David Parker, Global SVP, SAP
It is widely recognized that machine-to-machine (M2M) communications and the Internet of Things (IoT) are transforming the way we live and work. We encounter digital services every day, from online shopping, to using a mobile device for making travel arrangements, to filling out expense reports while waiting for our flight.
“IoT is transformational because brilliant customer service is turned into a business opportunity, laying the foundation of a vibrant digital business ecosystem”
Even our cars and homes are becoming smarter, with connected components that tell us where we are or when we need a service or that gives us remote control capabilities, and even allows us to personalized automated features. Yet as familiar as these experiences are, and as important as digital services like these have become to our lives and our work, most businesses are just beginning to realize the true transformational power of IoT technologies.
Consider this example. If you have ever visited the city of Montreal, Canada, you may have noticed that Montreal has an outstanding mass transit system. Several years ago, as part of an effort to encourage more use of public transit in Montreal, the Montreal Transit Corporation (STM) developed a mobile app designed to make the public transit experience more enjoyable and richer for consumers. This app, called STM Merci, provides smartphone users basic transit information about subways and busses, including route information, schedules, and delays (all made possible through real-time M2M communications between transit equipment and back-end systems). STM Merci also provides context-sensitive information from local participating merchants that are personalized to the consumer. For instance transit users can opt to receive timely offers from certain businesses located on their route. If a participating business is familiar with that consumer’s shopping habits, such real-time offers can be highly personalized. Transit system customers can also use the app to find nearby businesses such as restaurants. STM Merci is a business-to-business-to-consumer application that works in real time. It is also very popular. Within 48 hours of its release, STM Merci became Canada’s most frequently downloaded lifestyle app.
STM Merci has proven to be highly successful in fulfilling its original mission. Nearly one quarter of regular transit users increased their use of the public transit system after downloading the app. Over half found new destinations they could reach by public transit. These are gratifying statistics that speak to the success of STM Merci, but something else has happened that was not expected.
STM Merci users are also spending more money at participating businesses. STM reports that their app is directly responsible for nearly 3000 new business transactions every day, and the number of businesses that want to become STM partners is growing fast. There are now over 1300 participating businesses. What began as an effort to improve the public transit system user experience has turned into a new digital economy built around transit system users themselves. This is an important lesson in the burgeoning digital economy. By using M2M communications to turn better customer service into business opportunity, the IoT has become the foundation of a digital business ecosystem that did not exist before. That is transformational. What does this mean to the way traditional enterprises operate? Let’s look at another example.
How the IoT Connects Customer Engagement to Enterprise Operations
Several years ago a major home improvement retailer launched a mobile app that helps customers find and purchase products, either while they are off-site or in the store. If the customer is in a store, the application tells exactly where in the store a particular product is located and how many items are in stock. It has other features too, including enabling customers to purchase a product for delivery or for pick-up at a designated store location, build custom project and wish lists, submit product reviews, and accept alerts for special offers.
This application offers a new engagement experience for customers. It makes finding products in a store faster and easier with less reliance on in-store staff. It also provides a way for the retailer to bridge the online and in-store experiences they offer their customers. But this app does something more. It provides a deeper connection between the customer and enterprise operations that have traditionally been far removed from customer facing activities. Here are some examples:
• Data generated by the “connected customer” such as individual customer purchasing patterns, time in store, time between search and purchase,combined with other data such astransaction activity, inventory,offers and promotions, and other relevant context specific information (weather conditions for instance), becomes available for analysis in real time. This enables the retailer to customize special offers, more accurately measure the effectiveness of offers and promotions in real time, and to more accurately forecast inventory needs.
• More accurate forecasting means marketing strategies and supply chain management become more tightly linked, and both become more responsive to predictive assessments of customer behaviors.
• With deeper knowledge of customer history and interests, it becomes possible to leverage stronger customer relationships into new business opportunities. This retailer already has partnerships with contractors. That partnership network can be expanded to offer customers complementary and more personalized products and services, and life-cycle services, some of which may be based on connected sensors built into products the customers purchase.
Increasingly the IoT is becoming the connective tissue of the supply chain itself, all the way from distribution networks to manufactures to component sourcing and raw materials. Supply chain management systems rely on IoT data to track, trace, and manage the flow of wholesale goods. In the digital economy, all these activities are more tightly integrated so that they become more directly responsive to the front end customers.
IT Investments Must Be Customer Centric
The IoT, combined with advanced analytics that make sense of large streams of real-time data and business applications that respond to IoT triggers, becomes the basis for more efficient and profitable business operations. But that alone is not enough.
Businesses must recognize that in the digital economy, consumers have tremendous power. If they become frustrated or dissatisfied with an experience, they can switch to a competitor at the touch of a smartphone screen. To be competitive and profitable in the digital economy, a business must have deep visibility into its processes and costs so that when it sells a product to a customer, the business knows that product will appeal to that customer based on price, quality, and functionality. Such insight can only come from a robust, real-time platform capable of supporting the different data types and processing requirements of the digital economy. Ready-made off the shelf solutions will be a prerequisite to helping businesses transform in ways that enable them to more effectively service the new breed of intelligent consumers.