Manufacturing and the IoT — Now It’s All About Service

December 8, 2015 Nicole Klemp

Manufacturing and the IoT

Generally speaking, producing and selling consumer products has been (up until very recently) a strictly transactional process. Manufacturers design and develop a product, market it, distribute it, and sell it. Once the end customer takes that product home from the store, the transaction is over. But the Internet of Things (IoT) is in the process of completely disrupting traditional commerce. With more and more products becoming “connected products,” manufacturers are being forced to keep one foot planted in the factory, producing durable goods, while simultaneously dipping the other foot into the rippling waters of the software industry.

Connected products create new revenue streams and deepen the customer-brand relationship

But even though this idea of connected products may be new — and even scary — for many manufacturers, the companies that do it successfully will reap boundless benefits. In our “service as a something” world, customers are demanding more from the goods they buy. When done right, connected products can benefit both customers and manufacturers. For customers, they get continuing service after the sale, whether that be through product upgrades, proactive maintenance, or the ability to add on features and functions — all of which create a recurring revenue stream for manufacturers.

In a recent Harvard Business Review webinar, Michael Porter — one of the world’s foremost experts on strategy and competition — said manufacturers can succeed in the connected products business by differentiating themselves with features and functionality. The more tailoring a company can provide, the more “stickiness” they will create with customers. Meaning, customers will use their connected products more regularly and will be more loyal to those brands (think Apple customers). Rather than selling a product as a one-time transaction, companies can sell services to go with it, creating a deeper relationship between the customer and the brand.

Becoming a “smart manufacturer”

Although connected products can create additional revenue streams in the long run, significant upfront investment is required for building infrastructure and hiring top talent. Traditional manufacturing companies are organized very differently from software companies, so to produce smart products, companies must find a way to merge those organizational structures. Research and development will need to work very closely with IT, and data scientists will become crucial to managing the vast amounts of data that will be created as customers use their connected products.

According to Porter, Customer success management will become more prevalent, as brands will look to data and analytics to create maximum value for customers and improve products and the Customer Experience. Connected products will also make service more efficient. For example, if a customer has a smart water heater and a part is going out, that information can be sent to the manufacturer or service provider, who will then be able to notify the customer and have the faulty part’s replacement on the repair truck and ready for a specialist to take it to the customer’s home and replace it — all before a malfunction even occurs.

IoT is here, and the possibilities are endless. It’s up to manufacturers to differentiate themselves with products, features, and services that help customers solve problems and make life more efficient.



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