The Opportunity: From Products to Services in the Internet of Things

Will Services Replace Products in the Industrial Internet? 

Today, many enterprises buy and sell machines and spare parts as one-time, capital purchases. Tomorrow, could they satisfy the same needs and reach the same goals through online services? The real world with buildings, farming, or power generation may seem unlikely to turn virtual. However, the industrial internet is significantly changing the way business is done.

Not only are new business models now available for renting instead of buying, but thanks to the industrial internet, some manufacturers are starting to sell something better still: results. 

Let me show you some tangible examples of new business opportunities.

Extending the Equipment Hire Model

In the construction industry for instance, large equipment hire is an established service. It makes a lot of sense for many contractors. They pay on a per-usage basis, their overall risk is reduced and there are often tax advantages too. The latest generation of backhoes and earthmovers is also capable of much more. Automatic alignment for cutting gradients and slops according to onboard GPS and digital survey data is just one example. Data upload via the net about hours and type of usage, wear and prevention of breakdown is another. Rental companies can offer customer online self-service and billing options if they choose, by driving the digital capabilities of these machines via a suitable web-based application.

But can they go further still?

Vehicle Rental to Start Where You Like, Stop Where You Like

Automotive company Daimler has taken the rental model even further. Not content with being solely a car manufacturer and seller, the company has started its Car2Go service. Within designated city areas, customers can find a car to rent via their mobile computing device. They can rent and drive the car by the minute, and leave the car anywhere within the area covered by the service after the rental period.

The advanced telematics allow customer to see the fuel gauge or the battery charge (for electric-powered cars) when reserving, to make sure they can drive the distance they want.

Companies like Wroomle are changing the expectations of how the business models can and should work.

I Don’t Want a Tractor, I Want a Good Crop Yield

The next step along is to provide a service that is based on a result, even if it takes machines or other physical assets to achieve that result. The interconnection via the industrial internet of intelligent farm equipment like tractors, tillers and seeders and the integration of weather and soil data can do this. Dow Chemical, John Deere, and Monsanto use this facility to sell guaranteed crop yield, instead of products. Similar initiatives are in operation elsewhere, for example with 365FarmNet, another consortium of machinery, seed and fertilizer vendors.

How Will the Future Look for the Internet of Services?

The Internet of Things is already alive with opportunities for operational and economic efficiency. Service delivery is forever transformed in what is the Internet of Services. Using data received over the web, vendors and service providers can help end-users reduce costs and improve asset utilization and productivity, while improving their own profit margins.

The right software self-service and billing solutions can then help providers to offer new services, continually better adapted to market needs. An interconnection of machines, as in the farming example above, allows a transition to an ‘outcome economy’. In the future, customers can expect increasingly to pay for results, not just service, and even less for just machines.

The Impacts of IoT on Service Delivery

How is IoT impacting the way services are delievered? How to succeed in the digital economy? I've outlined 5 critical, intertwining elements for creating new digital service models. Feel free to view my slideshare presentation and please comment on my blog or slideshare!