A Decade of Best Practices for Connected Appliances
The enhanced user engagement that IoT creates will have an impact on every team in your organization.
Over half of Fortune 500 companies listed in the year 2000 are gone today, victims of internet disruption. So it should come as no surprise that the leadership at manufacturing companies are closely watching the second iteration of the internet: the Internet of Things (IoT). Executives in almost all appliance companies know that they have to do something to stay relevant—and alive—but what to do is not always as clear.
IoT-enabled appliances will provide companies direct access and engagement with end users. This new world of connected appliances promises a highly engaged user base that is also more loyal and profitable. IoT provides better intelligence of how users actually use products, along with insights that enable designers to better satisfy their needs. Although IoT holds great long term promise, it also enables ways to grow the bottom line in the short term. Two examples every manufacturer should evaluate are: 1) increasing ‘consumable’ sales frequency and profit dollars (e.g. filters, cleaning agents, fragrances), or 2) creating cost savings by streamlining and delivering product repairs.
But the value of IoT goes well beyond mere product features or remote control via smartphone app. The enhanced user engagement that IoT creates will have an impact on every team in an appliance maker’s organization: product planning, design, manufacturing, sales, supply chain, support, warranty, and reverse logistics. No doubt change was scary to the half of Fortune 500 companies that couldn’t adjust, and they died as a result. The good news is that there are companies making the transition to a connected product world in ways that are low risk with high returns. Here are some of the best practices from those companies deemed successful with IoT, observed while working with them over the past ten years.
First Pilot, Then Launch Broadly
None of us have been down the IoT road before. So it’s important at this early stage to maximize learning with minimum risk and cost. Many IoT initiatives are killed because they don’t meet a company’s project approval criteria, which can be entrenched within the company’s new product introduction process.
Companies with successful connected consumer products have taken a different approach. Since connected appliances are new, they took a page out of the consumer packaged goods playbook: namely, small market trials. One company we know started selling connected appliances at a single location of one retailer in a big market. Once the company understood the sales, installation and support processes of the connected product, they expanded and started selling broadly through national chains. A second company took the approach of only selling their connected products online through a dedicated website.
Taking small steps with pilot-scale quantities enables an organization to learn about consumer reaction. As with all new initiatives, serendipity is also very much involved. New lessons are discovered when placing connected products ‘in the wild’ that no amount of focus groups or surveys would ever uncover. A side benefit of small-scale deployments is the ability to assess the impact of distribution partners and customer support groups. Pilot-scale launches also limit the cost and potential damage associated with unintended consequences.
Use Cases: Begin With The End In Mind
Pity the poor connected refrigerator of CES past. This early IoT touchstone has been the butt of journalists’ jokes for years with plenty of good reason. Does a consumer really want to surf the web standing in front of their fridge? Do they want to view their refrigerator contents through a HDTV-size door mounted screen? Do they yearn to view shelf contents from their smartphone when at the store—for a mere $6,000 more than a plebian refrigerator? Of course not! Just because engineers can design something doesn’t mean that they should.
Design of compelling use cases is essential for long-term program success. Over the years, we’ve observed three compelling use case archetypes: 1) peace of mind, 2) cost savings, and 3) convenience.
For example, peace of mind is a primary driver for connected product adoption to homeowners with families—evidence the popularity of video doorbells. Garage door maker Chamberlain publicly reported it gets a 50% daily engagement rate on its mobile app for the simple reason that it reports how long the door has been open or closed. This feature acts as a proxy for loved ones coming home from school or work. As a result, the Chamberlain logo is seen by 50% of their end users every day. On the other hand companies that have created mobile apps to enable remote control of an air conditioner or lamp have reported zero engagement after 30 days.
Connected appliances can also offer cost savings, perennially a consumer favorite. Businesses can also benefit from cost savings especially since there is a growing amount of software embedded within appliances. The computer and consumer electronics industries have set expectations of businesses and end-users alike to expect appliance firmware fixes to be available while the product is in the field instead of becoming a growing cause of warranty claims.
IoT will likely deliver greater convenience initially for reordering of consumables (e.g. filters, cleaning agents and fragrances). As predictive analytics services mature, convenience will take on the task of preventive maintenance, potentially even leading towards a ‘Hardware-as-a-Service’ (HaaS) business model.
Build AND Buy
A common approach by engineering-minded companies is to vertically integrate and build everything associated with a connected product. But we have found that successful market leaders take a different approach because they know what they don’t know, and rely on vendors that do. In the long term, these market leaders may desire to more fully vertically integrate, but that investment typically comes as part of a well-understood cost reduction program and after lessons learned from their initial IoT market launches.
These experienced leaders bring in partners in the early stages to help them envision and plan their IoT programs and implement products for pilot trials, and afterwards for production deployments. Figure 2. illustrates how an IoT product is implemented in a layered approach. At the foundational level is the physical product itself, which is what your company is quite knowledgeable about, and shouldn’t be outsourced. As you go up the layered stack, different levels offer different levels of return, as measured by market size. For example, at the highest layers service and IoT applications that are transformative to your business are the biggest value. In the beginning you can outsource the development of these layers.
Something manufacturers find challenging when embracing IoT is letting go of the notion of full control. From a product development point of view, their product is no longer an island unto itself. It’s not restricted by the boundaries of an outer casing or printed circuit board. The connected product experience involves communicating outside the product over a local area network through a router through an internet service provider’s network across the world wide web to an IoT cloud back over the internet to another partner’s IoT cloud…and so on. The product’s user experience may extend to mobile or enterprise applications from the IoT cloud, a third-party service provider, or the manufacturer. This holistic view of a product’s technology and user experience describes a new reality: that connected products are not hardware, they are really a service. In particular, software is never ‘done.’ At a minimum, security patches will need to be updated on an ongoing basis. In addition, mobile apps require updates because of operating system updates from Apple, Android, etc.
It’s the rare company that is expert in all of the design disciplines required to build a connected product. We’ve identified six design disciplines that a connected device manufacturer would need to have to be a viable IoT provider: 1) product management, 2) system integration, 3) hardware design, 4) firmware development, 5) cloud platform architecture, 6) consumer or enterprise application design. A skillset that is definitely unknown is the systems integration (SI) function. SI is the function that brings all the pieces of a connected system together, writing any necessary software ‘glue’ and making sure through quality assurance testing that everything works together in concert to give the consumer a tremendous product experience—and the manufacturer a five-star rating in their mobile app stores.
No manufacturer wants to see their brand in the news as the latest consumer product to be hacked. Unfortunately, there is no ‘magic bullet’ to ensuring 100% security. What we know is that internet security, privacy, and safety must all be taken into account upfront in the design process, not as an afterthought. We also know that proprietary, or one-of-a-kind, software components are the least secure. The best security strategy involves buying commercially available components based on industry standards that have a large enough customer base to ensure the components are well vetted. A solid strategy is to use embedded design or mobile app development vendors that specialize in IoT applications and who know the standards and the well-vetted software components on which IoT systems are built.
Even if a company is just embarking on a field trial or limited release, it’s important to consider two things. First, updating firmware is a required feature for any connected product. At a minimum companies need to update application firmware to patch product security holes. Substantial added value then comes from the ability to add features over time. Second, and as important, is the ability to update a product’s communication firmware stack as well, which must be done expertly to not orphan a previously connected product.
Some products rely completely on a mobile app for the user interface, i.e. no on-product controls of any kind. When designing connected products and planning for the future, it is a best practice to ensure products can still function when a smartphone is lost, incapacitated, if internet service is interrupted, or if the company stops supporting mobile app updates.
Getting the Word Out
One of the paradoxes with the Internet of Things is that while the CEOs of every product company are planning for the impact IoT will have on their business, they are also observing very little consumer adoption. Prior to the launch of the $250 Nest Learning Thermostat, conventional wisdom argued that no consumer would buy a thermostat for over $50. Nest launched a beautiful product designed by the father of the iPod, receiving lots of exposure and adoption on that fact alone, and subsequently had sales well past the early-adopters. In 2016 Nest garnered entry into Time Magazine’s list of the 50 Most Influential Gadgets of All Time.
The new and improved user experiences made possible by internet-connected products offer a game-changing opportunity. But they require a completely different mindset around design, development, deployment and promotion to take advantage of the opportunity. Having the right partners that understand how to navigate these uncharted waters spell the difference between success and failure. So our recommendation is to jump in quickly with small-scale IoT projects and source experienced IoT technology partners to help you learn and grow effectively—before your competitors do it first.