Two: Continuous Value Delivery
In the previous post, we explored how you can take the first steps in your Real-Time business transformation, and the importance of getting off on the right foot by digging deeper in order to solve real problems and deliver unique value. Now, we turn to the approach of creating and capturing the value of our connected product.
The functionality, value, and services a product delivers is no longer set in stone once it rolls out of production. In the past, products were often designed and released in distinct generations. Now, a manufacturer can remain connected to their customers and partners through the data provided by sensors and by conducting continual user research and design. Thus, the product becomes a conduit for dialogue between the two parties. Just as a dialogue between two people evolves with the maturity of the relationship, so too do user needs and the tech ecosystem. Therefore, a connected product that is worthy of a customer’s investment should also evolve to provide maximum value over the course of its lifespan, and not remain the same as on the day it was purchased. To fulfill this, connected products should deliver updates to the software running the device to address new performance or security issues, along with delivering new features that support evolving user needs and usability.
Delivering a continuous stream of new value beyond the initial sale, where designing for usability includes designing for upgradability, can enable recurring revenue and kick start new business models. Many product-based industrial companies are beginning to view themselves as service companies, where the product is a means of delivering that service value. For example, Rolls-Royce has created a “power-by-the-hour” model where rather than paying a fixed price for engines plus maintenance, airlines are instead charged by the hour that the engine is used in flight. This creates a win-win situation for all parties involved, as it aligns the long-term interests of the organization and the customer.
Joy Global has produced machines and parts for mining companies since 1884, and recently transformed its business in an equally compelling manner. In 2008, they connected multiple mines in South Africa through a proprietary IoT system and created “The South African Smart Service Center”. The center collected and analyzed data from their customers’ mining locations to identify bottlenecks and other issues that were impacting performance and productivity. This new offering, “Smart Services”, has grown to encompass six centers where data from Joy’s global network of customers are evaluated and benchmarked. In one instance, a customer’s mine was operating at 50% utilization. Once this new service was implemented at that location, it resulted in more than $100 million in additional revenue. Here, Joy has created a larger IoT ecosystem of shared data where direct competitors began to see the value of greater data openness amongst each other in order to improve their own systems and processes. For Joy, this new offering unlocked the door to new business model offerings such as performance-based service contracts that include guaranteed uptime. In these models, Joy share in the risk and reward of its clients’ performance.
Looking towards the future with a more consumer facing example, automaker BMW is positioning itself for continuous value delivery. Thom Brenner, VP of Digital Life at the company recently stated, “We think the future of sheer driving pleasure will go beyond driving. It will start before you enter the car and it will end after you leave the car. We will make sure BMW cars perfectly and smoothly integrate the way you live your everyday life and use your digital devices and services.” As the first offering from its BMW Connected program, the company recently presented their personal assistant application which promises “seamless mobility” by providing timely traffic info, finding parking spaces, contact notification, and more.
Now that real-time data is available from the product itself, companies can rapidly ingest it, learn from it, and pair it with qualitative user research to iterate upon their product in far shorter cycles. To the consumer, these are continual updates and improvements to their investment. For the company, one major challenge in achieving a real-time design and development is in designing nimbler, cross-disciplined teams where the members possess different skills and attitudes or dispositions. While I am not focusing on that design challenge in this post, its significance must be strongly noted as it can often be one of the tallest hurdles in the path to transformation.
As an organization begins to view their product as a means to achieve continuous value delivery, it will shift how they will need to approach the design of the product itself. In the next post, we’ll take a look at how brand identity, sociocultural context, real world context, and product failure must be addressed with thoughtful design practices.