January 10, 2018

Why business models need disruptive thinking

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Rory Moore

Head of Industrial Services, Tieto

Industrial IoT and business model change. Can you have one without the other?

Despite the hype around Industrial IoT (IIoT), and indeed the massive investments that many manufacturers are making in sensors, platforms, connectivity solutions and analytics, very few have actually seen any real ROI on their spend.

In a fast changing world where machine manufacturers are investing heavily in making machines more “clever”, companies still face the same dilemma: how do I make my machines stand out compared to competitors and how do I generate new revenue streams?

This much is clear today: simply improving the functionality of equipment is not a quick fix. The only answer to unlocking new business value is to change and enhance the services surrounding your machines.

IoT is not a magic switch

How do you guarantee return on investment in IoT? Firstly, I believe ROI should be put into the context of transformation, meaning the ability to shift from a product focus to services.

In practical terms, IoT is not a magic switch that automatically creates new revenue streams – it’s the enabler, nothing more – nothing less. And like all enablers IoT requires the right implementation approach to match ambitions and expectations. Simply connecting end-user machines will not in itself create perceived value for your customers.

Well beyond technology choices, you need to define your customers’ expectations as they typically don’t care about which platform or hardware is used. Instead, what matters most to them is the outcome of your connected machines.

How to build a service mentality

To break things down, let’s assume that you already have some form of services to offer (aftermarket, optimization of performance etc), in which case ROI is well within reach. By importing these services into your IIoT offering you can fast track the rate of return. But that’s just to begin with.     

Empowered with new innovation tools, you can tap into new forms of engagement with your customers. The shift in our personal consumer lives is a good example, where we sign up for subscriptions to music from Spotify instead of buying CDs and MP3 files. We are now seeing the early signs of industrial clients expecting delivery of the final outcome of assets, rather than just the delivery of physical machines.

Adopting the Industrial Internet – Tieto Service Connect

Technology by itself is not a disrupter. Innovation thinking is the key to survival and growth for manufacturers, and Tieto makes this journey possible with our service platform Tieto Service Connect.

To start the transformation journey, you need to rethink your business model using IoT as an enabler. Of course, this goes hand in hand with making the right technology choices. But the best way of achieving ROI is to develop and refine new services that create long-term value for end users, rather than focus on the price you put on connected machines.

Changing how we think…

Is not an easy task! I readily admit it is deeply challenging and many companies face complex investment choices. However, I believe the key take away is that you need a balanced approach. By investing 50 percent in technology and 50 percent in business model change and implementation, you can jumpstart the shift and travel the road of success.

Are you ready to explore your service transformation needs? I’d be happy to take your questions here. Or why not come and talk to us for direct advice. Read more.

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