Does selling data dilute your brand? Will Industry 4.0 impact your core business negatively – and is the digitization tradeoff worth it? How willing will people be to pay? Is it in high demand… and do people really care?
Earlier this month, the Syncron team touched down in Chicago for the 29th Annual Spring Pricing Workshops & Conference at the Loews Chicago O’Hare Hotel. Hosted by the Professional Pricing Society (PPS), the conference is focused on bringing pricing’s foremost thought-leaders together for events, workshops and online courses to facilitate ongoing learning, networking, and shared experiences.
In between the hustle and bustle, we got to hear from Kristin Harris, Senior Consultant at Simon-Kucher & Partners, on “Monetizing Industrial Internet of Things.” In the session, Harris encouraged us to think about digitization and Industry 4.0 in a different way. We’ve heard how the abundance of data can be used to optimize prices intelligently, but now it’s time to think of the data we collect day to day, and use it for burgeoning monetization opportunities.
The 4th Industrial Revolution: Digital Transformation
As of today, we’re in the fourth run of industrial revolution, or as it’s more commonly known: Industry 4.0. We started in 1784 with the emergence of steam, water, and mechanical production, then headed into 1870 with the division of labor, electricity, and the birth of the modern factory. 1969 brought about new electronics, IT, and computing, but now we’re in the age of a post-millennium jump, where we’re blurring the physical and digital divide – essentially blurring the lines between actual and virtual reality.
Pricing has never been more important than it is in this new digital economy, and digital transformation is the perfect vessel for propelling pricing to the forefront. Industry 4.0 has brought us embedded systems, intelligent objects and cyber systems in product and logistics. There’s a horizontal and vertical integration of customers and business partners into business and supply chain processes, along with a connection of production and service hybrid products; and cloud computing and big data are the place to go for new analysis methods and optimization.
Harris asked the group about digitization in their business, and 93 percent admitted an expected impact of digitization on their business model – but only a quarter saw this as a risk. The other 75% saw digitization as an opportunity – which is exactly what opens the door for untapped potentials in Industry 4.0.
Industry 4.0 Opens New Untapped Potentials
This new revolution of digitization opens the door for traditional sales cycles to change; to evolve from traditional to transformed. Last year, Laura Preslan of Microsoft listed five key differences between traditional organizations and the digitally transformed:
- Where traditional business models are product-based, digitally transformed business are service-based.
- Where traditional mindsets center around selling products, digital mindsets center around selling customer uptime.
- Where traditional pricing models focus on price per unit, transformed pricing models focus on price per hour of uptime.
- Where traditional revenue generators think, “just sell more,” digitally transformed revenue generators sell both products and service.
- Where traditional profit generators come from lowering maintenance costs, the profit lever in digitally transformed organizations lies in maximized product uptime. – sales and optional maintenance
But, with those opportunities, digitization also brings the threat of losing your current customer interface – especially if you don’t make the shift correctly. Business model options vary depending on the disruptive potential of Industry 4.0, including opportunities and customer requirements that arise throughout the process. Businesses need to figure out which products and services need to evolve now to reap the financial benefits in the future.
Where is The Value of Digitization Being Created?
Determining the value of data is measured most easily by the willingness for your customers to pay for new products around digitization. Ask yourself this: What is the perceived value of this data in the market?
Harris provided the example of sold water filtration devices: Devices test water coming through to determine if more chemicals are needed, how clean the water is, etc. They finally realized that if they were already capturing the data constantly, they must not be the only ones who care about that data. That’s why, as businesses reevaluate the way they capture, share and digitize their data, they need to answer the following questions for their revenue model:
- Price Metric: Which metric is suitable to monetize the innovation and transitions?
- Price Level: What is the customer value and what are they willing to pay?
The answers to these questions will ultimately help companies determine the value of transforming for their organizations, their end customers’ and consumers’ performance, and, ultimately, their future financial performance.
Digitization and Industry 4.0 have created an always-connected world. The speed at which data and information travel is faster than ever, and is only expected to increase. And, this on-demand economy has led to a very well-informed customer base with extremely high expectations.
For manufacturers specifically, emerging technologies like IoT, Artificial Intelligence and predictive analytics are providing an opportunity to embrace this digital change. And, to meet increased customer expectations, many leading brands are realizing that an optimized after-sales service organization ultimately improves the customer experience and increases financial performance.