Why Do Most New IoT-Enabled Products Fail?
IoT-enabled products are creating a fundamental shift in how business is done, altering the landscape of how products are designed and delivered to customers.
In helping companies engineer, manufacture, and launch new IoT-enabled products, Logic PD has pinpointed seven stumbling blocks that are almost always to blame for IoT product development issues and failures.
New Strategies and Challenges for Connected Products
Connected product strategies involve a transformation of the fundamental nature of a product’s existing value proposition.
With this new strategy comes a new set of challenges that can trip up development efforts with seven root causes of connected product development failure:
- Misunderstanding the audience
- Miscalculating the opportunity
- Underestimating the competition
- Oversimplifying the business model
- Encountering delays in the development process
- Failing to fix technical or operational flaws
- Failing to secure full lifecycle funding
Root Cause #1: Misunderstanding the Target Audience
The problem: Several functional groups usually contribute to a product plan and are tasked with building out an innovative concept. But once a plan is put into action, execution can fall into a development black hole for a considerable period. During this time, it’s easy for product designers to lose sight of the specific needs of the stakeholders whose buy-in is crucial in a B2B selling situation and/or the end users in B2C scenarios.
To keep things on track, OEM development teams must constantly ask themselves questions such as:
- Does the product still match the value proposition?
- Does it still meet a competitive need?
- When do the trade-offs affect the product’s chances for attaining significant market share?
The solution: OEMs need to build “reality checks” into the process to ensure the product is still meeting customer needs that necessitated the product design in the first place. Cross-functional teams performing product reviews must stay consistent throughout the development process. Members of strategic teams who can provide ongoing input and keep the above questions top of mind must have a permanent seat at that table.
These cross-functional teams should have a roadmap they can use to ensure the new product meets customers’ needs. OEMs can use some kind of stakeholder journey template to identify the key stakeholders along the entire product path, from conception to customer. This will guide OEMs to the data sources to help confirm the development process is on the right track or sound the alarm that the design may need to be revised to better meet the intended customers’ needs.
Root Cause #2: Miscalculating the Opportunity
The problem: The key to designing smart products that sell is having systems that provide value-add services to your product and create, collect, and deliver additional information that customers need. OEMs must pay close attention to information sources and challenges in securing that data within the design process. Many IoT products fail because development teams underestimate the difficulty in obtaining information or inaccurately define what information end users would find most useful.
The solution: Consider potential information sources in two ways:
- Usefulness to end users
- Availability of data
Focus efforts on data sources that can realistically deliver the most useful services and information to customers.
OEMs eager to add an exciting feature to a product for launch should be careful. If the barriers to accessing the data are too high and threaten to delay the project, focus on more available and testable data. The new feature can always be added to later versions.
Collaborating with customers to understand their value proposition and pain points will help them become comfortable with a new technology at the start.
Root Cause #3: Underestimating the Competition
The problem: OEMs that have launched successful IoT-enabled products realized that evolution in their markets required them to re-frame both the core definition of their product and the company’s positioning, within this new market. This new reality meant value propositions, available market opportunities and competitive analysis required redefining, to shift from a product-centric to an information-centric playing field.
The solution: Simply put, companies whose connected products never made the necessary adjustments to stay competitive in a product-centric landscape lost. And they lost because their competitors figured out the right combination of features and framing for the new market before they did.
Often, IoT products compete more closely with other information sources—not with other products. OEMs must realize that improving the company’s competitive positioning requires an understanding of how this reality alters the company’s value propositions, market niches, and relevant competitors.
Root Cause #4: Oversimplifying the Business Model
The problem: Adopting an information-centric perspective to product design radically redefines the fundamental nature of a business model. It alters the value propositions and structures, and how value is created and delivered. It also changes how the value will be monetized. OEMs might design an offering that fulfills their customers’ needs with the right messaging to target markets, but their chances for a successful market launch can still be ruined by reliance on an old business model.
The solution: There are two different ways to design information to flow through a product design: closed flows and open flows. Closed flows offer enhanced stakeholder security and privacy as well as more compact feedback loops that allow for a tighter rein on quality control. In contrast, open flows often involve making data open source or available to third parties.
Likewise, there are two pathways a product can realize value: linear and non-linear. Linear pathways involve predictable upstream and downstream channels governed by relationships the OEM negotiated. They can provide operational efficiencies and just-in-time delivery through channels the OEM has earmarked for compatibility. Non-linear pathways are more adaptable, and OEMs can track real-time performance and exploit emerging patterns in an agile manner. This helps to track real-time service status and usage patterns.
The business model selected will rely on one of these types of information flows and value pathways. Consider security issues, relationships between product users and other stakeholders, and data privacy and collection concerns for guidance to get the best of the four combinations for a device in development. It’s important to keep in mind that digital business models are trending toward open designs and non-linear structures. This approach allows for the greatest variety of monetization options, the establishment of valuable user communities, and greater potential for organic growth.
Root Cause #5: Delays in the Development Process
The problem: Inefficient design and testing processes and ineffective transitions between product development stages can result in lost time and revenue and reduced market share. And those are the measurable impacts. Other negative impacts include poorly received products, political infighting inside an organization, and unfavorable market perception. These effects aren’t as easy to measure, but are just as real—and often cause long-term damage to the organization.
The solution: The agile development methodology (ADM) helps tackle product design issues before they balloon into big problems for the organization. ADM involves formulating and testing product design hypotheses. Hypotheses that can’t be clearly confirmed involve variables that can’t be measured, making it difficult to know for sure what’s working and what isn’t.
And while not the only root cause, ineffective transitions are the single-most avoidable cause of product delays and underperformance. Ideally, the transition process is a coordinated, structured review with all the major stakeholders involved in the product development effort. The objective is to catch issues before they make it into the next stage of development. Questions to ask in this stage are:
- Does the product still meet a customer need?
- Is the product still operationally and technically feasible?
- Does the product still surpass its financial hurdles?
Root Cause #6: Failure to Fix Technical or Operational Flaws
The problem: Design errors and production problems have waylaid even the best product launch plans. The connected product and its related ecosystem introduce an exponential increase to the number of potential pain points OEMs may experience on the product’s road to market.
Not all product launch delays are the result of internal trip-ups. When setting a target launch date, OEMs must account for potential component shortages, market shifts, and other external factors.
The solution: A systematic feasibility analysis framework helps beat the odds of a successful product launch. As part of this analysis, evaluate which connected product functions, technology components and data points offer the most value.
Root Cause #7: Inability to Secure Full Lifecycle Funding
The problem: Securing funding to get a new connected product in to production and the market is less of a concern for larger OEMs with deep pockets. But for start-ups and mid-sized companies, investor funding in the product launch cycle is necessary. All the journey mapping and feasibility analyses in the world can’t get a product onto shelves if a company can’t deliver an effective pitch to investors.
Many product launches and business startups fail because they run out of cash at the wrong times. Most often, a product’s budget is used to create the product, with little money left for launching, marketing, and selling it.
The solution: Develop a framework that lays out the OEM’s investor funding options in every stage of the product’s development. Regardless of where the product sits in its development cycle, the same three questions at the core of every funding dilemma are:
- What funding is left from development stages already covered?
- What stages of development remain that will require infusions of more funding?
- Which sources of funding are the best bets to obtain funding for these stages?
OEMs must continuously ask themselves these questions to recognize when new funding will be necessary and to stay one step ahead in the investor pitch.
Connected products deliver the services and information value today’s customers crave and the recurring revenue streams OEMs covet. Additionally, a successful launch and positive market first impression creates deeper engagement and customer loyalty. Making the switch from producing offline to connected products is a transformative change which will most certainly be fraught with growing pains.
But understanding where and why other companies have failed in their IoT development efforts and recognizing the warning signs, will help companies steer clear of the damage caused by these “7 Deadly Sins” and stay on a path toward a successful product launch and greater profitability.
Shawn Oreschnick is vice president of marketing & analytics, Logic PD.