IoT Strategy

Cloud Platforms Reshape the Value Chain for Connected Devices

by Brad Russell | Dec. 20, 2016

IoT cloud platforms offer device makers and companies the opportunity to greatly expand the value of products and services. These devices are reshaping the value chain by altering product design and development, manufacturing, marketing, supply chain management, and service after the sale. They also generate new support activities, such as product data analytics and security.

While connectivity and cloud support require additional product costs for device makers, business value is greatly expanded not only by virtue of the value the cloud services add to the product, but also by extending the product’s lifetime through ongoing enhancements and feature expansion. Virtually all areas of business can be enhanced by the data cloud platforms provide.

Product Differentiation

Smart, connected devices open up competitive advantages based on product differentiation that can elevate the consumer conversation above price alone. Convenience, remote control and monitoring, personalization, improved device and data security, and interoperability with other devices can all be differentiating factors when compared to traditional non-connected devices.

Increased product value may be captured in the following ways:

  • Higher retail pricing
  • More aggressive competition at the same price point
  • Consumer bonding to a product ecosystem
  • Monetization through value-added services


Product Development and Manufacturing

Cloud platforms enable a more agile, data-driven approach where new devices can be tested iteratively to accelerate the product development process and produce a more advanced product before market launch. Existing products can be enhanced or repaired through software and firmware updates without service calls or replacement. Also, by pushing more processing requirements to the cloud, hardware costs can be reduced and user interfaces can be simplified.

New control features can be added at the application layer without requiring any modification of the physical product. Lower product manufacturing costs increase consumer adoption and improve overall margins. Cloud-supported devices also enable A/B testing to see how a new product feature works and to see how consumers respond to it. This is a substantial benefit that gives the product development team the ability to conceive and manipulate features as well as measure results.

Supply Chain Management

The benefits of cloud-connected devices for supply chain management are not always obvious in the beginning, but once the device is turned on and connected to the cloud, the device maker knows that it is actively in use. Now, along with production, distribution, and point-of-sale data, manufacturers have a better sense of how long the supply chain takes and how much product is in the pipeline. Immediate feedback on actual sales can trigger orders in the supply chain, especially where retailer data is lacking or responsiveness is slow.

Device Optimization

The telemetry data analytics of cloud platforms are providing manufacturers with a level of information previously unavailable in non-connected products. In the past, manufacturers only knew how people used their products by conducting quantitative surveys or qualitative focus groups. Connected device makers are learning, however, that if you compare consumer-reported product experiences to actual usage data recorded in the cloud, consumers may misreport or misremember their product interactions. Cloud data provides the most reliable record of consumer usage, and therefore enables better optimization of the device.

Product Customization and Personalization

By virtualization of smart devices in the cloud, manufacturers can offer a variety of options for customizing the user experience with options for configuring the control app, notifications and alerts, rules engines that trigger actions, and interconnectedness with other products. With usage data and consumer profiles, manufacturers can proactively offer personalized experiences or offers, such as content recommendations, configuration recommendations, or features based upon a user’s location, time context, or frequency of usage. Great app experiences from initial connectivity to ongoing control create value for the manufacturer and the consumer, while poor app experiences can undermine the product experience, no matter how well-designed the physical product may be.

Marketing Analytics and Business Intelligence

The combination of device telemetry data with consumer profile and preference data gathered in the installation process enables smart product manufacturers to gain much deeper insights into customer interactions. Business intelligence dashboards enable marketing personnel to segment the user base and analyze usage by a number of demographic, lifestyle, and product variables. Patterns of usage can be identified that lead to the development of new features or to the cancellation of unused features. Assumptions about consumer preferences can be tested against actual usage, and segmented testing of application features can be conducted before rolling out to the broader product population.

Big data analytics can be applied to integrate multiple data sources, such as that from devices, weather, the energy grid, and customer GPS, to develop a premium service. An example would be a demand response energy management service offered by a smart thermostat manufacturer in partnership with a utility.

Interoperability

By enabling the interoperability of a connected device with others, either through peer-to-peer connectivity or integration with a home automation app or hub, smart devices expand their utility and their visibility to users of other device brands. While many smart devices are point solutions at this stage of the IoT, the emerging complexity and volume of devices in the home necessitate greater interoperability and simplified control platforms, rather than an app for every device.

E-commerce Integration

Currently, most e-commerce integrations with smart device apps are merchandising links to external sites and are not embedded e-commerce experiences where the transaction is completed in the app. With device use data, manufacturers can extend e-commerce offers for related consumables, such as appliance filters, laundry supplies, replacement bulbs, or repair parts and services.

Connected health, connected car, and connected entertainment platforms can facilitate similarly targeted in-app offers for related products and services, such as a weight loss program for health, automotive service for cars, or premium subscription for content. Data gleaned from these platforms can be used to facilitate device maker e-commerce or to forge mutually beneficial e-commerce partnerships with those operating in the same space.

Improving and Extending the Customer Relationship

With consumer expectations increasing and customer experience becoming the differentiator for so many brands, cloud platforms add value by improving and extending the customer relationship. Cloud-supported customer service tools provide a means to receive, gather, analyze, and respond to events from connected devices. This extended customer relationship is a doorway for cultivating brand loyalty, conducting product education, extending personalized offers, and up-selling or cross-selling related products and services.

The range of benefits above demonstrate the degree to which cloud platforms have redefined many products from largely static, one-off devices to dynamic, data gathering, distribution systems for expanded services. Likewise, the shift from products as hardware to products as hardware, software, and cloud support is radically transforming the processes of manufacturing, marketing, distribution, and customer support. 

This article originally appeared on E-commerce Times.

Further Reading:




Brad Russell

Brad Russell

Research Analyst

Brad Russell explores leading-edge issues in connected consumer electronics, smart home devices and platforms, IoT data privacy and security, and data-driven applications. He has a background in marketing communications, technology startups, and online media. Brad balances the art and science of market research to generate insights that lead to more astute business decision making and value-generating practices.

Brad received his BS degree in advertising and marketing from the University of Texas at Austin. He also earned MDiv and DMin degrees from two leading seminaries with concentrations in ethics and cross-cultural leadership.

INDUSTRY EXPERTISE: Connected Consumer Electronics, Smart Home Devices and Platforms, IoT Data Privacy and Security

© 1998-2017 Parks Associates. All Rights Reserved.