In our work, we have discovered that the most common challenge with Internet of Things (IoT) projects is not the implementation time, learning curve, or even the cost—although all of those issues can prevent a business from realizing its potential with the IoT. The most significant challenge is that many enterprise-level IoT projects lack a clear strategy. The lack of a cohesive plan that incorporates the unique aspects of the IoT and market needs results in these companies struggling to achieve their objectives, with little success.
The opportunity offered with the IoT (an estimated 6.4 billion devices by 2020, with an impact of about 6% of the entire global economy) has lured companies with the promise of new markets and endless horizons, but its novelty has resulted in patchwork approaches or flash-in-the-pan projects that ultimately cost the company time and resources and fail to deliver on the full potential of the IoT. However, a strong framework for approaching IoT projects can ensure that your IoT products and services have the best chance of reaching your target customers and competing in the market. Here are four key areas that build on each other to provide a general structure for an IoT strategy.
Assess Your Company’s Core Competencies
The novelty and promise of the IoT have caused some enterprises to dash headlong into projects that do not appropriately capitalize on the company’s strengths. C.K. Prahald and G. Hamel are credited with developing the concept of core competencies, which they defined as “a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace”. Prahalad and Hamel noted that focusing on the core competencies of your business is key to profitability; their idea was particularly timely, as companies began to turn more to outsourcing to fulfill needs. Using Honda as an example, they showed how its strength in building engines was a core competency that led to the creation of other related products, such lawn mowers and snowblowers. The core competencies of the company act as guiding principles for product and service development.
By understanding what your company does best, you can make well-informed decisions about how the IoT can fit in with your business. Core competencies create part of the framework for your IoT solution and support its eventual growth. Identifying your company’s core strengths is as easy as answering three questions: What can your company do that your competitors cannot easily copy or acquire? Do these strengths allow you to develop new products/services, as well as access potential markets? Do your strengths make a real contribution to your end product or service?
Link Market Opportunities to Your Core Competencies
Selecting the right technology for your company strongly rests on your core competencies. Since every company has different strengths, the market opportunity for IoT-enabled products/services will be different. Understanding where IoT market opportunities intersect with your core competencies involves elucidating what your customers need and how you can supply those needs better than your competitors. This begins with a market needs assessment—are there current or potential customers who could benefit from your product or service? How can your company leverage its platform network effect to take advantage of new opportunities? Take a look at your existing market portfolio and examine how big the existing market is for your product/service. How could your product/service be enhanced through data derived from the IoT? Where would IoT solutions make sense? For example, Amazon sells consumer goods through its website, but one challenge it faces is that consumers may not always remember to log in to make purchases (or they may forget what items are needed when they are online). This is one problem that Amazon Dash can solve: the company delivers IoT-enabled sensors to users, who place the sensors in key areas throughout the home. When a product runs low, users simply need to press the button to order more.
Evaluate Your Value Chain
How ready is your organization to seize the opportunity offered by the IoT? After examining your core competencies and potential market opportunities, it is time to take a hard look at your company’s current productive advantage. Value chain analysis provides significant insight into how your company can leverage its current resources to enhance its IoT success. Are there gaps between where you are and where you want to be? A feasibility assessment and gap analysis are needed to show where your company needs growth before it can move forward with a project. The feasibility assessment should examine not only your inbound and outbound logistics, operations, and marketing/sales, but also take into account human resource management and current technology resources. Many companies find, at this stage, that they need to invest in their technology departments to ensure success for the current project and future implementations.
Clarify and Design
After analyzing your strengths, linking them to possible IoT solutions, and taking a hard look at your resources, you are in a good position to create a short list of possible IoT implementations. These concepts should be prioritized by core competencies, with a focus on those projects that link to multiple competencies (if applicable). This short list of concepts can be used to solicit consumer feedback through surveys and questionnaires. It is also important, at this stage, to tap into expert opinion about your proposed IoT project. While consumers can identify whether or not a product makes life easier, the expert can point out the various ways that the IoT product may provide additional benefits—or may result in costly challenges down the road. As more information becomes available, the short list of possible IoT projects will be narrowed even further, allowing for one or two strong possibilities to emerge. At this point in the process, the construction of a product requirements document (PRD) can help explain the main features of your product or service. It includes all of your earlier research about your IoT-enabled product or service, including a feature matrix and the product roadmap (how you expect the product to be developed, produced, and marketed). It is also at this point that an IoT design team may need to present their ideas for funding approval.
Realizing IoT Success
A lack of clear strategy for IoT implementations is a serious issue, and it can result in a significant waste of resources. However, partnering with an industry expert can enhance your company’s success.
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