Scott Nelson, CTO & EVP, Logic PD
No one is questioning whether the Internet of Things (IoT) is affecting their business anymore. The disruptive part of IoT is not that it is a technology disruption like Moore’s Law but rather a full techno business disruption like the Internet. IBM is now calling IoT the “Economy of Things” to drive home that it is as much about business models as the interoperability of wireless devices.
As such, there is no shortage of advice for C-level executives. As a CTO, I routinely receive articles intended for both CIO’s and CTO’s but because of my focus on new product development and design, I gravitate to those meant for CMO’s What I have found is that the media streams for each C-member are advising them on how not to get disinter mediated from corporate strategy as a result of the IoT.
• Gartner is advising CIO’s to pay more attention to operations so that they do not get absorbed by operational team members IT vs. OT so to speak.
• Others are advising CIO’s to become more tech savvy so that they don’t lose their position at the strategy table to CTO’s who learn how IT systems impact IoT solutions.
• Accenture is telling marketing executives to “go digital” or go home. Their future could be in the hands of a new role called the Chief Digital Officer who not only markets the digital offerings but also delivers and monitors them through IT based systems.
So let’s look at what CxO’s need to do to help their companies succeed in the business of IoT and how they can become the strategy leaders to drive that success. One of the indicators is that CEOs are getting to become more tech savvy and CFOs are being told to become more strategic to do their jobs in the IoT. These are the classic domains of the CTO and CIO so it’s intuitive that they must prepare themselves to help his/her peers with their new challenges. CTOs and CIO’s have the opportunity to be the technical glue that holds the C-suite together. But the CMO who embraces digital technology can leverage their market awareness to expand their impact and influence on corporate strategy.
To be a leader of digital strategy in an IoT business the CxO must become proficient in three key areas: understanding Product as a Service (PaaS) solutions which means Software as a Service (SaaS) technology; creating an intimate connection between the flow of data and the flow of revenue; and maintaining an intense, continuous focus on user value. Let’s examine each.
Software-as-a-Service is not new but I feel most view it as a business or pricing model as opposed to a technology. Trust me, it’s a technology. SaaS impacts the design of both physical products in connecting to networks and the Internet as well as the software that drives the applications.
If your company sells devices or products that connect to the physical world, i.e. you are working at the edge of the IoT, then your device must communicate over networks in a secure and cost effective manner to support the subscription business propositions that IoT demands. Networks have usage costs so the connectivity must be optimized for financial efficiency as well as the usual power, reliability and timing efficiencies of the application o r control loop. SaaS lives on Application Programming Interfaces (APIs) – they create interoperability where none exists at the physical layer as well between information systems like Enterprise Resource Planning (ERPs) and Electronic Health Record (EHRs) platforms.
Your device and solution architecture must include both an API strategy and the capabilities to implement. SaaS also assumes reuse– it’s a multi-tenant proposition. If your IoT solution is unique to a customer or application, how will it scale to provide the expected return? Product as a Service is becoming the norm in the IoT and SaaS is the heart of that proposition. My advice - become fluent in the technology as well as the business model it drives.
Connecting Data and Revenue
This could be the toughest pivot for the traditional business executives–the intimate connection between the use of the product and the revenue it will generate. I could summarize this pivot with–become a product manager. Subscription driven offerings will have multiple layers of technology from fixed sensing at the edge to secure data streaming and to API driven interoperability. Every step has both a technical instantiation and a financial implication. To drive strategy you must understand not only how the product works but also the implications the use of the product will have on both the expense and revenue of the business at multiple points in time. In the IoT, the use of a product generates data that becomes the basis of more revenue. You have to understand that relationship to take advantage of the opportunity.
Financially modeling the new random variables of an IoT offering, e.g. churn, adoption, and usage, is not something many traditional product financial executives are familiar doing. Acquiring new processes to better understand the financial impact of the technology decisions from the manufactured costs of the product to the subscription revenue is required to demonstrate potential profitability over time.
This is the reality of the IoT seamless integration of technology with finance. My advice – gain intimate knowledge of what data is being captured, for what it is being used and what the data can uncover.
Consumer product CxO’s will likely say “duh” to my next point. In the consumer product world the proposition is always keenly focused on a consumer need and their experience with the product. In the world of IoT, the user makes a decision about whether to continue to use the service at each and every experience. So even though your IoT offering maybe an enterprise sale, the product must not just satisfy user needs at the point of purchase, but at every use.
“IoT being techno-business eruption calls for being transparent to the end user’s needs, mastering SaaS and being fluent to the relationship between flow of data and flow of revenue for the CxO”
Good CxOs of traditional product companies drive both the performance and quality of their products. A digital strategy must prevent churn and that means an intense focus on user-value. My advice gets to know your user from more than a marketing perspective; understand not only their needs and wants but also how the product fits into their lives. Technology should not be disruptive but rather transparent to user’s in order to deliver true value.
The IoT is stressing everyone in the C-suite but it is creating new opportunity as well. In the new digital business world someone in the C-suite must advise the CEO on the technical vision for digital business success or create it for them. They must help the CFO understand how revenue and costs will flow from not just products but the indeterminate use of those products. The future is bright for tech savvy CxO’s in the IoT.
So don’t relax your diligence in engineering, IT systems or market research, but get out of your comfort zone. Find a designer to help you understand the fickle behavior of users. Pick up book or take a class on finance and accounting at some level it’s just math. And dig into the rapidly changing world of SaaS. Without that integration your best, most patented device will sit on the shelf waiting for someone to introduce it to the world of IoT.