In this, the third installment of a four-part interview, Jim Heppelmann, CEO of Boston-based software company PTC, looks at how the Internet of Things and smart, connected products are transforming traditional sales and marketing models within manufacturing organizations.
Why do the IoT and smart, connected products mean a new approach to sales and marketing?
Smart, connected products create new opportunities and reasons to transform your value proposition and even address completely different markets and refined customer segments.
This requires a different marketing approach and potentially new skill sets, too. The whole relationship with the customer is changing because companies are now able to stay in touch with the product after the initial sale. The product, in a sense, becomes a sensor for the relationship with the customer. Companies can gain amazingly detailed insights into the customer relationship by collecting and analyzing product usage data to understand how the product is performing, how much is it being utilized, which features are being used, and which features are not.
This allows companies to improve segmentation, deploy more granular and targeted pricing models, deliver new value added services, and anticipate the needs of their customers. Recurring revenue streams can be created by combining physical products with digital content and services, which requires companies to transform the processes and culture across their marketing and sales organizations, and potentially their business models to capture more of the newly created value. The implications of shifting from a discrete product sale to streams of upgrades and services over the product’s life are dramatic.
So “after sales” becomes “sales after the initial sale”?
Correct. Because products are now connected we can stay in touch with the customer throughout the entire lifecycle of the product. This creates tremendous potential for cross-selling and up-selling. Take, for example, car engines. Instead of manufacturing multiple engines with different levels of horsepower, the horsepower rating on the same physical engine can be modified using software alone. By connecting this smart capability with a cloud service a customer could upgrade his car for his weekend trip up the coast highway; hence smart, connected products.
But traditional after sales services are still important?
Yes, of course. Product usage data can reveal current and potential future problems. Preventive and predictive maintenance are enabling product users and service organizations to prevent machine downtimes and improve OEE (overall equipment effectiveness).
For example, most service events today require multiple passes. The first pass enables a technician to identify the nature of the failure and what will be required to correct the problem; the second pass is to perform the actual repair. With smart, connected products, service technicians can obtain all “first pass” information remotely, and may even be able to perform the repair remotely if the failure can be remedied via software.
The savings associated with reduced service calls can be substantial, and the product usage data can also be used to validate warranty claims and to identify warranty agreement violations, another huge expense for most product companies today. These approaches allow a manufacturer to transform its service business from reactive to proactive and create substantial gains in both service and operational efficiency.
However, this doesn’t come for free, and also has the potential to disrupt the high revenue, high profit service businesses that many companies have in place today. Service organizations that connect product condition and operations data with existing service processes can transform those processes, and potentially enable new processes and services that take advantage of the insights that come from the smart, connected products. By monitoring a product’s condition and proactively delivering service, sometimes via software, a company can improve the reliability and availability of the product.
The potential benefits are significant, including reductions in field-service dispatch costs and capital costs for spare-part inventories. The threat of disruption comes if the benefit of the reduced need for spare parts and service visits accrues to the end customer, who then pays less for the cost of service. This reduced service demand may create a kind of “service paradox” for companies pursuing a smart, connected product strategy.
This interview has first published in Enterprise IoT, a digital book that analyzes and documents IoT use cases in various industries, including automotive, energy and manufacturing.