Over a few short years, the Internet of Things (IoT) has morphed from a futuristic concept into reality. A growing array of devices and systems--smartphones, beacons, RFID, POS terminals, and smart homes and businesses--generate new connection points and new data points. They change the stakes in profound ways.
"We are entering a third wave of digital transformation," said Olof Schybergson, founder and CEO of Fjord, the design and innovation group at Accenture Interactive. "The first wave involved the introduction of the Internet, the second wave brought us mobility, and the third wave involves transformative digital services."
Not surprisingly, marketers are at the center of this digital disruption. Not only is it necessary to understand constantly changing consumer preferences and behavioral patterns, it's critical to rethink products, services, and entire business strategies. The IoT introduces radically different ways to interact with consumers and businesses, but it also opens up new vistas for collecting, managing, and using data--including within the domain of predictive analytics.
"We are seeing the digitization of everything," said Suresh Vittal, vice president of marketing strategy for Adobe Marketing Cloud (Adobe is CMO.com’s parent company). "The Internet of Things cuts across channels, communication tools, and interaction points. It redefines brands and organizations."
To be sure, the IoT is more than the sum of snazzy Fitbits and smart thermostats. It is more than connected liquor bottles, diapers, toothbrushes, and belts. It's about peering into the previously invisible spaces between objects and motion and detecting patterns and trends. It's about assembling various data points in order to develop a more relevant and robust customer experience.
"The Internet of Things represents an enormous opportunity but also an incredible challenge," Vitall told CMO.com. "Brands now have unprecedented access to a customer's or prospect's identity. It's possible to have a deeper understanding of their needs. But delivering on the promise is difficult, particularly as the intersection points and data grow."
Making Connections Count
It's safe to say that pervasive connectedness is the new normal. According to networking firm Cisco Systems, about 15 billion connected devices currently exist, but the number is projected to reach 50 billion by 2020. In fact, Cisco has predicted that 98% of all physical objects will eventually become part of the IoT. At the center of everything is the smartphone, which provides the foundation for point-to-point communication but also serves as hub for a variety of digital capabilities, including messaging, photos, video, barcode scanning, e-commerce and payments, social media streams, geolocation and geofencing, and even reading sensor data in the field.
Although much of the chatter these days is on beacons, RFID, and other tools that tap into the IoT to provide data streams that can be used for analysis, it's important to view the environment holistically, said Tony Fross, vice president of digital advisory services at Capgemini Consulting.
For example, "Beacons create new possibilities, such as more personalized and contextual marketing--but they can also be used for a whole array of other purposes--many of which extend marketing into new territory and introduce new data streams and business opportunities," he told CMO.com. By placing beacons or RFID tags in beverage machines, baseball stadiums, parking lots, and other locations, a business and its partners can redefine the way they interact with consumers. "You can tantalize or nudge people through an app,” Fross added. “You can add value to their experience."
Over the next few years, as vehicles, houses, and even infrastructure get connected, business executives--including CMOs--will have to think and act very differently, Fjord’s Schybergson told CMO.com. Fjord described this emerging space as "living services" that revolve around the convergence of the "digitalization of everything" and "liquid expectations." Within this new order, doors, locks, light switches, sprinkler systems, cars, billboards, and even cereal boxes become data sources.
When all of these data sources are combined and analyzed, a broader and deeper understanding of the world ensues. "Everything becomes interrelated. Controlled, one-way messaging doesn't hold the same value or power," he said.
As living services take shape, consumers will increasingly expect that the experience they have with one product or service will automatically occur elsewhere. Banks are no longer simply banks and a utility is no longer simply a company that simply sells electricity or water. The data gleaned from smart systems provides behavior clues and enhanced marketing opportunities. When a company connects people, devices and infrastructure, it's possible to tap data and transform the experience.
"You realize that beacons aren't just a way to locate an individual and push marketing messages out--something that can become annoying very quickly, if they are not used the right way," Fross pointed out. "It's also a way for staff to locate a shopper, understand his or her preferences, and engage in a more informed and personal discussion. It feels less intrusive and more like excellent, personal service."
Companies such as Uber, Airbnb, OpenTable, and Square offer a glimpse at how business and marketing is likely to change in the months and years ahead. Uber, for instance, pulls together a diverse array of functions--calling or hailing a car, getting from Point A to Point B, paying and rating the driver--into a single app that represents a closed-loop system. Other users can use the ratings to pinpoint drivers they desire. For its part, OpenTable makes finding a restaurant reservation simple and seamless, and the service incorporates a loyalty program as well as a digital wallet. In this app-centric and connected world, partnerships and relationships increasingly dictate who soars and who stumbles.
This environment also requires a fundamentally different mind-set about data. While customer relationship management (CRM) data provides important information about past interactions and events, it does little to understand current and future behavior.
"Digital device and transactional data is much more signal rich," Vitall said. "It has the ability to dramatically improve the IQ of an organization. "When you put POS data, Passbook information, loyalty cards, social listening, RFID, and mobile apps together, you wind up with a sum that is far greater than any of the individual parts. You are able to gain insights and analysis on actions and events. This leads to a more connected, personalized and contextually relevant relationship."
The IoT ratchets up data volumes by an order of magnitude—and putting it to work and achieving significant results is nothing short of daunting. Building a foundation and framework for big data and analytics--particularly predictive modeling--is at the center of everything.
"We already have an environment on the Web that allows businesses to obtain highly detailed and granular information about behavior and actions," said Dean Abbott, co-founder and chief data scientist at analytics software firm SmarterHQ. "An effective IoT and digital strategy brings the same types of capabilities to the analog world. We can begin to understand how people spend their time in the store, how they view products, how they make decisions, and what types of things they purchase under different sets of conditions."
A starting point for navigating the IoT is to understand that the goal is to move from reactive to proactive business, and away from pushing and pitching products to creating value and satisfying a want or need. A basic truth is that a connected world generates mountains of data, but understanding how to identify key data elements and crunch all of it is extraordinarily difficult. As Abbott put it: "The raw data is almost never useful in and of itself. You have to do things with it to make it more interesting and useful." This includes combining the right data streams, eliminating bad data, ensuring that the data is clean and useful, and rolling it up into the right analytics and measurement systems.
At the center of it all is a basic challenge: Humans are highly unpredictable, and what works one day may go down the smokestack the next day. "Data generated by machines is consistent. If something is wrong, we know that the answer lies in the machine," Abbott explained. "But with people you never know for sure. You could have an argument with your spouse one morning, and it affects your behavior. Suddenly, you are buying different things and eating differently. And there is no way to measure this. So there's a need for a lot of data and the right combination of data in order to understand a person's real intent and behavioral pattern and how this plays out in the real world."
Abbott said that harnessing the IoT and putting predictive analytics to work requires a focus on three primary factors: a need for visionaries--including senior executives and analysts--who can view and understand the business in a forward-thinking way; data scientists who can code the necessary business processes and workflows into software and systems; and predictive modelers who understand how to connect the previous two tasks.
Within this framework, Abbott said, it's critical to have strong communication channels that reach to the C Suite. "You can't just build models and learn from the data,” he said. “You have to have a fundamental grasp of how to design systems and understand what data means."
A key to IoT success, he said, is not looking to hit homeruns but, rather, score on a lot of singles: "It's wise to engage in a lot of pilots, test concepts, learn from success and failure, and make incremental and ongoing improvements."
Abbott said that it's also critical to look for quick wins and develop an IT environment, typically through data tools, such as Hadoop, Redshift, or Azure, that can support large data sets and a more flexible approach to big data and analytics. Successful organizations, he said, typically take an iterative approach. "It's best to pick the low-hanging fruit, get quick answers, make improvements, and move on," Abbott added.
Capgemini's Fross said that marketers are behind the curve in recognizing the power of the IoT. "If retailers and others were doing this well, Facebook wouldn't be giving away beacons and businesses would be sending out more relevant promotions," he said.
Relatively few businesses, he pointed out, use locational marketing to make appropriate suggestions--whether it's for a favorite coffee beverage or a grocery or clothing item--at the moment a potential customer is in a position to make a purchase. In best-practice cases, all of this happens without any effort on the part of the consumer. For instance, fast-food chain Taco Bell lets customers order food through its app, but the outlet doesn't prepare the order until it receives a confirmation through a geofencing system that the person is in the parking lot and ready to pick up the food.
While this approach may not seem like classic marketing, it a big selling point for those who want to order take out food and have it hot and ready. Fross said that in the new digital economy, cool capabilities and shortcuts can be among the biggest marketing tools.
"You really have to think about how you can innovate," he said. "Through the Internet of Things and the right software and data tools, it's possible to introduce applications, features, and promotions that take a business to an entirely different level."
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