Over the last decade, there has been a substantial amount of hype around the Internet of Things (IoT) and how it can be a strategic game changer for businesses. However, it is important to establish that simply investing in IoT is not a winning strategy. Building an IoT product that provides continuous, recurring value requires strategic planning and a focus on solving the right problems in your business.
According to Cisco, 75% of self-initiated IoT projects fail. The reasons are typically due to a lack of coherent strategy and/or a lack of understanding of how the underlying technology works to enable the strategy.
While there are many ways to build an IoT product, we have found that companies that succeed in taking their connected products to market accomplish four key steps. While this list is by no means comprehensive, we hope it gives you a starting point or new piece of information as you look to develop your own strategies and build your IoT product.
1. Understand your business problems and challenges
Too often, businesses start with an “intent to connect” instead of focusing on their business model. Companies that are looking to create a connected version of a product often fail to solve actual problems that are affecting the business.
Companies should first understand the problem they want to solve. Does a factory machine break too often? Are you losing business to a 3rd party service provider to fix your equipment? Once you establish the problem, you need to make sure every product decision is driving towards solving that business problem.
At this stage, companies often misdiagnose the real business problems they are facing, and try to build an IoT product to solve minor problems that don’t deliver real value. IoT products only prove economically viable when they deliver continuous, recurring value for your business and your customers. While there are multiple ways to create value through IoT, we’ve found that there are five primary methods companies make money off of their connected products:
- Preventative Maintenance — A simple IoT device can be used to remotely monitor equipment and prevent malfunction. If a piece of equipment begins to malfunction, the IoT device can instantly issue an automated alert. This can help limit losses caused by inefficiency, and help prevent full-scale failures and equipment damage.
- Asset Tracking/Fleet Management — Connected sensors can help companies track and manage constantly moving remote assets (like electric scooters and construction equipment). This helps companies better mange their assets and make better decisions for their business based off the data they collect from sensors.
- Compliance Monitoring — Each year, American manufacturers spend an estimated $192 billion on compliance. With IoT, companies can collect data with sensors to ensure operations and equipment meet regulatory standards and avoid possible compliance penalties.
- Supply-chain management — Cisco estimates that IoT technologies will have a $1.9-trillion-dollar impact on the logistics and supply-chain. That's because IoT technologies can help improve visibility, demand forecasting, and reduce operating costs by collecting data on day to day operations.
- Environmental monitoring — IoT solutions are proving adept at helping environmental services monitor and manage everything from water utilities to air quality. For instance, Opti uses IoT technology to prevent city flooding in major cities, helping to protect valuable infrastructure from damage.
2. Assemble the right team
Companies must bring together the right domain experts with the right skill sets to build a successful IoT product. This is where many companies go wrong because they don’t know the actual experts they need to build a connected product. An IoT initiative requires new types of teams that traditional org structures don’t support or are not familiar with. To build a successful IoT product, companies typically require the expertise of firmware engineers, electrical, mechanical, hardware . . . and the list goes on.
Not only do teams fail to bring in the right experts, they fail to build the right teams that makes these experts initiatives worthwhile. The best IoT teams are collaborative and span business decision makers and technical experts (such as C-suite executives, operations, IT, engineering, marketing, and support). For example, product and marketing teams need to build a long-term vision of the product and a short-term executable roadmap together. These teams ought to live under one roof for effective planning collaboration. Decisions cannot be made in isolation.
3. Decide where to invest resources
The infrastructure needed to build an IoT product is often underestimated, and thus, many companies don’t make good decisions on where to invest resources. For instance, companies tend to heavily focus their resources on the software layer, but forget that a significant portion of the infrastructure also runs on the hardware and networking layer.
The infrastructure needed to build a IoT product is often underestimated, and thus, many companies don't make good decisions on where to invest resources.
These three components (the hardware, software, and connectivity layer) need to be tightly integrated together in order to build valuable features that are needed for your IoT product. While integrating these three disparate components may sound simple, there are many components underneath these three buckets that can be complex and confusing. Many of these components need to be built within the first week to avoid re-engineering work.
When building an IoT product, you should first assess your own organization’s skill sets, experts, and resources. By doing so, you’ll be able to increase your own knowledge on the gaps in your organization and be able to properly educate stakeholders on how to assemble the right team for your IoT project.
4. Research and find an IoT partner
The structure of an IoT platform
The IoT industry is highly complex and fragmented, which can make it confusing to choose the right platform for your IoT product. What doesn’t help matters is that every provider markets IoT differently, but inevitably, will try to explain that their solution is best for you.
To choose the right partner, you need to thoroughly understand how their solution and expertise would allow you to capture value. For instance, if you are looking to build a fleet management solution for trucks, there are many factors you should consider, such as their hardware, device management tools, connectivity stack reliability, flexibility, and more. You need to consider if you can build a flexible application on top of their infrastructure.
One way to understand which IoT platform may be best for you is to develop a connected prototype with their platform. Developing a prototype that can reliably connect to the Internet and perform the minimum parameters of your intended product is of utmost importance before making any decisions about your IoT strategy. If it takes longer than a few days, you’re missing critical pieces of infrastructure.
The Bottom Line
The four steps covered here provide a baseline for how to build a profitable IoT product that provides continuous, recurring value. If you understand the technology, the business problems that you are trying to solve, and work with the right partners, you'll be on your way to building an effective IoT strategy. If you're interested to learn more on how to build a profitable IoT product, you can learn more from the following resources: