The buzz surrounding the Internet of Things (IoT) has been constant, even if discordant. From appliance manufacturers to automotive companies, to marketing gurus, security specialists, journalists, the government and beyond – the IoT has been heralded as the inevitable future of all things digital.
According to the Economist Intelligence Unit, three-quarters of companies (75%) are either actively exploring the IoT or already using it, and three years from now, almost all senior executives (96%) expect their business to be using the IoT in some respect to either gain a competitive edge or simply “stay in the game.”
Yet, where did this innovation trigger come from and who is driving the market forward? Call them millennials, Generation Y or simply those born between 1980 and 2000, this group forms the heart of why the IoT exists – and why it will endure. There are many reasons for this: Generation Y is connected by choice: the majority spend a minimum of 6 hours online a day and more than two-thirds of them, globally, have smartphones, according to a recent Telefónica study.
Harshly impacted by the 2008 recession, rising property prices and increased student debt, Generation Y are also pioneers of the sharing economy and prone to renting, borrowing or sharing – instead of buying high-value assets. They also expect to interact with their service provider in an inherently digital way.
Unlike the boomers or Generation X before them, Generation Y is showing us an entirely new way to relate to the consumption and ownership of assets. From Zipcar to BMW to Mercedes, the pay-as-you-go model is becoming increasingly lucrative. The service model has been around for a while as Rolls Royce had all but stopped selling jet engines in the 1980s and has started selling “power by the hour” – a fixed cost service package over a fixed term.
The digital generation expect integrated service offerings and are either happy to trade personal data in lieu of better service or a price reduction or are savvy enough to detect a poor value exchange. By creating new pay-as-you-go business models, you are effectively removing the barrier to entry for the high-value asset class. What’s more, you are paving the way for the IoT to flourish.
This works by the service provider owning the asset (be it a car, building or even a fridge) and using IoT technology to enable full access to the consumer. It’s this customer-access business model that enables the asset owners to cover the cost of technology and credit this on an amortised offering to the customer. These value added services are often extremely desirable but either infrequently used or very costly to deliver if using propriety technology.
Imagine an example where a car manufacturer actively monitors a pay-as-you go customer’s driving performance and usage. However, the trade-off is that the car manufacturer is able to offer you a proactive service that responds to faults, provides free emergency service and stolen vehicle recovery and predictive reminders for fuel and maintenance checks. These value added services drive additional revenue and increase the quality of service to the end user.
Such models offer a vast opportunity to understand buying behaviors, customer preferences and time-scales associated with consumer use. Prediction becomes easier. Supply chains become more intelligent. Customer satisfaction increases. Costs are streamlined.
While the benefits are great, there are also risks. For instance, privacy and security remain top of mind for many would-be consumers, despite a predilection for pay-per-use based models and an expectation for ubiquitous internet connectivity. Undeniably, it is the end user’s right to dictate which service provider owns your data. Thus, service providers must make data ownership policies very clear to the end-user so that there is complete transparency and the highest regard to ethics. After all, clear data use and data privacy policies will only serve to build reputation and trust, thus contributing to brand loyalty in such models.
The IoT affects everything in an organisation, from people to data to process. It is enabling businesses to do more than was ever previously possible and the benefits are real and numerous. So, why wouldn’t you get on board as a business? For those businesses that remain skeptical about how profit margins will derive from such IoT models – the answer exists whenever a consumer triggers a real-world service in the IoT economy.
For instance, repairs, service, device management, analysis, security – will all remain constant expenditures, even despite new models, as Rolls Royce proved a generation ago. But perhaps the biggest reason to adopt the IoT is to connect with an entire generation of consumers, who are increasingly dominating the world stage.