We're on the edge of a new wave of connectivity.

One that promises to change the way people behave and buy; and in turn will force retailers and consumer goods companies to change the way they serve and interact with their customers. The 'Innovators' are already out there rapidly prototyping, testing, learning and changing their businesses to embrace it.

There's two main factors, which are driving this change:

  • The cost of Internet of Things (IoT) sensors is dropping faster than predicted.
  • The form factor that IoT sensors can take is now flexible and adaptable.

The cost

In 2014, Goldman Sachs researched the cost of IoT sensors to predict the level at which even the simplest of things would become connected. i.e. when the internet would tip the existing balance towards the 'Physical Web'.

As you can see, three years ago they predicted the cost of a sensor would be around the $0.50 mark today; a modest drop from the actual sensor cost at the time the report was published. It's right to highlight that the cost does depend upon a number of sensor criteria, including battery life, chosen communications protocol, memory size, scale of production and what is being 'sensed' from location through movement, weight, light, sound and even air quality detection. 

 Goldman Sachs Cost of IoT Sensor Forecast

But since this forecast, and like a lot of other forecasts, it has proven not to be as accurate as originally thought. Technology and the ability to produce such sensors has moved forward dramatically and we are now seeing the costs drop a lot quicker than expected.

For the simplest of things, sensors can now be produced for <$0.10 and this is dropping further. This is a price point that means even the most basic of 'things' can become connected. However, we must keep in mind that because technology now allows us to create smart products, we must ensure, from a customer experience (CX) perspective, they have to serve a purpose and offer value to the person using them.

Form factor

The other element to compliment the low cost is the physical form a sensor can now take. The restriction of rigid and chunky printed circuit boards has gone, and IoT sensors can now be printed on very thin, flexible and transparent substrate.

Yes, printed; batteries, memory, comm's etc. Because of this and the low cost, we can now imagine (or soon, experience) a world where a simple label on a consumer product can become smart.

printed sensor

A printed sensor

By the way, this is not some futurist talk and PowerPoint slide from a conference. This is based upon practical prototyping across a number of active projects from coffee cups, bottles, nappies, packaging....even bras! The Amazon Dash button has become obsolete already (but Amazon knows this). However, as exciting (or not) as a connected thing sounds, the impact of this is far reaching, and will potentially catch many businesses on the back foot. This is not just about the 'physical'.

Key Considerations

The physical smart product or package is just the enabler. It records and transmits data, which, of course, needs storing and securing somewhere. Such data (and it's real-time) needs to serve a purpose to both the consumer and the business. It has to offer tangible benefit, easy to visualise, interact with and be integrated with other systems that support the connected consumer eco-system.

For the consumer, however, the value should offer one or more from the list below:

  • Give people time back - remove unnecessary mundane tasks. why should I have to write lists or pick my favourites?
  • Offer true convenience - make life easier. I no longer want to queue, I'd rather brands queue up to serve me.
  • Ensure the control lies with the consumer - the ability to opt in and opt out. My data must be protected and I give the brand permission to use it to benefit me.
  • Offer real personalisation - that is unique to each consumer. I'll give the brand the 15 minute delivery slot, and want my products tailored to my needs, on my terms.

And this is where the Zero Moment of Truth, The Loyalty Loop and the path to purchase will change. M2M (machine-to-machine) communications, will make it a seamless customer experience to repurchase. It could happen automatically. It is technically feasibly for IoT sensors to communicate with Amazon Alexa or Google Home, for automated 'add to shopping basket'.

For the consumer goods company and retailer, the implications are significant:

  • Product sales to subscription services - is the business geared up to be able to serve the consumer in this way? I'll subscribe to beer, and it's the job of my chosen brand to keep my fridge stocked up.
  • Supply chain and fulfilment - the data is now there to 'light up' the supply chain in real-time. The ability to manage this based upon consumer demand.
  • Systems & infrastructure - does the business have the necessary systems in place to manage the personal data effectively? Is this the time to migrate to the Cloud and dump those legacy, on premise systems?
  • Cyber security & GDPR - is the business ready for the legislation that kicks in in less than 12 months time? Is it geared up to cater for a cyber attack?
  • Business design - existing operating models will need to change.
  • People, culture & expertise - does the business have the mindset, skills and environment to adapt and adopt to this change?
  • Consumer research and product trials - this just got a whole lot easier and more accurate. Real-time, action based data on adoption and usage can inform development decisions and provide significant cost savings.

The Law of Disruption shows that technology is the outright leader in driving change, which is then followed by social and business change. Not all technology has the subsequent knock on affect, however, in this instance, I think we will see its impact...and not too far into the future either.

The Law of Disruption

For more on IoT, read:

And if you're interested in talking all things customer experience, check out this year's Festival of Marketing in London.

Karl Havard

Published 20 June, 2017 by Karl Havard

Karl Havard is a Partner at PA Consulting. You can follow him on Twitter and connect via LinkedIn.

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Comments (1)

Pete Austin

Pete Austin, CINO at Fresh Relevance

It's really not about hardware cost, but TCO (total cost of ownership). Especially the cost of managing IOT devices securely. Not the data collected, as mentioned in this article, but the devices themselves.

Currently the elephant in the room with IOT devices is lack of security, because many can be hacked trivially. And this is a really hard problem to solve, because of the hassle factor: it's disproportionately expensive for customers to do tasks like changing default passwords and downloading security patches for lots of devices, each costing under $10.

"We all know the vast majority of Internet-of-Things devices haven’t anything more than a fig leaf for protection"
https://www.theregister.co.uk/2017/02/15/libertarians_call_for_govt_regulation_iot/

"How Google fought back against a crippling IoT-powered botnet and won ... the biggest distributed denial-of-service attacks ever recorded."
https://arstechnica.com/security/2017/02/how-google-fought-back-against-a-crippling-iot-powered-botnet-and-won/

Security is important enough that fairly soon we're going to see big lawsuits or legislation imposing it - and that's likely to result in eye-watering costs.

5 months ago

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