Are your sensors generating money for you?
What have your device sensors done lately for you? Your company markets a device with sensors. They are good and reliable sensors. But are they generating revenue for you in addition to what you generate by selling the device? Have you considered the possibility that those sensors can be put to work to make a new stream of revenues for you?
Let us start with an example of a simple sensor based household gadget almost every house uses. It is a common household thermostat. A thermostat measures the temperature of a room and based on the temperature it starts or stops a connected appliance like a heater or air conditioner. The traditional thermostat does its job admirably just by controlling the intended appliances.
However, some interesting things start happening when the thermostat is connected to the Internet (aka Cloud) and its sensory data streamed to a Cloud based server. For example, when you connect the thermostat to the internet, you can monitor the temperature in real time using a mobile app whether you are at home or not. Not only that, you can even program the thermostat using the same mobile app using a user-friendly interface. You can also start and stop your heater or air conditioner remotely. Before you come back home from work, you can start the heater (or air conditioner) so that upon arrival your home is already warm and toasty (or cool and comfortable).
So how do the manufacturers benefit by connecting this sensor based gadget with Internet? There are many ways to monetize this service. New generation of thermostats that are connected to Internet can be marketed at a premium price with the free services as described above. Or the services can be provided to the customers at an annual subscription. This is clearly a new revenue stream for the manufacturer beyond the traditional selling of those devices in the retail market. It makes sense but is it happening? Actually, a company called Nest Labs was formed in 2010 to do exactly that. It was so successful that Google acquired them in 2014. In addition, there are a few vendors including traditional industrial manufacturing companies e.g. Honeywell, Trane, Lenox, Pro1, Ecobee who are offering a new generation of Internet connected domestic thermostats with these features and more.
While the above example was for a temperature sensor, the basic idea is applicable to many other sensors. So let's go back to the original question - what are the sensors in your products doing today? You can collect data from all the sensors and then using various network technologies you can send those to the Cloud. Once the data is in the Cloud, you can do interesting things useful to the company as well as to your customers.
The services can be provided at three levels. At level 1, you can provide either a website or a mobile app to monitor your device with the sensors in real time. At level 2, you can provide a way for the user to control the device using the same website or mobile app. At level 3, once you have collected enough data over time from a customer, you can provide trend analysis to show how the equipment is used over time or predictive analysis to show how the equipment will perform in the future based on various input conditions. When you have enough data from hundreds of thousands of connected devices running in various different environments you can do machine learning based analysis and figure out how you can improve the performance of your device. All these are doable today and using this Internet of Things (IoT) technology you can give a new purpose and a new lease of life to your traditional sensor based devices and create a new business model.
But this is just the beginning of a journey of expanding the relationship with your customer. As shown in the diagram below, as you move up in your relationship with your customers from ‘Transactional’ to ‘Collaborative’, you create opportunities to create new set of revenue streams. This also allows a much stronger and persistent relationship with your customers who will be less prone to move to your competitor at the smallest of pretext.
So let’s recap the three pillars of sensor monetization strategy -
Look for those products in your portfolio that either already use sensors or can use sensors. They are the best candidates for your monetization analysis.
Look for ways to benefit your customers either from their sensor generated data directly or using analytics on that data. The benefits should be compelling enough so that users will be willing to pay for it directly or you should be able to include them in product pricing as a premium.
Look for ways to use the sensor data to predict business or technical outcomes and improve learning, consequently improving product/ service performance, customer satisfaction, operational optimization or influence new product development,.
For many companies this initiative will need significant effort. However the rewards can be big. A willingness to leverage emerging IoT technologies for your company can produce amazing business results in a relatively short time. Often this will go a long way to help you achieve leadership position in your industry resulting in significant top line growth.