Internet of Things (IoT) solutions offer tremendous and disruptive value for customers. However, IoT solutions sometimes have the unintended effect of adversely impacting the channel that they’re sold and serviced through. This results in slow adoption of IoT solutions, even if those solutions have significant and tangible customer value.
IoT Channel Sales – Common Mistakes
Mistake #1 – Overlooking Stakeholders
While many IoT vendors understand the concept of product-market fit, a common mistake that many product managers make is to overlook or understate the impact of the solution on stakeholders that “touch” the solution beyond the end user customer (Figure One).
When the needs of all the primary and secondary stakeholders are aligned with the solution, market adoption is facilitated. When the needs of these stakeholders conflict, market adoption is slowed or even stopped.
One example of an external stakeholder is the channel reseller. Many manufacturers incorporate a channel strategy to market, sell, and service their products in order to scale the business. The channel can be a one-tier channel (manufacturer sells directly to a reseller, who then resells it to the end-customer) or a two-tier channel (manufacturer sells to a distributor, who then resells it to a reseller, who finally resells it to the end-customer).
Consider an IoT-based predictive maintenance solution for commercial heating, ventilation, and air conditioning (HVAC) systems:
With this solution, the channel resellers will now know when the parts in the HVAC system are wearing out and a proactive service call is needed. While this assures the customers that their HVAC system will have minimum downtime, it may not be so good for the reseller. Prior to the incorporation of IoT into an HVAC system, channel resellers may have set up a service agreement with the end user where they would perform routine maintenance four times a year.
With the IoT solution in place, it may reveal that they only need to come out once or twice a year to do maintenance. The reduced number of visits mean that their revenue from service calls is also reduced. Given this reality, the channel resellers have no incentive to adopt the predictive maintenance solution.
Mistake #2 – Looking at Product-Market Fit as Static
A second common mistake is to look at product-market fit from a static perspective. In fact, the product manager must look at the product-market fit over the solution’s entire lifecycle from purchase to retirement (Figure Two).
At each of the stages over the lifecycle, there may be different people or organizations “touching” the solution and performing a slightly different task in support of common activities. Problems arise when the needs of each party are inconsistent or misaligned.
Conflicts or friction arise between the buyer, the vendor, and the other affected stakeholders when there is a misalignment of their needs. These needs may include performance, cost, revenue, operating efficiency, roles, and responsibilities. Some of these misalignments may be managed, while others may be more severe and require a solution redesign.
4 Best Practices to Remove Friction and Overcome Slow Adoption
1. Expand Product-Market Fit Analysis Over the Entire Solution Lifecycle
As you design your IoT solutions, map out the different stakeholders that touch your product, from the time it leaves your hands to the time it’s retired from use. Identify who they are, why the customer buys from them, the tasks they do, the value they add, and how they make their money.
How does your solution impact the services the channel provides, their value, and their financials? What is changed and/or disintermediated?
It isn’t always possible to avoid disintermediation. But with this understanding, work with the channel to co-create a solution that removes the friction points, creating new value and opportunities.
2. Create New Value Beyond Product Innovation
Product managers must think beyond product and technological innovation. IoT solutions can also provide business model, service, and customer experience innovation. When designing the IoT solution with the channel needs in mind, look for opportunities to create these forms of innovation that will provide significant value for all stakeholders.
Customer experience innovation transforms the “customer journey.” It re-imagines how a customer uses a product or service. It uses data collected to create new processes, business partnerships, organizations, and technology to support the new journey.
Examples include Apple iPod/iTunes changing how we buy and listen to music, Uber changing how we go from one place to another, Netflix changing how we watch television, and Amazon Echo (“Alexa”) changing how we control devices.
Services innovation transforms how, what, and when a service is rendered, and who it is being offered to. It enhances a current value or creates an entirely new value that wasn’t possible before. A product can also be transformed into a service (e.g. car rentals).
Some examples include Software-as-a-Service changing how we buy software, Uber changing how we go from one place to another, and Amazon Web Services changing how businesses use IT infrastructure.
Business model innovation. A business model describes how an organization creates and delivers value to its customers. It’s defined by nine parts: customer types, value to customers, sales channels, customer relationship types, revenue sources, operating resources, operational activities, key partnerships, and cost structure. Business model innovation transforms these nine parts to create new value for existing customers or for an entirely new customer base.
Some examples include Amazon Web Services’ “IT pay for your use” model, ZipCar’s “car sharing” model, and Apple’s iPhone app ecosystem model.
3. Develop Marketing Programs that Incentivize the Channel to Pursue “Green Field” Opportunities
It isn’t always possible to redesign the solution and eliminate the misalignment between the stakeholders. In this scenario, develop marketing and channel programs that allow the channel to target new opportunities where the solution provides a significant competitive advantage. This will allow them to create new revenue streams that will offset any loss of revenues from the current business.
Recall the predictive maintenance example above, in which the reseller is reluctant to offer the IoT-based solution because their services revenues would decrease. Instead, the reseller can offer the solution to new customers (those it never had, including those customers who use a competitor’s solutions). The new solution may give them a unique and compelling competitive advantage and offset potential revenue decreases when their customers convert to the new IoT solution in the future.
4. Help Your Channel Identify Suitable Niches within their Existing Customer Base
While the channel may be reluctant to offer your IoT solution to all of their existing customers, there may be pockets within their customer base where your solution is in alignment with the reseller’s needs.
They may have existing customers where the cost to service them is high, or the revenue impact is minimal, or are considering alternative offerings from other vendors. Help the channel understand what these opportunities are, identify the target customer profiles, and develop conversion campaigns that allow them to sell to these customer niches.