How IoT Is Changing B2B Business Models
B2C gets most of the attention when it comes to the Internet of Things (IoT). But with B2B applications set to account for nearly 70% of the value IoT unlocks, manufacturers and B2B organizations are adapting their business models to take advantage of the IoT opportunity.
What’s the IoT opportunity for B2B?
Put simply, the Internet of Things is a network of connected devices that collect and exchange data. With an ever-growing number of these devices capturing vast amounts of data, IoT products are opening up new opportunities for B2B organizations to grow beyond their traditional markets, drive innovation, and open new revenue streams.
Businesses that seize the IoT opportunity can look forward to some compelling advantages:
- Stronger Customer Relationships – Thanks to the data that IoT products unlock, product manufacturers for the first time have more information about the end user than their intermediary or retail ‘middlemen’. IoT data empowers these businesses to optimize the customer experience by using real-time insight about their behaviors.
- Predictive Maintenance – Thanks to sensors collecting data in IoT products, product manufacturers can pre-empt issues and predict when equipment is wearing or is in need of repair. According to McKinsey, this could reduce maintenance costs by as much as 40% and halve unplanned downtime.
- Optimized Products – By replacing assumptions with real-time data about how products are used by customers, IoT can drastically improve how products are designed, produced, marketed, and serviced.
- Supply Chain Efficiencies – With more Internet-connected equipment and vehicles, there will be more visibility across the entire supply chain providing genuine end-to-end shipment tracking.
- Inventory Efficiencies – Managing inventory levels and being able to replenish stocks efficiently is a constant challenge for manufacturers. But as IoT products automatically reorder consumables and parts as and when they’re needed, there’s a reduced need to hold large amounts of inventory.
So how are B2B business models changing to take advantage of these opportunities and unlock new revenue streams?
From Graze to Heidelberg, we’re already seeing a host of brand manufacturers jump on the direct-to-consumer (D2C) opportunity. Where a brand can provide a compelling reason for a customer to shop from them directly, there’s clearly an opportunity to unlock new revenue streams, drive higher margins, and own the customer experience.
As we’ve seen with high-profile D2C failures, customers might not initially seek out products on dedicated websites unless they have a very strong incentive. But thanks to the quality (and quantity) of data captured by IoT product sensors, industrial goods and product manufacturers can use real-time insight to offer a compelling reason for customers to engage with them directly in exchange for value-added services. Further, product manufacturers are recognizing the need to deliver value over and above their physical products, and they are using sensors, software, and services to grow the value of their products. IoT data can also be marketed to other businesses opening up new B2B channels.
Expect to see a further blurring of lines between B2C and B2B business models, and B2B and B2C companies competing for new (and sometimes the same) markets.
Recurring Revenue Models
IoT offers the opportunity to transform potential one-time buyers into long-term, repeat customers through recurring business models.
As we reach a point where almost anything can be sold as a service, manufacturers will use IoT sensor data collection to launch pay-as-you-go and subscription-based services that create more sustainable revenue streams. We may even see IoT product manufacturers charge for the service and volume of data processed, rather than for the hardware itself.
Achieving better digital experiences for customers requires business to business organizations to solve the complexity of the sales ecosystem, and these B2B subscriptions will only survive if they provide clear customer value, whether that’s convenience, or simplifying the B2B purchase process. Thankfully, B2B subscription models aren’t a massive step away from regular B2B buying (in which customers tend to buy regularly, in bulk, from the same branded manufacturers).
From printers that order ink when levels are low to servers that can proactively maintain themselves, IoT devices provide an opportunity for manufacturers to expand into services and unlock new revenue streams, creating a more predictable revenue stream along the way.
Machine learning provides a means for B2B organizations to transform IoT sensor data into actionable insight.
As organizations look to automate processes such as sales and customer support, machine-learning insights will be key to taking relevant data and using that to perform a host of actions, from automatically generating a quote that best fits with an individual buyer’s expectations, to identifying which product images are most likely to result in a sale.
Companies are already seeing great value in using machine learning, in combination with personalization APIs, to help corporate buyers seamlessly procure what they need. And some companies are launching dedicated AI centers and IoT platforms on which to run IoT services and apps.
Machine learning will help manage and automate elements of the buying process, as well as providing invaluable insight to sales teams through assessing buyer habits over time and predicting order preferences and quantities. A chatbot, for example, can register a customer’s pain points and recommend a solution based on insights gleaned from machine-learning in a cost-effective way that frees up staff time.
Of course, machine learning comes with its own challenges. Business-to-business organizations will need to develop or purchase analytical software and algorithms that can extract actionable insight from the vast amount of data IoT will generate. But once implemented and correctly programmed, the opportunities provided by machine learning are almost limitless.
Overcoming IoT Challenges
IoT provides the opportunity to get closer to customers than ever before, but becoming a genuinely customer-centric organization will require businesses to establish the right structures, processes, and practices to support innovation and digital experimentation.
When it comes to technology, now, more than ever, B2B organizations need a robust eCommerce shop that enables them to sell directly to customers, as well as receiving and processing information from IoT sensors in physical products.
About Nicholas Weber and Inviqa
Nicholas Weber is a senior consultant with Inviqa’s digital strategy consulting practice. Inviqa is one of Europe’s most acclaimed Magento Commerce partners. Our award-winning work is helping B2B and B2C organizations to achieve their goals faster, accelerate growth, and drive innovation.