The “internet of things” favors the brand-led business
[Originally published on Brand Source: Labbrand's Blog of Branding Insights. Please visit that site to comment.]
The most recent edition of McKinsey Quarterly includes an overview of “The Internet of Things”—countless tiny sensors embedded in physical objects, all linked and sharing data through wired and wireless networks. Many examples of networked devices have already gained mainstream awareness, such as RFID tags and smart electricity-use meters. But the article also details more obscure applications, such as continuous optimization of manufacturing processes and presence-based advertising. All in all, the article’s authors propose, the resulting network of information will have far-reaching implications for businesses across all industries, and executives should be aware of “the potential impact and opportunities likely to emerge.”
We agree that awareness of relevant emerging technologies is imperative for any business leader. But mere awareness is only the first step for organizations that wish to truly capitalize on opportunities afforded by the internet of things. The next step is determining which technologies are most likely to directly impact a given company or industry. Answering this question requires a deep understanding of one’s business, competitive landscape, and customers—an understanding indicative of a brand-led business. We believe, therefore, that:
a) stronger brands stand to gain more from these technologies, and
b) in order to maintain success, companies will need to understand how these technologies will heighten customer expectations of manufacturing quality, relevance, and responsibility.
Stronger brands stand to gain more from the internet of things
Companies with strong brands are those with a credible, relevant, and differentiating value proposition, the nature of which is usually pinpointed through market research. These companies have more carefully considered expressions of their “brand idea” along with knowledge of how that idea is ingrained in everything the organization does—from strategy, to operations, to marketing.
These brands stand to gain more from the internet of things because their intimate, frequently updated knowledge of themselves and their customers leads to insights as to which technological advancements are most relevant to their situation. For example, an automotive company whose brand is built around the concept of safety should be at the leading edge of research into “the development of systems that can detect imminent collisions and take evasive action.” Safety, of course, should be a concern for every automobile manufacturer and the industry as a whole, but a company with a clearly internalized brand idea of ’safety’ can make intelligent investment decisions based on this knowledge. Another car company—one focused on luxury, say—could invest more heavily in sensitive temperature control systems, or seats that dynamically react to passengers’ size, weight, and posture for optimized comfort.
Companies without a focused brand idea, on the other hand, lack a lodestar upon which to base such prioritization. Instead, they may choose to invest equally in every new opportunity, follow prevailing trends, or invest heavily in technology that bears no relevance to their customers—misguided solutions that are recipes for little more than dilution, commoditization, and disaster. The power of knowing how to apply technology in a customer-relevant way is epitomized by the dotcom bubble and the disparate fortunes of success stories like Amazon.com and famous failures like Webvan.
Heightened customer expectations of quality, relevance, and responsibility
The McKinsey Quarterly article divides the internet of things into six application groups: tracking behavior, enhanced situational awareness, sensor-driven decision analytics, process optimization, optimized resource consumption, and complex autonomous systems. How will these applications affect customer needs, desires, and expectations? How should they impact strategic decisions made by brand-led organizations? We believe the effects on customer expectations can be broadly clustered into three groups.
1) Manufacturing quality
Enhancements in manufacturing processes will improve both efficiency and consistency of output. For example, “sensors and actuators can…be used to change the position of a physical object as it moves down an assembly line, ensuring that it arrives at machine tools in an optimum position.” These enhancements will reduce flaws, which will in turn require manufacturers to meet heightened customer demands for quality as a “price of entry,” no matter the category.
2) Relevance
Products and services that take advantage of the internet of things will be imbued with increasingly specific customer data, allowing them to be customized based on demographics, psychographics, behavior, and situation. For example, car insurance premiums could be tied to “the actual risks of operating a vehicle rather than based on proxies such as a driver’s age, gender, or place of residence,” and retailers will employ “sensors that note shoppers’ profile data (stored in their membership cards) [and] help close purchases by providing additional information or offering discounts at the point of sale.”
3) Responsibility
One of the most interesting applications of this family of technologies is optimized resource consumption, already in use with smart meters and some web-enabled energy management systems. Consumers may soon demand that their favorite brands not only use recyclable materials and renewable sources of energy, but that they make intelligent use of resources to minimize waste.
The internet of things will raise the bar for manufacturing quality, relevance, and responsibility across a range of industries. Furthermore, leading brands will gain by making targeted investments in cutting edge technologies that are well-suited to their brand positions and the needs and wants of their customers. It is the responsibility of any business leader to be familiar with relevant technological advances. But brand savvy leaders—those who can clearly articulate what their company stands for, why it matters to customers, and what sets it apart from competitors—are best positioned to benefit from the enormous potential of paradigm shifts like the internet of things.
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@Paul: Couldn’t agree more. You’re saying stop thinking about specific tools (i.e. “Do we need an iPhone app?”) and start thinking about functionality (i.e. “Wouldn’t it be cool if we could…? How could we do that? Maybe an iPhone app? Maybe a webinar? Maybe an interactive billboard? Maybe…?”). It might seem argumentative, but it’s an important shift in outlook—too many brand managers are looking at technology from the wrong direction.
Anyway, don’t forget to check out Brand Source and start up the discourse there as well.
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The type of companies being look at for investment these days are consumer-facing small businesses that do not need to build big sales forces around the world to scale and grow. That requires better brand design for communications that are more direct – and more fully integrated into the business.
If the business model’s thought out and mapped, and working, they can get large revenues without having to go through too many financing rounds – and are therefore more valuable from an investment POV. Same goes for new product launches within larger companies.
That all needs strong (smarter) management and an “open-minded” but “surgical” approach — rather than chasing established themes such as iPhone applications or social networks. And this requires exactly the opposite of the type of thinking the U.S. has seemed hell-bent on churning these past 20-30 years.