The Internet of Things (IoT) promises to turn virtually every product company into a service organization. With sensors embedded into products, the relationship between companies and customers changes, opening up the ability (if it hadn’t existed before) of an ongoing service relationship.
“How we run a company is going to change, very dramatically. How we organize ourselves as companies is going to be changing because of the impact of smart, connected products on the nature of work, on the nature of what companies have to do,” said Harvard Business School Professor Michael E. Porter, speaking at the LiveWorx15, a conference held last month in Boston, MA, examining the business implications of the Internet of Things.
Customer service will become more important than ever before. Said Porter, “We now have to take ownership of this product forever. We can’t just sell it and say, ‘We’re done.’ We’re responsible for how it works.”
This follows on the already burgeoning trend of “servitization,” but ups the stakes as smart connected products pump out data in real-time or near real-time.
Here are five ways service organizations and manufacturers will be affected:
1) Product Manufacturers Will Evolve to “Product as Service” Providers: According to Porter, manufacturers will be the most affected as products go smart. Currently, manufacturers design, build and sell products. Consumers buy these products and own them, with the understanding that when they break down they must get them fixed. To hedge against unknown costs of a repair and for convenience, consumers buy a service contract that covers the product when problems occur. But with monitors embedded inside, manufacturers now have access to product data and the ability to anticipate, reduce and repair failures. Indeed, by looping back this information to product design, manufacturers have the ability to fix the design fault and optimize performance. This, however, would eat into their business of selling spare parts and service contracts. Manufacturers — especially consumer products companies — may evolve to offer their products as a service, though the challenge will be to figure out the pricing model.
2) More than Ever Service Departments Must Shift to Being Proactive, Rather than Reactive: It’s a catchphrase that common in customer service, but as more products have sensors embedded into them monitoring their performance, service departments will need to respond much more quickly. It’s not just about sending out a technician quickly, but as technology improves, it will be about anticipating and correcting predicted failures.
3) Big Data and Its Analysis Will Be More Important Than Ever: The shift to “proactive” will put the onus on service departments not just to capture and manage this data, but to fully understand this data and put it to work. To move toward a proactive organization, companies will need to install analytics platforms, including platforms to tell them in real-time what’s happening to their products; descriptive analytics to help them make sense of data; diagnostic analytics to help them understand why products are behaving the way they do, predictive analytics to tell them what might happen next, and prescriptive analytics to help prevent problems from occurring.
4) The Evolving Role of Service Employees: Expect a shake up in the role of service technicians. As products become smarter, some of the roles that humans currently fill in service, will be fulfilled by the products themselves. Instead of humans gathering data on how a product performs, the data will be automatically captured. Human workers can be responsible for more products or a fleet of products, rather than individual units. Service organizations will also need to expand whom they hire. They will need to increase employees in software development, data science, and systems integration. Porter said this will be one of the greatest challenges for companies - finding the right employees with the right skills.
5) Increased, Yes, Increased Customer Expectations: Customer expectations are already thought to be through the roof, but when products become connected, those expectations will only ratchet up even more. While smart connected devices or equipment will allow companies to better monitor and respond to glitches or breakdowns, it will also put companies under the spotlight like never before. Porter said, “We’re going to have an opportunity for differentiation, but we’re going to be held accountable in ways we’ve never been held accountable before.”