Today Every Company must be a Service Provider and a Software Company

Today Every Company must be a Service Provider and a Software Company - Innovation ExcellenceThe Internet of Things (IOT) will have a dramatic impact on product and service innovation. Gartner group forecast that the number of wirelessly connected products will increase from 5 billion today to 21 billion by 2020 (not including smartphones or computers). Everyday objects from kettles to T-shirts will have sensors that can detect when, where and how they are used.

Stephen Hoover, CEO of the Xerox Palo Alto Research Center (PARC) puts it this way, ‘I can instrument and understand what my customers are doing with my products across the world. I can understand if those devices starting to fail. I can understand the environment they’re in and adapt their behavior to be responsive to the local environment.’

Companies will need to fundamentally rethink their products and the user experience. Manufacturers have the opportunity to bypass traditional distribution channels and forge personal relationships with their end-users by offering web based services. Where previously products wore out and were replaced by new versions the IOT offers the promise of products which get better with updates and new releases.

Rolls-Royce uses sensors in its jet engines to monitor performance and to detect problems. It has turned its product into a service and charges by engine usage rather than outright purchase. Babolat makes tennis racquets whose sensors can send data which allows analysis of your tennis strokes, giving the company the opportunity to offer coaching services. John Deere supplies agricultural equipment which can receive and sense data on weather and soil conditions to as to advise on when and where to sow seeds.

Where previously products wore out and were replaced by new hardware the IOT offers the promise of products which get better with updates and new releases. When Tesla discovered that its cars had a problem with uphill starts it released a software patch to fix the problem. Similarly when they wanted to add a “crawl” feature which lets drivers use slow cruise control in heavy traffic, the company broadcast a software release that delivered the new feature to all existing Tesla cars.

In 2014 Google bought home-automation company Nest for a massive $3.2 billion to give it a strong stake in IOT technology. Nest systems can lower your heating bills and warm your house just as you get home but they can also send alerts or shut off home heating systems if sensors detect fire, smoke or carbon monoxide.

‘Once the things in the IoT are connected and given a voice, they become more than just ‘things.’ They become part of a living experience shaped by interactions among people, places, and objects, among product, nature, and life,’ said Olivier Ribet, VP of High Tech for Dassault Systemes. ‘They become contributors to what beckons just beyond the IoT: the Internet of Experiences.’

Companies will need to think innovatively about customer needs. CEOs must ask, ‘In the IOT what is our new value proposition?’ Firms will have to hire software engineers to design and deliver service solutions based on usage data. They will need data analysts to review all the data they gather from their devices. In other words every company will have to become a service provider and a software company – or perish.

image credit: ringthedamnbell.com

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Paul SloanePaul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader and editor of A Guide to Open Innovation and Crowdsourcing, published both published by Kogan-Page. Follow him @PaulSloane

One comment

  1. Linda Bernardi, an IBM Chief Innovation Officer, and I wrote about a very similar topic here a couple of years ago that you might find interesting:

    http://www.innovationexcellence.com/blog/2014/09/24/you%e2%80%99re-either-a-technology-business-or-you%e2%80%99re-out-of-business/

    Keep innovating!

    Braden (@innovate)

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