Critical Considerations: Starting a Smart Connected Products Program
00:00 Good afternoon. Thanks for attending the presentation. How many people here are working on or thinking about working on a smart connected products program or project? All right, good. You're in the right place. All right. So what we're going to talk about today is just some of the considerations, things that you should be thinking about when you're planning or working on an SCP project. Just a little bit about me. I was employee number four at a company called Exida. We were a company that specialized in doing Iot for OEMs to connect to machines
00:32 and equipment at their customers for doing remote service. We started this actually before it was called Iot and we were later acquired by PTC. So a lot of the. Technology and thinking and so on from exceed have flowed into the ThingWorx product. As part of that experience, I got to work with a lot of companies that were doing Iot projects and I got to see a lot of companies be successful and a lot of companies be not successful. So that's what we want to talk about today. So there's a lot of reasons that projects Iot projects fail that I've seen.
01:05 One of them is they just don't have a compelling business case. Maybe the project gets started because somebody thinks, Oh, this would be kind of cool. Let's see if we can make something work. And then it drags on a little longer than they expected. And then somebody from higher management comes along and goes, Why are we doing this? You know, where's the should we keep funding this, that kind of thing. So the project just fails because somebody didn't really do their homework on what the return was going to be and where it was going to come from.
01:36 The other place that shows up is people underestimate the amount of work. So I'm not here to tell you this is going to be easy or instant or anything like that. It is hard. It can be really rewarding when you do this. You can save a lot of money, make a lot of money and so on. But it's going to take some work. And the place that people often miss Misestimate is will their engineering department be able to figure it out? It's kind of like, okay, we're going to go do this thing that we've never done before as a company. We're going to hand it to a group of guys who've never done it before
02:06 and let's hope they figure it out. And then we're surprised when it takes them longer than we thought. And then the other thing is, even if you did everything correctly, you have something that works. You you're ready to deploy it and then your customers start asking you security questions or you ask the customers to pay and they don't want to pay and that kind of thing. So a customer adoption is often the last thing that gets in the way. And in some ways that's kind of the worst one because you've already invested all the work and effort and now you suddenly find out that people aren't buying what
02:38 you're what you're selling. So anyway, that's the downer part of our presentation. So there's all kinds of reasons things can fail, but they generally fall into these categories. So if you know you have a good business case and you know why you're doing it, then the rest of it we can generally figure out. Notice though, that all these reasons projects fail are not technology problems. There are plenty of technology challenges, don't get me wrong. But. These big failures are almost all business related. They're actually very similar to a company deciding to launch a whole new product.
03:10 It's the same thing. This is not just a feature. It's it's almost a whole nother initiative inside of the company. Now, every Iot project is different. No surprise there. Different industries, different product types , different customers and so on. But they have a lot of commonalities. In the end, we're going to pick data up from the machine. We're going to transport it across the Internet. We're going to get it into the cloud and we're going to present it to people who can then use it. So in that regard, they're very similar.
03:42 And so a lot of things we're going to talk about as we go along are some of these commonalities, some of the things that that you can learn from what other people have done. So your technology needs and selections may be different, but the fundamental physics of the project will be the same. So it's very so my goal today is just help you understand what some of these potential pitfalls are so that you can at least be aware and think ahead so you can plan for them. Now, why do people do? Why do companies do Iot?
04:15 It really comes down into three categories. Make money, save money, or stay out of jail. That's the simple way to put it. But we'll dress that up a little bit. So obviously, if you can connect to products and machines at your customers and you can collect data from them, you can take that information and use it to produce new services, new things that your customers would be willing to pay for. Or you can make your product be able to do things that other people can't do so easily. And you can, even in the long run,
04:45 perhaps move to a pay per use model where the customers are paying for for uses of the equipment as opposed to just paying for it right up front. So there's all kinds of different revenue ways that you can get revenue. But it all starts with I've got to get information coming from these devices. Reducing service costs is a common one, and this is often where people start because the cost problem is easily identifiable, identifiable. I have so many techs and I have so many machines and I have so many service calls I need to make. And each service call costs X amount of dollars.
05:18 So if I can make less service calls, I get two wins. Number one, I save the money for the travel. And number two, the customer satisfaction is better because the the equipment is back up and running faster. And another thing is, if I knew before I went what the problem was, I could take the right parts, do the right thing. So my first time fix rate should be much better. On the managed risk side, sometimes people do Iot projects for no other reason that they're mandated to do something,
05:50 whether that's collect information in the case of certain types of greenhouse gas emissions or, you know, exhaust from engines or things like that. And they need to be able to collect that information to report it, or perhaps they need to be able to monitor equipment so that they can know, for example, why it failed or who was involved when it failed or that kind of thing. But probably the most common one around risk management is software updates. Can I deliver software updates to this equipment so that it's always running
06:23 the latest version without having to invest in sending somebody out there or expecting the customer to get the software update installed correctly, that kind of thing. So there's great reasons why you want to do an Iot project. The question you have to ask yourself is what are your customers want out of an out of your Iot project? Because they probably don't want the same thing you do there. All these things are great. They won't complain about them. But what did they get from you for doing all of this work? And in the end.
06:55 That's a really important distinction. We'll talk more about why here. So first off, a lot of people do Iot projects and the engineers love it because we can connect to the machine and we can collect data. And that's really cool. And it has zero value because we collected all this information is sitting in a database somewhere. If no one is looking at it or using it or analyzing it. If no one is making a decision on the data that you're collecting through Iot, you have created no value. You have only created cost.
07:28 So if you remember nothing else from this whole presentation, it's this one thing you need to keep repeating to people when they come up with more cool ideas like, Oh, we could do this or we could do that. It's like, okay, who is going to be using this data and what are they going to do? So the question to ask yourself is what decisions or what kind of actions will help your customers run their business better or use your equipment better or whatever the case may be?
07:58 And by the way, the data doesn't always have to flow back to you to make decisions. It could flow back to the to your customers and they could be making the decisions or it could flow back to the cloud and you could have logic and other integrations that help automate, automate and make the decisions. But the key thing here is the data is being used and it's making something happen differently. I will often try to get people to talk about, Well, here's how we do it today, here's how we want to do it. And then I try to dig for why or who's the person who's actually making that decision and what do they need to see
08:33 and know to make the right decision to do something differently. If all you do is collect data and you make the same decision you would have made anyway, like they call the 800 numbers, they have a problem. And you say, okay, I'll send a guy and you can do that through Iot. You haven't gained anything. You have to do something different out of all of this. So a great way is if my customer knew X, what would they do differently? Like if my customer knew that that machine had just run for 1800 hours and they should do their maintenance and they did it, that's good.
09:06 If they knew that a machine was reporting increased number of faults and I could send them some advisory that says, Hey, you should look at this or take this corrective action. And they did it. That would be good. The same thing is if I knew Z, if there were things that the machine was telling me and I knew what could I do to help them. So the advisory service is one thing I could. We've had customers who call their customers on the phone and say, Hey, we're seeing a problem. Are you aware of this, that kind of thing. But notice that we're we're starting to take this information that we've collected
09:40 and we're using it. So what are the customers really want? You know, we did the slide on what you want as an OEM making an Iot project. Well, what the customers want is pretty similar. Just they think of it differently. They want to improve their productivity and they get improved productivity by reducing unplanned downtime. So if you could prevent the machine from failing by doing, you know, kind of suggested maintenance or something, or you could tell them what the problem was so they could diagnose it faster.
10:13 More runtime is always good. Even just helping them be able to plan better by knowing information coming from their device or their fleet of devices that they own that can help them be more efficient. Obviously, reducing costs is important, so how can they do enough maintenance? But maybe not too much Like one of the big shifts that can happen here is that you go from change the oil every three months, no matter what, to change the oil when it really matters or when it the use dictates that.
10:47 Another thing that you can do to help customers reduce costs is you can outsource your expertise to them because you know what their machines are doing. You know your machines very well. So could you sell them some services to help them do better? And then lastly, the managed risk, again, different types of services. But the most important thing here is software and security updates. How can I help make sure that your equipment is always up to date and you may have to jump through hoops to be able to do this? Like they've got to put the machine in a certain state or it can only happen at certain times when they say it's okay, that's fine.
11:19 But the fact is you can make sure their machine is always up to date. And probably the best example in the world right now on this is Tesla because they keep delivering updates to customers. I heard the other day they had a braking problem. They recalled a million cars in China and they're going to fix them all remotely through a software update. So that's a pretty powerful thing to aspire to, is to be able to have equipment that you can do that. Being able to articulate this to your customers is the number one is
11:51 the key thing to customer adoption. So when you come to the customer and say, I want to connect your machine to the Internet, by the way, don't ever say that. But if you did, you got to be able to tell them why that's going to be good for them. So I'm going to change course a little bit here and then we'll come back. One of the things that really helps an Iot program is to know where you're going and why. It again, oftentimes these programs kind of start off in a skunkworks fashion or they're done kind of bottoms up and they just organically grow,
12:22 which isn't always the most efficient, but it's really great if the company knows why it's doing Iot. And so this example from the space program, remember if John F Kennedy talked to at Rice University, he gave a speech in 1961 saying we should put a man on the moon in ten years. It took five years before they actually launched a rocket with no people in it. And obviously there were a number of disasters that happened through all of that. But this vision was the thing that kept them on track.
12:52 They knew where they were going and they knew when they needed to get there. So they had invent a bunch of stuff. They had to invent a rocket. They had to invent the command module thing. They had to invent spacesuits and all the stuff that came along with that. And then they had to get the people back. And all of that took eight years, which is kind of incredible when you think about it today. Can't even imagine that happening. But notice how knowing where you're going and when enabled people to keep making progress on the objective. So if you're going to help your program get socialized within your company
13:26 and with your management and so on, they need. Everybody needs to know where they're going and why. So what's the business objective? What are we trying to accomplish by doing this? How are we going to measure our progress? That's probably the most overlooked one of all. Believe it or not, I've more than one Iot program. I've gone in and talked to people two years after they started, and they cannot articulate how they know they're doing a good job. Which is just asking somebody to come and cut your budget. It's just like it's like, please come cut my budget because
13:57 I can't defend why I'm doing this. And then obviously you want to have a target so that you have some accountability and some schedule. So I just wrote an example here. Not the best one in the world, but you know, we're going to deepen customer loyalty and produce new revenue. So there's the why. By providing insights and services around the use of our equipment. There's the what? We intend to have 20% of our customers paying for services by the end of. So we've said and how we're going to monetize this or accomplish
14:27 the return doesn't always have to be about selling stuff and has a deadline. So pretty much in one statement here, everybody kind of knows where we're going, why, how we're going to get there, that kind of thing. Obviously, it'll need a lot more words around this, but that's kind of what you're looking for. Something crystal clear. It could be shorter than this. It could be longer. Okay, so you have your vision, you want to do this project. So now what? Oftentimes what happens is some people will sit around in a room with a whiteboard and they'll make up a list of things. It'd be magical if we could do all these things.
14:59 They get written on the board and then they end up in a requirements document. And then you go talk to vendors and the vendors all say, Yeah, sure, we can do that. And then there will be some kind of evaluation. And at that point, and none of the people who are doing this have ever done it before except the vendors. And so you end up saying, okay, we're going to choose vendor A. And guess what happens? We hand it over to engineering now and all the people involved in the selection process, they leave. And now the engineers are like, okay,
15:29 I've got a product and a vision statement and some stuff I need to do, and then they start figuring it out. And that takes any unknown amount of time. And sometimes they get to do it twice. When they get close to done, they tell marketing, okay, here's what we're making. Marketing go make us a message for the to tell people in marketing does that and then they tell sales, okay, here's what we're doing. So sales is now armed. They don't they've probably not seen a lot of this, but they know, okay, we got to go sell these extra services on top of our service contracts.
16:02 And then finally, we bring the customer in. Hey, Mr. Customer. Look what we're doing for you. And so. That's a lot of work before we actually get to the most important person in the process, which is the guy who's actually going to accept this or adopt it, which is the customer. So anything that can be done to get that customer viewpoint fed back into the process as early as possible. And this is an interesting one because a lot of times, you know, it gets thrown. Ayat Oh, that's technical. Give it to engineering and maybe there'll be
16:34 a product manager, maybe not. There's not a good mechanism to get the customers involved. But really, somebody should take the job of I'm going to go visit our ten biggest, best, most troubled problematic customers or whatever. And I'm going to say, Hey, if we could do something like this, what would matter to you? I guarantee you a couple of things they will come up with at least one thing you would have never thought of. And they'll probably tell you a couple of things you thought of that were really valuable are totally useless to
17:04 them. So you can learn early or learn late. That's the bottom line here. So Iot really is a journey. There is not it doesn't matter what the vendors say, what products are available, whatever. It's very hard to do plug and play of this kind of stuff. It takes because every Iot project is different, right? They have commonality. That's what allows platforms like ThingWorx to exist and to be valuable. But the fact is they're all going to be a little bit different.
17:34 So my route guide would be start with benefits, focus on features that will encourage customer adoption. Why will the customers want you to connect to their machines? It's got to be able to answer that question. If you can't answer that question, you might as well go back and start over. Second thing is when you tell the customers that they respond positively or not. If they liked the idea and so on. Great. You're slowly collecting your early adopters there. The most important people that you have in this process, because they're going to take it first and they're going to tell you if it works
18:06 or not. The next thing is, I guarantee you you will not do it right the first time. Just accept that that's the way it is. No one ever does it right the first time. And by not doing it right, it could be any number of things. You don't collect the right data, you don't connect it, collect it fast enough, you don't present it back to people in the right way. You don't write the right rules. It's okay. That's accept that. That's why it's a journey and not just a trip. You're you're going to learn as you go along. You're going to work off the feedback.
18:37 You're going to discover new things that you can do with the exhaust data that you're getting and so on. So just be be agile, I guess, to use the word of the day. Just be prepared that, okay, we're going to get something working. We're going to get out in front of these early adopters and they're going to tell us what they want next. And we're going to keep building that. And that's really the way most of the successful customers have done it. And then lastly, you know, it's kind of variant of that. You're just going to learn as you go, just accept that this is going to be a learning process. And when you're budgeting or setting up the expectations about this,
19:11 realize it's not going to we're going to sign six guys for six months and then they're done. They're never going to be done because there's always going to be more stuff. So just have to accept that, okay, this is we're building a new piece of our product that we're going to stick on to the side. And if you're expecting it to produce revenue, you've got to take care of the care and feeding. So next thing here is go to market. I've kind of talked about this already, but it's important to realize that when you go talk to your customers,
19:43 you're not selling them Iot. Iot is a tool. It is a nobody. I think somebody from AWS once said nobody wakes up wanting to buy Iot. Iot is this tool that helps you get to where you want to go. So what people want to buy is the value of what you can do, helping them more uptime, less downtime, faster fixes, whatever the case may be. That's what they're buying, not Iot. You didn't even have to mention Iot. Except that it has certain amount of acronym coolness still.
20:19 I can't tell you how many small customers or small companies that I talked to today who are like, We're going to build this Iot thing and we're going to charge people for it. And the problem you run into is if you showed up someplace and you wanted to charge somebody for something, they're going to want to know what they're going to get. So almost expect that you're going to go through a phase where you're going to be giving this away for free. Because what you want is the stories. How did this help somebody?
20:49 Give me some stories that when I start to charge for it, I can go to people and say, hey, here's the kind of things that we're seeing and this is where your metrics and your KPIs could be really good. We're seeing people have less downtime, we're seeing faster response to things. You've got to be able to tell people what they're going to get if they're going to pay. So these customer examples are your best proof of that. So it doesn't have to be super mathematical numbers and all that kind of stuff. Even just stories will help people realize, okay, I have that problem that guy had. If you can help me with that, it's worth something.
21:21 If you can just tell me what's going on. It's worth something. The other thing is you have to be prepared. One of the things that make SCP really interesting and difficult is the fact that you're often connecting to machines and equipment that are at your customers. They're on somebody else's network, which means that somebody else gets to make the rules. So you have to be prepared that you're going to get some questions. So if I walked up to any one of you and I said, Can I have your car keys? What?
21:51 What's the first thing you would. What's the first thing you would think? I guarantee you nobody here is going to say yes or sure, right? It's always no, we're always going to say no. Well, when you go up so I'm going to say this two ways. If I went up and asked to somebody and said, Can I connect your machine to the Internet? They're going to say no because nothing but bad things goes through their head. So you're never going to say that. But if you showed up to somebody and said, Hey, we are going, we have the ability to monitor your machine remotely so that it can do something,
22:26 then now you could at least have a dialog about it. But it's funny how many companies in there again, the technical influence, the engineers all think of it as though we're connecting the machine, the internet. You do not want the sales and marketing guys ever saying that out loud. But I use this as an example just to help you realize how jarring it can be. Sometimes when you go up and ask a customer to say, Hey, let me get on your network. And so they want some assurances. And it generally comes down to.
22:59 What are the perceived risks versus what are the business benefits of allowing this? And as we all know, the answer from all things you ask, it is no. And then you work from there. So kind of the same thing here. It would go there's no way we can let you on our network, blah, blah, blah. Or here, fill out this 300 page questionnaire or whatever the case may be. There's always something, some gates to jump through, but in the end, your business buyer, the IT department. Yes, they have a role in this, no question about it. Their job is to protect the business.
23:29 But the business buyer who's going to see the benefit needs to have enough conviction. There's a benefit there that he can tell the Iot guy, tell the IT guys, we still need this. Figure it out. They can always figure it out, but somebody on the buying side needs to be able to say why it matters. And as part of the Why it matters, we'll also help articulate what the risks truly are, and that will help everybody get more comfortable with the idea and so on. So in customer adoption, you want to sell
24:00 the value of what you're going to be accomplished by making this connection. And you need to be prepared to talk to whoever's the gatekeeper is for getting the connectivity. This is a lot better today where we've got a cellular networks are so good and you can do a lot of things, more things through cellular. So you often don't need to get on the customer's network. The downside is now you have to pay for the connectivity or somebody does. Whereas if you can leverage the customer's network, you can often get the connectivity for free.
24:31 So I mentioned earlier, you know what your metrics are. There's a lot of different ways people measure, but in the beginning, often the most important metric you have is how many devices do I have connected? Because how much value do you get from zero devices connected? The answer is zero times. Any number is still going to be zero. So the so just at the beginning. So let's just see if we can get the first five machines connected and then the first ten, then the first hundred and so on start growing that number because that really will tell you that you've got
25:03 an offer that people are accepting and that you're you're making progress. And. The next another thing you might look at is user logins. So let's say I'm collecting data, I've got a bunch of machines connected, but if nobody's logging in and looking at the data or using it, we're back to zero times any number. So user logins is a proxy for our people logging in and using this, whether it's customer users, service users, whatever. An easy one that we see a lot of times in service organizations is can
25:34 I measure how many trips that we avoided? That sometimes is difficult because they can't always tell if the trip was avoided because of Iot, because of remote service or something else. But I bring this up because this is a great example of a metric that if you build into the program, build into the CRM system, as you're rolling this out, you can collect the data. It may not be perfect, but at least you have some idea. Whereas if you don't collect it, then you're just guessing. Software updates delivers another good one because it has a value.
26:07 Maybe not super visible one, but in the end if we delivered 10,000 updates, that's something you can report back to management. Like hey, we, we delivered 10,000 updates at the cost of the program as opposed to the cost of mailing out 10,000 thumb drives or something. I don't like NPS that much because it's too. It's a trailing metric. It's way too far behind. So if you built a program, you say we're going to measure customer SAT as our metric.
26:37 Sometimes it just can take three years before you really start to see the impact. So try to pick ones that are countable and early and then build up to the NPS. So I've already preached this one enough. Here's another thing that's really valuable. When you do Iot with the customer and you're monitoring their equipment. I once did a project where we monitored machine in a grocery store for 30 days. That was the trial. I've got data from all 30 days for everything that
27:09 the machine did. But the machine never failed. So the customer goes, Oh, well, we didn't see any failure, so we don't think your technology worked. So think about that for a second. No technology worked perfectly. So did your machine. So we have a different we should be having a different conversation. But it just shows how, you know, sometimes the things that aren't seen are discarded or dismissed. Another thing I did at one point in one of my roles was we started sending reports
27:40 to every customer every month about how many devices they had connected, how much data they transferred, how much data they had in storage and all this other kind of just stuff that we had. And customers are calling me. Oh, thank you for this. This is so great because it gave them something they could show their management. The device is connected. Number kept moving up into the right. Or they could see that there was activity happening in the system and that kind of thing. Well, the same thing is true of your customers. If they're monitoring. If you're monitoring a machine. And they don't see you and they get to the end of their one year service contract
28:14 and they go, Well, you didn't do anything. But if they were getting a report every month, it kind of just very subtly reminded them, hey, we're monitoring, everything's okay. We saw this many events. We knew you did this many whatevers that reinforces the value of it so that they see something tangible come out of it. Now, that said, you have to be careful. I once lost a project because another grocery store said, Oh, you know that I can't let you know that out of my store,
28:44 so we're not letting you connect. So this is where there's just all kinds of things that can can come in here. But in the end, we didn't really care how many packages of something they had produced. What we cared about was the machine throwing faults or not. So maybe we needed to go back and re-architect what we were doing. But the number one predictor of Iot success. I, I will say this with 100% certainty. Its executive commitment. If you don't have this program with the vision statement
29:19 and the alignment of all the different departments coming from somebody or a group at the top. You will have either a lot of trouble or you will eventually fail. There's just I've just seen this too many times. It's kind of this same movie over and over again. So somebody with authority has to own the project and the budget. They have to care enough that they go into the management meetings and go, No, we have to keep doing this because. Q Division statement and background music.
29:50 Number two, this person and the management needs to establish governance around this project so that we know who the player every department knows their job. And. And we'll do their job. It's so easy for one department to go, Yeah, we're busy. We're not going to work on it right now. And the whole the whole program gets tanked. You need urgency, deadlines, accountability, like, hey, we're going to get this in five customers hands by the end of the year. And if not, who's going to get in trouble?
30:20 The last thing, the reason you need this executive commitment because Iot is really hard to do halfway or on the cheap, you cannot go half swimming. You are in or you are not in. The people who only go dip a toe in the water, they really struggle. So in the end, just to kind of sum it up, value comes from using data and not collecting it. Talked about that already got to know where you're going or you'll never get there. It's not this is not even though technology is involved, this is ultimately not a technology problem. Success is a business problem and a management problem and a program problem.
30:54 Knowing how to bring all these pieces together. And if you haven't done it before or you're not sure, get somebody to help you. The shameless plug for Transition Technologies. We've done this lots of times before, but regardless, find somebody who's done it before because that experience will save you a lot of do overs and a lot of rework.