How to Develop Product Strategy for IoT Business?

     

- Three insights on how to develop product strategies for IoT businesses 

Everyone is preparing for the next Internet boom. The IoT. It will change the way you do business. It will change the way you develop products. It can give you a Quantum Leap, exploding your business (learn more at the Quantum Leap conference in Stockholm) Still most companies have not learned from the mistakes made and the success stories.  The product strategy work is critical. And most companies have not built the capabilities of building create-strategic-assets.jpgproduct strategies. If you cannot formulate the direction for success you will have to rely on pure luck. From our work and conferences we have concluded three insights that will affect the way you develop your products and run your IoT business:

 Usage is king

 Many companies focus the design and the marketing to make the customer buy the product in the store. Many designers has put an extraordinary amount into making the products feel attractive to buy. In the packaging, in the feeling and in the feature set. We have seen products were features are included only to attract procurement (even if we know that they want be used.)

This made commercial sense when the buyer analyzed his procurement in the store or from a PowerPoint, excel or maybe just a demo. But the IoT is changing the game.

 In the world of connected products new business models appear. The customer will not pay when they buy the product but when they use the product. This has a direct impact in how we design and develop products. The importance of UX is emphasized. The importance of ease-of-use and even more the Desire to Use (DtU) is to be critical for success.

 Today an average user of a software benefits from less than 15% of the functions you developed. Your customer probably intended to use more as they bought and paid for your product. The new business models will alter this. They will use the functions they pay for or more accurately they will only pay for the functions they use. Your customer will not pay for the 85% they are not using. The Product Management must really make sure that we develop the functions that are used not the functions that are attractive. Also we need to change the concept of “Buying Persona” and “User Personas”. The “User Persona” is the buying persona.

 In the connected IoT world Moment of Truth is not in the store but in the Usage.

 User Life Cycle > Product Life Cycle

In the connected world the offer is continuously being updated with different products and services. We have over many years focused on the product life cycle as a product manager. How do we launch the product, how do we grow it etc. It is of course still relevant but the user life cycle might be more interesting in the IoT world. How shall we grow the customer over the coming years? How do we design a user journey? 

I have seen many IoT concepts over the years (since 1997 when we launched Internet connected electricity meters at ABB). Almost all products I have worked with and come across have been great products adding value to the customers. But unfortunately only to very few customers. We learned to develop from a customer point of view. That’s good. But we haven’t learned how to develop from a customer journey’s point of view. 

Your customer’s behaviors will not change in the same speed as your development. If you thought that the development is your bottleneck for the business think again. The customer behavior will need to change to make great use of the IoT products you are developing. We need to assist our customers in adapting to the world of connectivity. Your IoT product is not an end station it is a beginning for a new way of driving, locking, handling service etc. 

The User Journey, and growing customer share, will be more important than Product life Cycle and Market Share. 

Cluster strategy 

The IoT business is defined by connections. The value of IoT is created via the communication between “things”.  Cooperation between different companies is the foundation of the IoT industry. The network economy is part of the IoT. How we deal and develop cooperation will lay the foundation for your success. To do this we need to make a definition of cooperation.

We need to establish two levels of communication: 

  1. Ecosystem; An industry domain where standards for connections and communications are developed. Within an ecosystem multiple suppliers, partnerships and clusters exist and      compete.
  2. Cluster; A group of companies creating an offer to customer. Within a cluster Partnerships can exist.
  3. Partners;  Two companies with a point to point cooperation creating a common offer.

A customer will choose a Cluster to work with. The customer choice will depend on the trust of the cluster. How well will it work together and how will it develop over time. Someone has to take lead in a cluster securing the short term and long term solution.IoT mingle

The difficult for questions for all companies are: Shall we create our own cluster and own it. Or shall we participate in multiple clusters in the ecosystem?

You must develop a cluster strategy. Shall you invest in one cluster-brand and drive the success of the specific cluster. This means that you will have to secure the success of the cluster. You will drive it as a Keystone strategy.  Alternatively you can participate in multiple clusters, spreading your risk. This is the Niche strategy where you are the best throughout the Ecosystem on a specific area.

The cluster strategy is the most important IoT decision you will need to make!

We have created a movie on how to work with product strategies and how you build your strategic assets. Download it here

 Create Your Strategic Assets

 

 There's also a program for creating executable strategies next year, leading to a certificate in ISPMA Excellence Level Product Strategy.  Read More about the Product Strategy Training

 

About The Author

Magnus's profession is to turn technology into selling products. He has worked with product management for more than 20 years with electronics, software, services and hardware and is a thought leader within high performance Product Management.