Why is the Internet of Things set to "swamp" CRM?

Speaking at the World Economic Forum in Davos last week, Yahoo chief executive Marissa Mayer confidently predicted that the Internet of Things would create a "tipping point" for businesses this year that will change our lives "like never before". 

Mayer is just the latest of a growing number of tech chiefs that are lauding the Internet of Things as the next big thing. At Dreamforce 2013, Salesforce.com CEO Marc Benioff even devoted his keynote to the topic, putting his particular spin on it by boldly heralding the Internet of Customers. Not quite as bold as his Louboutin sneakers, but the fact that the visionary CEO felt it necessary to focus on the topic gives you an idea of how important it is. 

For a quick introduction, the Internet of Things (or IoT, for short) is a term that’s being thrown around most quarters to describe our vision of a fully connected world. That’s everything connected - your phone, your desktop, your fridge, maybe even your Louboutin sneakers - all streaming data backwards and forwards with the potential for making your life a whole bunch easier.

It’s a grand vision. A little bit sci-fi. So, as a result, most people tend to see IoT as an intangible, Orwellian depiction of what our world will look like in 20 years’ time, when really it’s something that’s happening now, in our homes and perhaps most importantly, in our offices. Benioff’s attempted rebrand is proof of that. Google’s recent purchase of Nest for $3.2bn is an IoT thing. And many people in the know are predicting businesses will dedicate more of their resources into putting IoT into practice this year.

“IoT is gathering pace in 2014 supported by the launch of new chips from AMD in collaboration with ARM, Cisco and Intel, and greater API standardisation which will make it far more cost effective to embed intelligent sensors in a wide variety of products, systems and infrastructure,” says Ovum’s principal CRM analyst, Jeremy Cox. 

“The high-tech industries, particularly automotive, aerospace, healthcare and white goods manufacturers provide some of the more obvious candidates [for adoption] with utilities, transport and real estate following hot on their heels to deliver smarter metering, traffic management and more sustainable energy management solutions.”

Tunde Cockshott, creative consultant for digital marketers, AMAZE, envisages a range of opportunities for brands to capitalise on the emergence of IoT, with businesses able to get real-time, end-to end visibility of logistics chains; identify and fix logistics bottlenecks before they happen; and have networks of IOT devices that can self monitor and adapt to changes in usage and working conditions based on pre-defined heuristics or using learning genetic algorithms.

CRM and IoT

One area that used to get far less IoT attention (until Benioff’s intervention) was CRM. Then Salesforce 1 got an official launch, we were introduced to the Internet of Customers, Salesforce’s plans “to be an advocate for companies to become customer companies”, and before we knew it IoT was all about CRM too.

And when you think about the latest technological advances of CRM, it is the definition of IoT - using Big Data associated with customers and staff, combining it with open data from social media, devices and sensors and building personalised customer experiences around it.

Benioff envisages IoT revolutionising customer engagement. 

"Everything is going to be on the net,”  Benioff told Dreamforce attendees in November. “At the moment I get into the bookstore, I buy the books, but I get no reward because nobody knows who I am. But I will, because it doesn't matter what industry you're in, your industry will transform.” 

It’s the same with toothbrushes he added, brandishing his GPS-enabled Philips Sonicare toothbrush that “knows how I’m brushing, how I’m holding it, where it is in the world,” he said. “When I go to my dentist’s office, he isn’t going to say, ‘Did you brush?’ He’s going to say, ‘What’s your log-in to your Philips account?’"

So what is potentially in store as IoT and CRM converge?

Cockshott points to the ability to change prices and promotions on the fly based on real-time demand. “Once a company starts to have live data streams and aggregated data from historic usage of the devices used and owned by consumers, businesses will have a huge opportunity to find the right time and place to communicate and offer new services," he explains. "No longer will consumer modelling be limited to static and statistical assumptions, instead, it can be based on real behaviours in real-time.”

However, Jeremy Cox believes that far from building on existing strategies, IoT will give brands the opportunity to have more grand ideas, built around fresh sources of value for the customer. 

“While IoT and Big Data offer potential to increase their relevance to customers by gaining deeper insights, and many firms have quite rightly focused on creating a better customer experience to differentiate themselves, this alone does not go far enough to guarantee future relevance," he explains. “Continuous innovation is required and today at a faster pace than ever before. So we encourage firms to develop much broader, more collaborative innovation management practices so that they can adapt to customers changing needs, wants and behaviours at the right pace. What we call being ‘customer-adaptive’.”

He continues: "IoT provides a natural extension to CRM and opens up the opportunity to provide greater value in the products they have purchased. An example could be preventative maintenance by anticipating based on usage and climate, when a part is likely to fail and require replacement. In the automotive space IoT offers the potential for real-time diagnostics and engine performance  tuning to make sure the customer is alerted in advance of a potential component failure or that his or her car is always at peak condition."   

Ed Thompson, VP and distinguished analyst at Gartner Research, is another that sees IoT looming large on CRM's horizon, and he believes that it is already generating innovative customer-centric ideas within some industries. 

"The Internet of Things is going to explode," he says. "It is starting to develop completely new services and completely new economies. There are a whole heap of different things that are being enabled by the fact that the costs of chip sensors is now so low that it is affordable to stick it on to anything you like and then collect that data. 

"You can now get your genes sequenced for $99. And there has been a discussion about privacy regulations around this, as well as discussions from a healthcare insurance legal liability standpoint. But the other side of it is, well for $99 why don’t we just do that as a test for everybody and when someone sees a doctor and does a blood test we also sequence their genes, giving them their information back and advice on what diseases they are most likely to contract, and how they could change their behaviour patterns accordingly or even have a pre-emptive operation. That’s the first step. The second step is that in real-time we could start to monitor you, monitoring your heart rate of blood pressure or glucose rate and transmit that to your doctor and you could take real-time action based on that.

"So is that CRM? Kind of. It’s marketing, it’s customer service, it’s sales, it’s offering you new services. And even if it’s more primitive than that – establishing how many chairs on a railway train are unoccupied at peak time versus other times of the day so that the trains could be reused and configured in a different way – it’s just making things more efficient. So the Internet of Things swamps all of the social, Cloud and Big Data topics we’re talking about at the moment." 

Privacy

Unsurprisingly, the rise of IoT will be accompanied by a growing debate related to data privacy. In an age where customers are more concerned about the use and misuse of their personal data than ever before, this is an issue that is sure to come for the fore and organisations will need to tread carefully as they would with any other source of customer data. 

Cockshott notes: "As we increase the quantity and our ability to leave data trails (or as some call them ‘scents’), and as we interact with connected devices, questions will start to be asked about who owns this data. The consumer, the manufacturer, the retailer or a third party? Other questions will also be raised. For instance: how will my data be used? What will my payback be? And, what about my privacy?"

Cox is in agreement. “Privacy still rears its head as an issue, and there are some governmental moves afoot to give ownership of customer data to the customer,” he says. “Organisations will have to tread warily and seek permission from customers to use information for the good of the customer. Another concern is standardisation. In the future we can imagine all sorts of complex ecosystems that could be snapped together in a trice to create and offer new value, however IoT standards will need to emerge before this can happen.”

Despite this, the Internet of Things seems certain to play an influential part in the future of not only CRM, but business as a whole. As with any seismic shift in technology, IoT will represent both a threat and an opportunity - and to ensure that your business is one of the beneficiaries of its power, Benioff has encouraged brands to see the people behind the connected devices. 

Cox agrees, recommending that we should simply do what businesses should always do: "work from the customer backwards".

He concludes: "Cisco reckons that by 2020 the value [of IoT] to businesses could be as much as $14.4 trillion in additional profits. Firms should explore the potential and how it might offer new opportunities to increase their value and relevance to customers. Those which don’t may find themselves out innovated by smarter companies."