You work for an OEM manufacturing company that is defining or has already implemented an IoT-enabled “connected product” project. You are evaluating the possibilities to create new revenue streams to achieve a positive ROI. You started collecting data from your products and you want now to understand how to monetize data. In this post we have already made a comparison between the potential and the value of IoT raw data monetization and IoT-enabled services monetization. Now let’s dig into IoT-enabled services.
Basic, intermediate and advanced services
IoT technologies enable the creation of many types of services, but not all of them have the same value and the same possibility of creating revenues. In this regard, we must refer to the studies and publications of prof. Tim Baines (Advanced Services Group), summarized in his blog post and well described in his book “Made to Serve” (one of the fundamental books about servitization). We can therefore divide the services that a manufacturing company can provide in addition to its products in 3 levels: basic services, intermediate services, advanced services.
Basic services: they aim to facilitate product installation and use
Intermediate services: they aim to improve the operating conditions of the product
Advanced services: they aim to maximize the final outcome obtained through the use of the product.
The higher the level, the greater the value transferred to the customer, and therefore the greater the possibility of creating revenues.
The role of the IoT in the 3 service levels
The same happens with IoT-enabled services, provided in addition to a connected product. You can choose to offer your customers services that fall into one of the 3 levels. Let’s look at some examples.
Basic IoT services: you can offer your customers a Mobile App for remote control of the product or a Web dashboard for viewing statistics or data analytics. The generation of revenues in this case is difficult, often the customer perceives this service as part of the product already purchased.
Intermediate IoT services: you can offer your customers a dashboard for monitoring the operating conditions of the product that helps them in carrying out preventive maintenance operations, or even better predictive maintenance. This kind of services is more suitable to be monetized, especially if aimed at customers, or third parties, who are in charge of maintaining a large installed base. The monetizable value is proportional to the time and costs saved by the customer thanks to the IoT-enabled service.
Advanced IoT services: you can offer your customers a “full risk” maintenance service, in which your company, thanks to remote IoT monitoring, takes responsibility for ensuring maximum product efficiency and productivity. At this level you can maximize revenues and monetization. In fact, your customers will not only buy additional features or information, but, most importantly, also production capacity, output and quality. These are outcomes directly related to their business. They will therefore be more willing to recognize a price, which will be proportional to the added value that your product-service system creates in their business model.