A 2017 survey conducted by Cisco, engaging with 1,845 business IoT leaders, showed that 60% of IoT initiatives never passed the Proof-of-Concept (PoC) stage(1). This correlates with the findings of the consulting firm Capgemini’s Digital Transformation Institute, highlighting that – on average – only 36% of the companies deployed IoT solutions at full scale(2).
This is a pretty low success rate, which raised the question: why are these initiatives stalling instead of scaling? What leads a decision-maker to halt and completely stop an innovative project?
Technology capabilities? IoT maturity? Lack of standardization? These are surely wrong answers. CEO’s and board members, tech-savvies or not, have a primary duty to protect and preserve the interests of the shareholders – which equates to maximizing the value of the entity of which they are in charge(3)(4).
Simply put, the decision makers care less about the latest technology breakthroughs or an extensive list of product features than they care about their bottom-line. As such, PoC is a major disservice for both seller and buyer, as it inherently fails to demonstrate the value generated by the IoT project, to focus on proving the technology works.
There is a need to change the paradigm.
As Deloitte’s Chief IoT Technologist Robert Schmid explained at LiveWorx19(5), one must kill proof-of-concept and replace it by a proof-of-value (PoV). The latter shall explicitly articulate value (especially the dollar value – most tangible return among all), mostly using common indicators such as Return on Investment (ROI) or Net Present Value (NVP).
This is not to say that technology aspect and its challenges have to be neglected, but this should come in the discussion at a later stage, as one (or several) item during the risks assessment review. This discussion will even be easier to have if the customer is sold on the value the project brings, and you can demonstrate maturity and expertise in this space (backed up by previous successes, possessing strong know-how or engaging with an expert IoT partner).
To successfully sell an IoT project at scale – as any complex B2B Digital sale (ERP, CRM, desktop virtualization, etc.), one must adopt a value-based approach, not a transactional-based. As stated in many complex solution sales analysis, push of pre-packaged bundles of existing products and services is an increasingly losing proposition in a competitive environment with a cost-down approach.(6)
“Price is what you pay. Value is what you get.” – Warren Buffet
If price is immediately clear to anyone, value (and outcomes) remains hard to comprehend, so once the PoC is done and comes the time to decide whether or not to roll-out at scale, it is impossible for executives to justify a (high) price in the absence of clear understanding of the value.
Similarly, arguing that you have the best product or solutions based on XYZ features to solve a problem is pointless if you haven’t demonstrated that this is a problem your prospect is really facing and that it is worth solving.
Listening to your prospect and understanding what are their pain points and how it impacts the company is the first step to quantify value. What are the benefits of solving a problem should always come first in your analysis – prior to how to solve the problem. Don’t confuse your discovery phase with solutioning.
At a high level, benefits can always be sorted into two categories:
- Decrease of costs (leading to higher profits with increased margin)
- Increase of revenue (leading to higher profits with fixed margin)
The second category is often disregarded by C-levels, as they prefer the certainty of the first. For instance, capturing more market share due to better customer service (increase revenue) cannot be as easily quantified (at least not without extrapolations and market surveys) as a net reduction of your freight expenditure (decrease of costs).
Once the benefits quantification is reviewed and acknowledged by your customer, demonstrating the theoretical worth of the project, you now have a solid basis to continue building your business case and move to the second step of value quantification: establish how to solve the pain point and establish the Total Cost of Ownership (TCO) of the solution. More often than not, you don’t need to be accurate to the penny, as several unknowns might remain – nonetheless, IoT is no different than other complex projects (for instance, TCO calculation for cloud deployment is widely understood now(7)(8)) and, for a given industry, recurring patterns (e.g cost centers) are emerging, enabling organizations to be able to calculate TCO repetitively.
With the quantified benefits and the estimated TCO, it is now possible to start evaluating whether or not the IoT initiative should be considered. Not only this approach does benefit the customer, but also the solution provider – as nobody wants to invest resources and time in a project that will never scale due to lack of economic viability. This first high-level analysis provides a clear and timely “GO/NOGO” gate, does not require lengthy in-field technical evaluation, can be done repeatedly with different prospects or on different problematics (provided that you possess the adequate expertise) and in-time will reinsure all stakeholders to move forward.
In our next article “Find Value in IoT – Part 2”, we will discuss how to validate theoretical value quantification (both benefits and TCO).
At OneSimCard M2M, we are constantly thinking about Value and how we can improve the value of services to our customers. This can take the form of offering 24/7 Tech support for life, outstanding levels of Customer Support, a team of
References:
(1) – The Journey to IoT Value: Challenges, Breakthroughs, and Best Practices – May 2017, by Cisco
(2) – Unlocking the business value of IoT in operations – October 2017, by Capgemini
(3) – Definition of Chief Executive Office, Wikipedia
(4) – Financial Definition of Chief Executive Office, by Merriam-Webster
(7) – Cloud Economics: Making the Business Case for Cloud, 2014, KPMG