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Surpassing Operational Effectiveness: IoT Is Not the Product

1 Nov 2017 by Ryan Hayen

By now, most of us have heard the business promise of the Internet of Things (IoT): Connecting products to the cloud and enabling them to communicate with each other and with their manufacturers will provide a wealth of data that can boost operational effectiveness and transform the way companies engage with their customers.

Let’s boil that down to its essence: Leveraging the information provided by IoT products can enable lucrative new business models and revenue streams. Still, business leaders are faced with evaluating a continual flow of potential new strategies, platforms and investment opportunities in a rapidly evolving business environment. Therefore, any possible investment in IoT infrastructure must withstand the same degree of healthy scrutiny.

Sorting through the facts and the hype around a new wave of technology to understand its true financial potential can be cloudy. In the case of the IoT, however, the potential is rather clear.

Billions of dollars have already been invested in startups focusing on enterprise IoT specifically. A McKinsey Global Institute report estimates the IoT has the potential economic impact of $3.9 to $11.1 trillion per year by 2025. Intel suggests that 200 billion connected devices will be in use by 2020. The research further indicates that while the quantity of connected things will be driven by consumer apps, enterprise efforts will contribute most of the revenue.

Organizations at the forefront of this movement are harnessing their real-time data to inform the evolution of their products and services, resulting in a competitive advantage. Yet, for those not at the forefront (which by definition is most), they may want to embrace this change but can be daunted by the simple question of “How can we get started?”

At Insight, we collaborate closely with our clients to accelerate their digital evolution to achieve what we call Business Optimization. Business Optimization it not a one-off product/service launch paired with a wait-and-see-what-happens approach. Instead, it’s a multiphase philosophical and operational commitment from the top down, where the result is continued innovation facilitated by advanced analytics and customer feedback.

Product design is a discipline that spans every phase of the journey to Business Optimization. In this post, I’d like to specifically discuss one of three important principles that help establish a thoughtful design mindset, one that's sure to serve any organization well as it sets out to achieve real-time business transformation.

Getting the ball rolling

Before I dive into the principles, let’s address the first question most have: How do we get started? It’s easy to look at an organization that is further along the IoT maturity curve and be overwhelmed, frustrated or even under the misimpression that getting there is easy. Those under that perception will quickly find out otherwise. The others may feel like they have to do everything at once, which is not the case.

In this situation, I think back to when I was a kid and had just started to learn how to play an instrument. I listened to all the famous players and would get frustrated about how long it would take to get to the level of playing I wanted. One day, my instructor brought my young mind into focus by saying that every hour I practiced was one step closer to my goals than if I had done nothing at all. While that sounds like a somewhat obvious statement to me now, at the time it helped me understand the value of starting small and working on one focused part of my playing at a time.

Similarly, starting small with a Minimum Viable Product (MVP) is a very effective approach for organizations looking to take that first step away from business as usual. An MVP asks for the minimal amount of effort necessary to be able to release a product and obtain information that will shape its future development. Many approach their first MVP by looking inward. They often start by implementing solutions to improve operational effectiveness in their own machines, devices and processes. These efforts can typically be classified as remote support or preventive maintenance applications — or what we like to call “initial applications.”

Initial applications are great — they can lead to a decrease in cost, an increase in uptime, identification of risks and even improved customer satisfaction. Some companies spend much time fretting over their ideal point of entry into the IoT world. However, simply getting the ball rolling through the more focused scope of an initial application can be very beneficial. It lowers the stakes of the original investment and increases the likelihood of measurable results. Another benefit, of course, is the access to a new wealth of data (the cornerstone of any real-time business IoT strategy), which will be used to inform next steps in the development of their product and technology stack.

Despite having internal success with an initial application, it can be easy for companies to get stuck at this point on the maturity curve. Why?

For a company to move past addressing operational effectiveness, it must arrive at a more strategic positioning. Saving money is great, but your business likely doesn’t exist just to save money. Since the company is probably not making more money through these initial applications, demonstrating return on investment with them can be challenging. Whereas operational effectiveness is all about doing things well, a strategic positioning is about doing things differently. The company must determine how it will deliver unique value to its customers and partners.

By shifting the focus to identifying how the company can use its data to support more open collaboration with customers and partners, it’s positioned to achieve more meaningful and rewarding innovation.

A graphic showing the growth of ROI from the initial application to the strategic planning of focusing on customers and partners

It’s pretty easy for a company to say, “We’re going to focus on our customers and partners.” The hard work in building and delivering unique value comes in adopting a certain design mentality, one that can demand change from longstanding business practices and structures.

OK, now that I’ve finally got all of that out of the way, let’s explore the first of three principles of a healthy design mentality when approaching the IoT.

The IoT is not the product.

Simply connecting a product to the internet may enhance a product’s value, but it cannot serve as the driving rationale behind a customer’s investment. As we see with most new tech pushes, many companies and entrepreneurs rush to find a problem to fit the technology instead of focusing first on a real problem and then applying the right technology. This has led to the design of a slew of connected products, some comical and some questionable, that really go nowhere.

In order to develop IoT products or services that solve real problems for their users, organizations must dig deeper to arrive at insights about their customers’ and partners’ pain points and needs. Sometimes, a team member has a hunch (i.e., a hypothesis) about a new way to serve customers or partners. Other times, a hypothesis doesn’t exist, but the company may be staring failure in the face if it does not adapt. In either scenario, our design team will conduct a number of user experience research activities such as user interviews, contextual inquiry (or “ride-alongs”), experience mapping and usability testing on prototypes to start to address the question of “How can we deliver something of unique value?”

Although these user-centered design methods have received much attention in recent years, they’re still new to most organizations. When we conduct these exercises in close collaboration with our clients, they’re often amazed at the results, as designing with the intended users instead of for them leads to greater insight, clarity, stakeholder consensus and confidence when launching Version 1 of their customer/partner-serving MVP.

Once Version 1 is launched, new advanced analytics methodologies and platforms enable business intelligence practitioners, engineers and designers to identify usage patterns, failure points and other noteworthy reflection points within an overall product/service experience. These findings can help create hypotheses around opportunities for improvement, or entirely new avenues for exploration, which are then merged with User Experience (UX) activities mentioned above.

Subscribing to the idea that connectivity does not equal value, and the willingness to blend UX research and data analysis, will put teams in an advantageous position. Instead of throwing darts in the dark, or staring helplessly at a sea of sensor data, a clear map for iterative improvement emerges.

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