By N. Chandrasekaran, CEO and Managing Director, Tata Consultancy Services
What if your company had a vivid picture in real-time of how its products and services performed every day? Not at the end of the month or quarter and not filtered by the interpretations of call center agents or salespeople. Just how your products and services performed and how your customer used them. Live data that provides pure, detailed, direct-from-the-customer information.
Welcome to the age of IoT or the Internet of Things. This live information has begun streaming back to a small but fast-growing number of companies that are embedding digital sensors in all their products, installing digital cameras and other sensors in places where they do business (stores, branches and other locations), and tracking a customer’s digital habits through sensors on every smartphone.
The age of IoT is well underway. The question is whether businesses are ready to cope with the deluge of information headed their way. Does that information scare or comfort? Alarm or motivate? Intimidate or fascinate? Is it just noise or are more real actionable insights revealed?
How a large company’s top management team reacts to those questions will separate the winners of this decade from those who also ran. Their answers will reveal how receptive they are to digitally reimagine the way to do business in a world of ‘things’ –as the IoT phenomenon is now popularly called.
The latest TCS trend study on IoT provides some of the answers. In our latest research, we studied IoT initiatives at 795 large companies in North America, Europe, Asia-Pacific and Latin America (with average revenues of $22 billion).
The findings are revealing – especially what’s happening at 65 companies that had the greatest revenue impact last year from their IoT initiatives. Those companies’ whose IoT programs are giving them ‘the ultimate truth’ about the state of their business. In other words, live insights into how their products and services are actually performing for customers.
Our latest global trends study found that about four out of every five large companies are already using IoT technologies to deliver a picture that is richer than ever before on at least one of these four key aspects of their businesses:
Companies that have deployed IoT technologies to track all four areas – and especially how customers are using their products and services — are much better positioned to digitally reimagine their businesses. And as we’ve seen since 2011 in our five previous studies on the business impact of digital technologies, companies that have digitally reimagined their businesses are pulling ahead in their sectors. They are profiting handsomely by changing their business model, core offerings, business processes, customer segmentation, channels to market, and workplaces.
Our latest study found that IoT technologies are giving many companies new and vital insights on the state of their businesses. For example, about a quarter have embedded digital sensors in their product offerings, ranging from coffee makers and refrigerators to aircraft engines and television sets. Such product-monitoring IoT data reveals whether a piece of construction equipment or a truck engine is running or is incapacitated, or whether a car or truck will break down in the next 500 miles or motor along without a hitch. It therefore paints a clear picture of how customers actually use the product or service.
Nearly half of companies are using IoT technologies today to monitor their supply chains (45%), and 47% track customers themselves via apps. One in eight has begun tracking customers through the digital devices that they wear such as digital wristbands and watches. And one quarter of companies have digital cameras and sensors tracking the premises in which they do business with customers – i.e., monitoring the customer experience.
But how IoT technologies are actually used is industry-specific. Consumer-led companies such as retailers, hotel chains, amusement park operators, movie theaters and airlines increasingly use premises monitoring – i.e., deploying digital cameras, sensors and other technologies to track data in the places where they do business with customers. That gives them a detailed view into the environment they’ve created for customers.
Sectors such as industrial manufacturing, high tech, and life sciences are investing more and more in IoT technologies in their supply chains. They’re gaining much deeper insights about the efficiency and effectiveness of these critical operations.
Putting products and services in customers’ hands with embedded technologies that report their performance back to the firm will be the most important part of a company’s IoT journey to a reimagined business. That is clear after studying the companies with the greatest success with IoT technologies – those with the biggest revenue boost last year from their IoT initiatives (an average 64% gain in revenue) – and comparing them against the firms whose IoT programs generated the smallest revenue increases (a 2.5% average revenue gain). In some cases, it was zero percent increase.
Among the IoT leaders, reimagination may include changes to the business model or new products or services. These companies also redefine old wisdom about customer segments and channel relationships. Disney, for example, is getting a much richer picture of families visiting its Orlando, Florida, theme park due to its deployment of wearable MagicBand bracelets. All these companies deliver value back to customers in exchange for that data. Disney offers the benefit of cash-free purchases using the wristbands, for example.
While most of the companies we studied are committed to investing in their IoT initiatives this year — an average $86 million per company – it isn’t the magnitude of that investment which separates IoT leaders from the rest. It’s what they are investing in, and how they are changing the way they do business to capitalize on the investment.
In other words, the early leaders at IoT are investing in ways that reflect benefits to customers and themselves by getting the ultimate truth: how their products and services are performing when they’re in their customers’ hands. The 65 companies we’ve identified as IoT Leaders will spend four times what IoT followers will invest this year on using the IoT to monitor their products (an average $88 million vs. $22 million per company).
The data that those companies are gathering from tracking their products is invaluable: the car that needs to be serviced before it stalls, the aircraft engine that requires a tune up, the computer printer that will soon run out of ink, the streamed movie video that’s being interrupted by a digital traffic jam to the home, and so on. At the end of the day, it’s a product or service’s performance that matters to customers.
Being able to weave together and act on all four sources of data – from the supply chain, premises, the product and customers themselves – will be critical to every company. If you’re not using digital technologies to track and adjust your product and services in the years ahead, it’s likely that you’ll fall behind a competitor that does.
Exploiting IoT also has cultural consequences – improper use of the information collected through the IoT will make many managers and workers nervous. Such data will make their company’s performance transparent to customers, all the time.
And that’s why IoT initiatives not only need air cover at the top of big companies – they will require the passion of CEOs and their management teams to succeed. The IoT leaders call executive support for cultural change crucial to IoT project success. CEOs can push back internal resistance to the data. They can make sure their company can act quickly on the data gleaned from monitoring its products, premises and customers.
The companies in the lead in using IoT techologies commit not only to gathering the data-rich picture – but also to truly reimagining their businesses based on that data. But their commitment must start at the top or else the initiatives will quickly lose direction and the ability to deliver big results.
If they haven’t done so already, now is the time for every company in every industry to reimagine possibilities in a world of smart, connected ‘things’. The age of the IoT has arrived.