Products are set to become a lot more exciting in age of the Internet of Things. With the rise of big data, improving technology and the move towards connectivity in everything many products could well become services in the not-too-distant future.

Being a service adds considerably more value to consumers than the offerings of a one-dimensional product. Taking Nike, for example, the powerhouse doesn’t just sell footwear these days. Through Nike+ it offers a range of services designed to help Nike’s customers monitor and improve their exercise regimes using a variety of tailored apps and wearable technology. So as well as providing the basic products to enable and inspire customers to exercise, Nike has added additional brand and consumer value via services that drive their performance.

It is easy to throw away a pair of old trainers and try out a new brand, less so two years of fitness data.

What does this mean for brands big and small?

As even the most run-of-the-mill products suddenly have the capacity to offer new services to consumers, brands will be faced with many new opportunities. We have had the capability to connect white goods such as refrigerators to the Internet for a decade now, but the product proposition hasn’t interested consumers. The service proposition that advises users on their diet, reminds them to order new groceries when supplies are running low and orders them in automatically for the lowest price possible is far more interesting. GE is already moving into this space in linking the fridge to your smart home.

The decreasing cost of technology and greater proliferation of data will mean that even the smallest retailers, brands and start-ups will be able to offer products with a valuable service element or add a service layer on top of other companies’ products. For example, by pressing a button on my UP fitness band I can turn my heating down, saving me a little money if I go to bed early.

This approach of converting products into services and therefore embedding the customer into the brand experience will increase loyalty among customers. However, brands also face a prolonged period in which they will be forced to re-define themselves within an eco-system and fight to become the most valued services.

Hierarchy of services

As more devices become connected so will more services. We will increasingly need to rely on a hierarchy or network of services that control each other. I, for one, do not wish to manage each individually updating every one with changes in my life. For simplicity and ease of use, it makes sense in the IoT world that the data of our daily lives is managed via a minimal number of platforms. These platforms will then be used as channels through which to communicate with smart services such as nutrition, energy, finance, time, as well as our friends and family.

The battle is already underway with tech stacks like Google, Facebook and Amazon in pole position to run our lives due to the data they already hold on consumers and their innovation in the technology space. They may well be joined by forward looking brands such as banks, supermarkets and telcos. It is the brand that can provide the most valuable service proposition, not product proposition that will rise in the service hierarchy.

Simple, trusted and curated interoperability

Importantly, the brands that are set to ‘run our lives’ in this IoT-dominated world also need the trust of consumers. In fact they must tick three important boxes with consumers: security, trust and interoperability with devices. Those with a strong history of securely looking after our data will have a significant advantage. It is communicating that credibility to a mass audience which will be an interesting communications challenge.

In terms of interoperability we are seeing early signs of a new innovation in this space. IBM recently announced an approach to managing security on IoT devices by utilising blockchain technology that underpins the cryptocurrency Bitcoin. It is this blockchain technology that’s helping make systems and devices work easily and securely together.

Whether consumers will be comfortable sharing so much of their data – and, if not, whether new alternatives will become available – time will only tell. But looking at the more immediate picture, all brands big or small need to start thinking deeply about their products as services, or how their services can work with connected products, if they are serious about adding value to their customer base in the IoT world and maintaining their relevance in the face of increased competition.

In the long term, we will see which brands are trusted to ‘run our lives’ in the increasingly digital world. 

 

By Jean-Paul Edwards, director of strategy and product development at OMD EMEA.


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