Internet of Things Grand Challenge Workshop. Forging the Path to Revenue Generation
Deloitte, Internet of Things Grand Challenge Workshop. Forging the Path to Revenue Generation, San Jose, CA, 9-10 December 2014
|Abstract|| On December 9 & 10, Deloitte hosted over 20 business executives and thought
leaders at the Internet of Things (IoT) Grand Challenge Workshop at the Tech Museum of Innovation in San Jose. The objective of the gathering was to work collectively to solve one of the more largely unexplored areas of IoT: looking beyond cost savings to forge a path to revenue generation. This report captures what was discussed during this extraordinary event where an open, collaborative dialogue focused on advancing the field of IoT. The report’s goal is to recreate the experience and capture the highlights of the content discussed at the meeting.
|Topics||Business Model, Property|
From product to service outcomes.
"As IoT makes successful forays into the world of consumer and industrial products, it may radically change the producer—buyer transactional model from one based on capital expenditure to one based on operating expenditure. Specifically, in a widely adopted IoT world, buyers may be more apt to purchase product service outcomes on some kind of “per unit” basis, rather than the product itself and in so doing, render the physical product as something more of an afterthought. The manufacturer would then gradually transform into a service provider, operating on a complete awareness of each product’s need for replenishment, repair, replacement, etc."
"Is such a scenario realistic? Even when IoT is widely adopted, product ownership is still expected to remain an indelible part of the consumer mindset, and to some extent the enterprise mindset as well. So the question is, as an example, would an airline company want to pay for an aircraft engine upfront as part of a standard lease / buy arrangement, or under a “power by the hour” model that is operated more as a “jet-engine-as-a-service”? The manufacturing and service business models are fundamentally and completely different under each scenario; any such migration by product makers inevitably faces hurdles, both known and unknown. Furthermore, buyers under the new service-oriented paradigm must consider how they can best use product usage data and whether that data is private, or available for public dissemination. Then there are buyers who will simply rebuff the idea of the smart product as-a-service altogether as unnecessary, especially in the lower end of the consumer product spectrum."
"There are certainly competing viewpoints as to whether the product or the service focused market will ultimately prevail, and to what extent enterprise buyers actually have the appetite to transform to a services-first mindset. What may ultimately happen in a relatively connected product world is that many may accept the notion of the smartly connected product, but in a limited way. Such people will want to own the smartly connected product outright, but will also accept the idea of sharing the usage data to the limited extent that the sellers use such data in relatively benign ways, such as providing advice on more efficient usage, etc."
"The outcome here will also rely upon a long term total cost of ownership (TCO) perspective. With any fundamental purchasing model changes (as is taking place in owned vs. cloud resources in the network / IT world), not all suppliers will be able to reap additional economic benefit under the service model. Buyers will eventually recognize the increase in TCO and revert back to the more economical business model if the economic rents are too high."