrinking accordingly, actionable insights backed by IoT data increase in value. Device manufacturers may benefit by creating new insight-based offerings, which provide sought-after value by equipping customers with the capabilities to make wiser decisions. Remember to consider operational requirements, as well. Keeping devices up to date, for example, will also facilitate delivery of valuable data.
- Back your digital business model with a monetization platform. A successful digital business requires not just the right digital business model, but the data to correctly implement and operate that model. A monetization platform greatly facilitates the management of relevant data from across your organization, while automating pertinent processes such as software delivery and updates, licensing and fulfilment, usage analytics and entitlement management. Ultimately, these increase the revenue brought in by digital offerings, also accelerating revenue recognition.
By building and supporting customer-centric offerings and capitalizing on a thorough knowledge of the value your business delivers, you can lead your IoT organization in making the transition to a digital recurring revenue model a successful one.
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