Business leaders today face unprecedented challenges, in part due to the astonishing rate of technological advancement. The main topic of discussion at the World Economic Forum in Davos in January this year revolved around the impact of digital technology and the Internet of Things, which is set to revolutionize the way businesses serve their customers. In this new age, there are great commercial opportunities for those that utilize this new technology effectively.
At the moment, much of this potential is being lost because the data is not being fully utilized. However, if businesses do draw on it effectively, the new industrial wave could generate up to $11.1 trillion a year by 2025, according to McKinsey.
Technology unleashes new potential
Harvard professor Michael Porter, a globally recognized authority on competitiveness, believes the Internet of Things is reshaping business and society. The rise of smart, digitally connected products will, he writes in Harvard Business Review, “generate real-time readings that are unprecedented in their variety and volume. Data now stands on par with people, technology, and capital as a core asset of the corporation and in many businesses is perhaps becoming the decisive asset.”
While technology might unleash a new industrial revolution, we are also living in an age where our economic activities are threatening the planet on which we all depend. The great challenge, therefore, is for business leaders also to develop models that draw less and less on finite, non-renewable resources such as metals and minerals and reduces carbon emissions, offsetting two of the biggest environmental challenges we face: resource scarcity and global warming.
Sustainable economic growth is circular
There is a way forward which addresses both these issues and could help businesses to both engage their customers and develop a more environmentally friendly approach to commerce known as the circular economy, in which goods are designed to be recycled, reused, refurbished or remanufactured, extending their product life cycles. The circular economy concept, informed by such ideas as cradle to cradle, is also about driving towards a low carbon economy and utilizing healthy materials to make products, all of which lends itself to creating positive closed loop manufacturing systems.
This is the ideal. But how do we get there? The answer could be through developing service-based models, facilitated by servitization, in which customers demand smarter, added value services. Instead of selling an asset in a one-off transaction, the supplier provides a service such as selling the service of light rather than supplying lighting products or providing on-going medical scans rather than a scanner. This model is already familiar in some sectors such as office technology.
Customer service is at the heart of the new economy
But the revolutionary shift is that more and more suppliers can go down this road. Porter describes how the service-based model, underpinned by the Internet of Things, will boost customer engagement: “The ability to remain connected to the product and track how it’s being used shifts the focus of a company’s customer relationship from selling—often a predominantly onetimetransaction—to maximizing the customer’s value from the product over time. This opens up important new requirements and opportunities for marketing and sales.” They will maintain ownership of the product and will often be responsible, as part of the deal, for servicing it during use. The Internet of Things means that most suppliers will be able to monitor and keep in constant touch with their equipment digitally, facilitating an enhanced service: they can optimize the equipment, predict problems before they occur and fix them without breakdowns and radically improve minute by minute, their understanding of customer behaviour and needs.