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Things start to get interesting

The 'internet of things' is the term used to describe how chips can be embedded into everything from washing machines to jet engines, enabling them to relay information about their current state to a remote service centre or to receive commands to adjust their settings.

With the advent of super-cheap chipsets and sensors, the economics are changing. What was once the preserve of esoteric machinery and expensive services is now applicable to lower-cost products that can be equipped with an embedded chip for as little as $5 per item. Smarter organisations are already thinking about how they can change their business to benefit from this development.

To benefit from a cheaper 'internet of things', organisations should develop new service offerings that are responsive to the flow of information from the chips embedded in their products.

To achieve this, businesses must consider:

  • how they can generate more than $5 of profit, per object, by offering a service that customers are likely to want

  • how they can they overcome technical issues – such as dealing with embryonic standards – to make the venture a reality

Creating service models for the 'internet of things'

Several companies have already created successful service offerings around the ‘internet of things.’ Rolls Royce Aerospace (RRA), for example, has embedded its engines with chips so they transmit information about their condition, and their need for maintenance if necessary, so RRA can ensure replacement parts are available at the right airport to service them when they arrive. This infrastructure and added-value to customers has allowed RRA to introduce new service-based costing to its customers.

In a similar vein, a washing machine manufacturer could hypothetically track detergent usage in the machines it has sold, and then deliver a new bottle of detergent to the customer before the current one runs out. In a marketplace with a mature e-commerce order-fulfilment capability, it would be economic to deliver enough detergent over two or three years to easily recoup the cost of installing the chip in the machine in the first place.

In addition, PA has worked with a fast-moving consumer goods organisation to help it identify the points at which it would make sense to embed intelligence into its products.

Overcoming the challenges

Inevitably there are business challenges associated with offering new services in this area. For one thing, embedded chips have the potential to create a great deal more continuous data than businesses are used to handling. Some of this data will be valuable, as it can be analysed to guide how existing services can be improved (such as performance-tuning the washing machine). Other data will need to be mined in case it can provide insight for new business opportunities. While difficult to predict the type, volume or usefulness of the data, cloud-hosted solutions and cloud architecture reduce the associated challenge by providing a cost-effective means of accumulating and analysing large amounts of unpredictable data.

To develop an achievable service offering linked to a product through the advent of super-cheap chipsets and sensors please contact us now.

Anita Chandraker
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Kevin O’Shaughnessy
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