How to Drive Revenue with IoT Devices
The Internet of Things (IoT) has become a lot of things to a lot of people. For consumers, IoT can mean smarter homes, energy savings, better security, convenience, and more responsive services. For Smart Government, it can mean connected cities, better transportation, and a stronger infrastructure that creates jobs and attracts business.
Manufacturing is one industry where IoT-enabled devices have opened up the possibility of an entirely new business model addition: Service Provider.
Service for enterprise equipment, such as industrial AC units, has traditionally been managed through a large Enterprise Asset Management system (EAM). Asset management has always been expensive and inefficient. Work tickets, planned maintenance, unplanned maintenance, and all of the other service activities that ensure your assets are operating at their best took a lot of time and required a lot of testing and guesswork.
The Rise of IoT in Manufacturing and Asset Management
Enabling technologies makes it easier for manufacturers to also service the devices they sell, driving a new revenue stream. Gathering the data means that the manufacturer can now manage the devices they install more efficiently.
Through IoT-connected devices and user-friendly data visualization dashboards, manufacturers can monitor all of their devices close to real-time and take action quickly if something goes wrong.
At the same time, the cost of the hardware and the software for connecting products has been steadily dropping, making connecting products to the IoT more and more attractive, even for lower cost products. For example, 20 years ago enterprises may have only invested in sensors for their most expensive or most risky assets, such as Internet-enabled nuclear plant data.
Now, consumers are buying Internet-connected refrigerators, and the Raspberry Pi computer, which costs just a couple hundred bucks, has plugs and pins that can connect nearly any device to the Internet. It should come as no surprise that the B2B and manufacturing worlds are following suit.
In addition to opening up a new business model for manufacturers, enabling IoT devices has additional potential benefits to consider:
Improve Service Quality Over Time
AI plus human ingenuity is a powerful thing.
With IoT-enabled devices, manufacturers can look at the trend analysis, look at the data, and deliver a better value and more efficient service to the customer.
In my industrial AC example, a manufacturer who decides to provide ongoing service may discover that the service interval is not optimal. In a milder climate where the unit gets minimal use, they may decide to extend the time between service, whereas in a hot climate or at a plant with poor air quality, they may decide to increase service.
In either case, they are now able to tailor their service to the environment and needs of the customer.
Create Monthly or Yearly Recurring Revenue
In addition to creating a new revenue stream, becoming a service provider gives your business a new kind of revenue stream.
Recurring revenue is not only a primary driver of valuation, it’s also helpful from a cash flow standpoint, delivering a consistent, flat source of income.
Stay in Contact with Customers
Becoming a service provider has tremendous business benefits, such as the ability to develop an ongoing relationship with your customers.
If a manufacturer sells a commercial AC unit with a mean time to failure of 15 years, it’s unlikely that any relationship will form. With a service contract, the manufacturer can be in frequent contact, stay in touch with clients, and lay the necessary groundwork for future sales.
Deliver a Better Customer Experience and Eliminate Risk
Perhaps most importantly, becoming a service provider can improve business operations for your customers. From their perspective, it’s much better to have steady, predictable service costs – the service contract becomes a win-win as long as the value hits the right point.
Selling commercial AC as a service, for example, means that the customer won’t have to capitalize any equipment and eliminates surprise costs that could otherwise kill their month or their quarter.
The Bottom Line
Due to the better, more tailored service and the elimination of risk, many businesses are willing to pay a little bit more for their service upfront, knowing it will save them time and frustration later.
If you’re a manufacturer, enabling IoT devices can help you deliver the kind of experience B2B customers are beginning to expect and transition toward opening a service revenue stream, or automating and enhancing the one you already have.