With an expected $1.6 trillion connected device market by 2026 – How can industry commercialize IoT?
Q&A with Daryoush Ziai, CEO of Schindler China
Daryoush Ziai is a seasoned business leader with over 30 years of experience in leading businesses and teams across Asia, Europe and North America. Born and raised in Tehran, he received much of his education in the US, earning his bachelor’s and master’s degrees in civil engineering and an MBA. He started his career at Otis Elevator Company, and has worked at Carrier Corporation and Schindler Group, where he is currently CEO of Schindler Group China. He is fluent in English and Farsi, and speaks Mandarin; transitioning almost effortlessly between cultures. Daryoush is based in Shanghai with his wife, who is Chinese, and their two boys and a girl. All three languages spoken at home and the family spend holidays visiting family in the US or Iran, or, going somewhere remote, to relax and learn, and where Daryoush can disconnect from work in a constantly connected world.
According to research by Gartner, the world would have more than 21 billion connected devices by the end of 2020. It is anticipated the market will reach $1.6 trillion by 2026, representing a 24.7% compound annual growth rate (CAGR) from its 2018 value of $190 billion. So, what does this mean for consumers and industry? In very simple terms, the rapid growth in connectivity between people, services and products will dramatically change the landscape of an organizations business model structure and how they interact with consumers.
Callum Sarsfield (CS): How do you see the future of IoT adoption and the ability for industry to commercialize it?
Daryoush Ziai (DZ) : It is rather clear that IoT will become the norm in all kinds of industrial and consumer products. Just like the consumer internet in the late 90s and early 2000s, there is now a lot of noise and not as much adoption. Within a few years, the combination of progress in the reduction in the cost of the hardware and software, advances in the use of the information to drive higher levels of service, greater safety and improvements in productivity will make it a standard and ubiquitous.
“A decade from now, we will no longer have new unconnected products”
CS: What challenges do OEMs face in driving their IoT strategy, generating healthy ROI’s and sustainable future revenue?
DZ: A key challenge for OEMs is a financial one. Without additional revenue and/or reduction in costs from productivity gains, it is hard to quantify the positive impacts of implementing IoT. Better levels of service, better products, higher quality, and safety, etc… will likely lead to higher customer retention or additional sales. These positive impacts are, however, difficult to measure, both in terms of value and timing. A key to successfully monetize IoT implementation is to work with customers to understand how to provide tangible value to them and articulate that tangible value proposition. Realizing cost reduction and productivity gains within the OEM is another opportunity to monetize investments in IoT implementation.
“A standard “one-size-fits-all” offering will generally not work.”
CS: So, what are some of the ways in which OEMs can create an additional revenue stream?
DZ: This is a broad topic and we are planning to explore this further during our next series. In this Q&A, I would like to highlight three key ways OEMs can drive additional IoT revenue streams:
Premium cost structure for a guarantee of uptime enabled by IoT
In some cases, the product or service and the operational requirements of users are such that the use of IoT or the information that it provides can indeed bring measurable value to a user. Examples are guaranteeing certain uptime in production or transportation equipment through connectivity, which allows for replacing components before a shutdown or very rapidly responding to failures, and perhaps implementing predictive maintenance as a second step. In this instance, a customer or user does not pay directly for IoT, but rather would very likely pay a premium for a guarantee of uptime enabled by IoT. There are many other examples of opportunities for delivering value using IoT for customers which can bring additional revenue opportunities to OEMs providing the IoT solutions.
Smart cities and campus’s with connected assets
Users with multiple locations, a large campus or even cities, with assets located across a wide geographic area may be able to gain productivity, reduce costs, increase safety and levels of service to their customers, or even increase revenue by real-time access to the status of assets and equipment. Examples are public transport authorities, large hotel chains, large healthcare providers, municipal governments, and the likes. Customers can gain efficiency and reduce both operating costs and capital investments through a better and more efficient use of assets, made possible by the availability of significantly richer and more timely information.
Alternative revenue streams unrelated to core product production
In some applications, IoT connectivity opens up the possibility of offering products and services which are broadly speaking, unrelated to the product(s) which an OEM produces. Examples are streaming media content in vehicles, elevators and other transportation devices and detecting motion through light fixtures. These use cases provide an opportunity to create revenue streams from IoT investments. An OEM engaged in a mature product may not by itself have the know-how and cultural fit to take advantage of such opportunities. However, the right partnerships can be the key to realizing such potentials.
In our next article with Daryoush, we explore IoT efficiency gains and cost reduction through business model and cultural evolution.
Interview series for Pullmann in Focus led by Callum Sarsfield, Partner at Pullmann Global | July 17, 2020