Servitisation and the Internet of Things

 The Internet of Things is a great idea.

Connected machines of all shapes, uses and sizes feedback constant data about usage, condition and performance – all for better efficiency.

Servitisation is not a new idea; it is merely becoming more widespread as firms find more innovative ways of maintaining customer relations, and changing their business models into lifetime revenue streams, from a position of better data and brand loyalty.

Tech firms themselves have been doing this for ages as they seek to secure revenue streams beyond their initial hardware and software costs. It is taking maintenance contracts to the extreme, but nevertheless, making the 'customer experience' better all round. Other product providers are getting to grips with this concept and the use of internet generated information has enabled producers of goods to become 'servitised'.

Data handling skill sets
With this data comes a requirement for a different set of skills, from providing goods to providing services. Instead of merely producing goods, manufacturers are looking at 'servitisation' of their business models and attempting to capture data in order to create new revenue streams.

In terms of workforce skills, the grunt factor in making the goods has been systematically taken over by mechanisation and this, in itself, provides opportunities for new jobs in data sciences, software development, hardware engineering and sales services.

The Internet of Things is a 'good thing' because it has enabled manufacturers to compete in the post production market of services and after sales care. This leads to more meaningful relationships with the customer, a deeper understanding of the markets and also a recurring revenue stream.

Brand enhancement
Producers are able to make their brands more attractive and likeable because the generation of data and knowledge of customers’ usage and buying habits means they can alter the service to suit individual needs, and therefore making it more difficult for consumers to switch brands, because to some extent, the service element in the product offering outweighs any price disadvantage.

Traditional intermediaries in the supply chain have now been replaced by algorithms telling people, directly to their phone, when a part wears out or different ways they can use the product. Further cementing the relationship with the customer.

Information flow
Internet of Things systems built into products can seriously disrupt more traditional jobs such as service engineers and there is much debate at the moment about the use of cloud technology or edge technology, for example, using the Internet of Things as a device itself to store and communicate data, as a means of relaying data about performance and condition.

This isn't just about smarter communication for consumer goods, the same principles can be applied to heavy machinery and the ability of data to drive cost efficiencies across a number of large scale projects where capital equipment use is intensive.

In essence, it is all about information, energy companies want to eliminate spikes in usage, farmers want to know the best soil conditions, even drones want to be able to take off and land safely, all this requires data and more importantly, data in real time which is relevant and creates value for the producer and consumer. In short, actionable information that benefits everyone.

Security and risk
Such connectivity is not without its risk. Servitisation is opening up devices which can be controlled remotely, not just by the producers of goods but also, unfortunately, by their competitors. Cyber security measures therefore create a whole new raft of jobs in order to maintain integrity of the customer relationship.

Given some of the lead times in production and design and the differing pace of change in software, it is no surprise that goods rolling off the production line leave themselves open to hacking, even before they are sold. This is also a concern when fitting retro systems into existing goods and trying to accommodate legacy software issues with newer technology. In a rush to be first, servitisation can often mean a lax stance on security, especially when there are still different fundamental operating systems. A lot of work still has to be done to standardise the babel.

This is probably where emerging economies have the edge, because they don't have the legacy issues of the West and are able to leapfrog relevant technology. They may not have the same degree of regulatory oversight which scrutinises standards.

In conclusion, servitisation is not a new concept, after sales service has always been a key measure of success and lifetime value creation for the customer. What is different is the connectivity of products via the internet and the real time nature of feedback mechanisms that are now standard across a number of sectors. Technology has been a key driver for a better customer experience, therefore, there is no going back to the dark ages where customers accepted products they didn't understand fully and that were not well supported.