How Iot Engages Consumers Benefits Business Paper
How Iot Engages Consumers Benefits Business Paper
How Iot Engages Consumers Benefits Business Paper
Every product, every process, every person, and every place leaves a data trail, and that data trail
can be captured, tracked, shared, combined, mined, and analysed. The result is ways of better
understanding, not only your own operations, but also what consumers want, what they need,
how to offer it to them, and what they are willing to pay for this. Data aggregated from multiple
sources and devices can be turned into unique, actionable insights which can inspire new
products, and new services, which enhance consumers’ lives and the way they experience the
world, whether they are part of the West’s aging demographic, or the burgeoning middle class in
an emerging economy.
To turn this inspiration into reality, consumer focused industries can build value networks –
loosely-coupled collaborations within the supply chain, across industries and with consumers
themselves. These networks can wrap products and services around consumers and their
demands. Gradually, such networks will replace the value chains that have been the backbone
of consumer industries for years (for more information on value networks, please see “Rethinking
the Value Chain: New Realities in Collaborative Business” by The Consumer Goods Forum and
Capgemini1).
It’s a huge opportunity. Companies can either grasp it, or wait for other players to do so. Every
market is ripe for disruptions and the Uber effect knows few limits. Startups can spring from
anywhere in the world and quickly reach a global market. Competitors can migrate from other
industries too. Apple disrupted the music industry; Amazon, the market for hosted software.
There is a concept that can help. It can provide the foundation for the necessary transformation,
but it comes with previous baggage. The internet of things (IoT) arrived with a bundle of
technology buzzwords which gave it a bad name. But don’t shoot the messenger. Think instead
about the business benefits it can bring.
Consumer Products and Retail the way we see it
internet of things by Meanwhile, data acquisition and analysis tools are now capable of collecting, and
drawing inferences from this vast array of sources at a volume and velocity never
20202. before possible. The combination of data from sources such as the IoT, social media,
and smartphone locations, can offer businesses insight into their operations, their
supply chains, consumer behaviour, and the life of products after they have left the
store – in real time. The insight can feed new product and service development.
The IoT gives consumer products companies and retailers an entirely new way of
collaborating with suppliers, other industries and consumers themselves.
The growth of the IoT will be staggering. According to Gartner, there will be nearly 26
billion devices on the internet of things by 20202. By which time, IDC says 10 percent
of all data in the world will come from machines talking to one another3. Network
technology firm Cisco and engineering giant GE estimate the IoT could add $10
trillion to $15 trillion to global GDP by 20344.
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Keeping step with consumers
First of all, the IoT can give retailers and consumer goods firms much richer insight
into shopper behaviour in stores. Video cameras and motion sensors in-store and
the resulting “unstructured” data provides intelligence about how consumers use
the store location, capturing information on traffic patterns, products of interest
and dwell times. Bluetooth and Wi-Fi beacons can track a shopper’s smartphone
through the building within a metre, and, with the right permissions, that data can be
integrated with the customer’s profile information and previous purchase history for
more personalised recommendations. Sensors inside and out can share information
about temperature, light and humidity, which can influence shopping behaviour, the
in-store experience and store operations.
Analysis of these multiple data feeds combined with input from social media and
external sources such as weather forecasts can, at the very least, act as a leading
indicator of future demand, offering the opportunity to optimise both supply chains
and pricing.
But there are further, deeper benefits. Monitoring movements and interactions within
stores enriches the retailer’s understanding of how consumers use the environment
and what they purchase. This can feed into customer intelligence systems, which
can tailor marketing messages, coupons, special offers, and useful content, targeted
at segmented groups of consumers or even individuals. Messaging can be designed
for wherever the consumer is most receptive to it: at home, at work or while browsing
a particular area of the store. Brands can create more top-of-mind awareness by
engaging with shoppers in this contextually relevant manner.
Of course, this needs to happen in a way that fully respects consumers’ privacy and
is relevant to each individual consumer’s interactions. The “Consumer Engagement
Principles”, developed by The Consumer Goods Forum together with Capgemini,
can help companies ensure a trusted engagement, with mutual benefits5.
Insights into how stores are used based on vast reserves of historical buying
behaviour can also help spot emerging trends, improving product positioning as
well as store assortments, layout, and design. The knowledge can also feed into
the development of media vehicles such as billboards and other forms of market
specific advertising.
Some simple examples are already with us.
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Agile supply chains, better delivery
While the IoT will help build bridges with consumers, the behind-the-scenes
transformation of supply chains will be where consumer products and retail
industries can see the most immediate benefit. For a start, IoT technologies offer a
great opportunity; they improve the efficiency and productivity of many processes
in logistics, replenishment, supply chain, merchandising, store operations and
manufacturing.
Having products, components, vehicles, distribution centres, and manufacturing
plants linked to the internet offers oversight of an end-to-end process. Operations
can be mapped and modelled. Analytics tools can seek out inefficiencies and predict
bottlenecks in the system. Suppliers, manufacturers, and retailers can synchronise
inventory to much greater accuracy, helping all players reduce costs.
When analysis of shopper behaviour, social media, marketplace trends or the
weather predicts a sudden surge or collapse in sales, supply chains can become
more responsive and less likely to fail to meet demand, or overshoot it. This helps
avoid the bullwhip effect, which can cause massive stock write-offs.
Clothing firm Levi Strauss & Co has been working with technology firm Intel to offer
near real-time inventory visibility10 of every item in its flagship store in San Francisco.
The project identifies all items in the store with an RFID tag and uses readers to
disseminate item-level data to its analytics systems. The store team gets visibility
about on-shelf availability and what is running low, making inventory replenishment
more accurate.
Combining smarter supply chain and logistics operations with mountains of data
available to the industry means organisations can be more flexible in responding
to demand, without losing margins. If analysis of social media conversations and
Google searches forecasts a flu outbreak, products and promotions can be directed
to the right stores at the right time.
Better supply chain management can also change what companies offer
consumers. The efficiencies gained make it economical to manufacture products
in smaller quantities to meet the needs of niche markets. The IoT can help change
mass customisation from a promising idea into a viable reality.
Inspiring innovation
While some of these proposals seem far-fetched, the benefits to consumer
convenience and product innovation are clear. The IoT gives businesses the
opportunity to understand how products are being used, which combined with
social, ecommerce, and in-store information, can help build better products, and
even new classes of product. Consumer companies, their suppliers, and retailers
can work with firms from other sectors in the spirit of open innovation in product
development, much as the software platform firms work with application developers.
This will not only create better products, but also an ecosystem of services that wrap
around them, generating additional revenue streams as well as long-term brand
loyalty.
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Consumer goods…as a service
Consumers are A consumer buys washing powder because he needs washing powder. That’s the
assumption the industry is built on. The challenge is persuading him to buy the right
looking for solutions brand. But maybe the assumption is wrong. Maybe he needs a crisp, ironed white
shirt for tomorrow’s important job interview and would rather not be spending time
to the challenges they shopping for washing powder when he could be preparing for the big day.
face in increasingly Consumers are looking for solutions to the challenges they face in increasingly busy
busy lives. lives. In just a few years, we will see massive adoption of new consumer technologies
embedded in new business models, built in co-operation with other sectors, all
aimed at improving the way people live their lives. A trip to the doctor might result
in a prescription, dietary advice, a complementary heath product, an app, an online
service, and a digital shopping assistant. Consumer goods, healthcare, financial
services and social care providers will hope to align paths to purchase and after-
purchase care, blurring the line between goods and services and placing a premium
on information, quality, connectivity, and convenience.
Services built around products have already been introduced in the automotive
and industrial sectors. General Motors pioneered the use of telematics to create
new revenue streams. With its OnStar telematics system, the company generates
nearly $1.5 billion in revenues annually14, through several paid safety, security, and
navigation services. Similarly, industrial giant GE launched its “Predictivity” line
of IoT services in 201215, to help industrial customers manage the data from their
connected equipment. Within a year of launch, Predictivity generated $290 million in
revenues for the company.
In consumer industries, the services firms build around products will almost certainly
require more than one organisation to support them. Companies and industries can
work together to build collaborative networks that not only support consumers, but
continually engage them.
Where to start
Adoption of the IoT is far from mature. Research from Capgemini shows solutions
vary significantly in their levels of sophistication16. The basic starting point is
connected products that generate alerts and notifications based on sensor readings.
More advanced solutions allow remote operation using sensors. The most mature
solutions allow organisations to use sensor data to provide customers with high-
value performance improvement based on actionable insights. The research, which
drew on responses from more than 100 leading organisations in North America and
Europe, shows less than 30 percent support remote operability and fewer than 40
percent use sensor data to offer insights that can be used to improve performance.
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Cheat sheet on IoT for consumer
industries
Technology experts are buzzing about the potential of the IoT, but where should leaders in consumer industries start to look for
business benefits?
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12 Making the connection
Consumer Products and Retail the way we see it
Conclusion
The IoT is easily misunderstood. Business leaders turn off when the technology
industry begins to spout technical jargon. But the IoT is not about technology.
At its core, the IoT is about data and insight. It gives consumer companies the power
to understand their supply chains in detail and to work with partners to innovate
and respond rapidly to unexpected events or emerging trends. It offers companies
the ability to see how people are using their stores, online services, and even their
products, in the context of their daily lives.
By combining these insights, companies can win consumers’ attention and continual
engagement. They can build services and products which synchronise with
consumers’ lives making their presence vital and their brand valuable. That is the
opportunity being offered– for those willing to take it.
This paper has been developed as part of The Consumer Goods Forum’s
Educational Series.
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References
1. Rethinking the Value Chain: New Realities in Collaborative Business, The
Consumer Goods Forum in collaboration with Capgemini, December 2015:
http://www.futurevaluenetwork.com
2. Gartner Says the Internet of Things Installed Base Will Grow to 26 Billion Units By
2020: http://www.gartner.com/newsroom/id/2636073
3. EMC Digital Universe with Research & Analysis by IDC: http://www.emc.com/
leadership/digital-universe/2014iview/executive-summary.htm
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us/solutions/collateral/enterprise/cisco-on-cisco/Cisco_IT_Trends_IoE_Is_the_
New_Economy.html Industrial Internet: Pushing the Boundaries of Minds and
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5. The Consumer Engagement Principles, The Consumer Goods Forum in
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6. Beautiful Hair Whatever the Weather: https://vimeo.com/107267546
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nation-now/2015/10/03/73319544/
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iot-for-food-manufacturing-beyond-food-safety-to-savvy-marketing
9. Diageo and Thinfilm Unveil the Connected ‘Smart Bottle’: http://www.diageo.
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connected-smart-bottle.aspx
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unzipped-blog/2015/09/lsco-intel-rfid-pilot-at-levis-plaza/
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dash-replenishment-service
12. Le Bouton Darty: http://www.darty.com/achat/le-bouton/index.html
13. So Smart, It’s GENIUS – Oral-B Unveils the World’s First Electric Toothbrush that Sees
What You Don’t: http://news.pg.com/press-release/pg-corporate-announcements/
so-smart-its-genius-%E2%80%93-oral-b-unveils-worlds-first-electric-
14. Not satisfied with OnStar’s steady profits, GM wants to create a global 4G
powerhouse: http://www.autonews.com/article/20130527/OEM/305279958/
not-satisfied-with-onstars-steady-profits-gm-wants-to-create-a-global-
15. GE Launches 14 New Industrial Internet Predictivity Technologies to
Improve Outcomes For Aviation, Oil & Gas, Transportation, Healthcare and
Energy: http://www.businesswire.com/news/home/20131009005749/en/
GE-Launches-14-Industrial-Internet-Predictivity-Technologies
16. The Digital Universe is Expanding: Are You Ready for the Internet of Things?:
https://www.capgemini-consulting.com/resource-file-access/resource/pdf/the-
internet-of-things.pdf
17. Type 2 Diabetes Statistics and Facts: http://www.healthline.com/health/type-
2-diabetes/statistics#2; Diabetes Fact sheet: http://www.who.int/mediacentre/
factsheets/fs312/en/
18. Google is working on a wearable that could test diabetics’ blood sugar levels:
http://www.computerworld.com/article/3012269/wearables/google-is-working-
on-a-wearable-that-could-test-diabetics-blood-sugar-levels.html
19. Business leaders struggle with cloud, big data and IoT security: http://www.cio.
com/article/3038418/security/business-leaders-struggle-with-cloud-big-data-
and-iot-security.html
20. The Consumer Engagement Principles, The Consumer Goods Forum in
conjunction with Capgemini: http://consumerengagementprinciples.com
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