Insight

From product to connected Product-as-a-Service: Seven things to consider

Transform your business from selling a product to providing a connected Product-as-a-Service. Download our in-depth report to learn more.

Adopting a Product-as-a-Service (PaaS) business model is a big step. Once your product is connected to the Internet of Things (IoT), it becomes a direct link between you and your customer. Using the power of data from IoT and connected products, you can find new ways to build relationships and create value for your customers.

From an organizational perspective, making that step into the world of IoT and PaaS is challenging. It requires a shift in mindset impacting strategy, processes, people and technology.

To provide a guide to Product-as-a-Service business models, we commissioned the strategic consultants at Northstream to help us define strategies for PaaS business transformation. The result is our in-depth report entitled: From Product to a Connected Product-as-a-Service.

As a preview, we have outlined the seven key factors consider as you invest in IoT and move towards PaaS. The starting point is naturally the customers, the other factors can be considered in order or in parallel, depending on your situation.

Customers

Generate business from new customers while better engaging with existing customers – these are the main goals of moving towards a PaaS model. Offering a low customer entry price, with a pay-as-you-go revenue model, expands your potential customer base, with a path to continual end-user feedback and engagement.

Questions to ask

  • Who are the new customer segments?
  • How to transition existing customers?

Value proposition

With a traditional product, the value proposition is built around selling an asset with certain features and quality. In a PaaS offering, the value you provide is reliable, on-demand performance. Adopting PaaS requires a complete rethinking of the offering and how the value is created and delivered.

Questions to ask

  • How do we redefine from selling an asset to delivering a service for a fee?
  • What are the range of possible services connected to our product?

Business Case

As PaaS and IoT are relatively new to every industry, quantifying a business case is challenging. However, to ensure the buy-in of management, it is crucial to understand the effect on revenue and costs, and the resulting return on investment.

Questions to ask

  • What is the impact on TCO and ROI?
  • What is our pricing model?
  • How do we manage payments?

Product development

The need to redesign existing products is the biggest initial impact of adopting IoT on R&D. The long-term impact will be applying end-user data to transform the entire product development process.

Questions to ask

  • What initial product redesign is needed?
  • What functionality should be in-device versus in the cloud?
  • How do we support after-sales updates and customization?

Sales & distribution

PaaS requires a revised focus on after-sales to increase your upsell and cross-sell with direct and long-lasting customer relationships. As services become an integral part of your offering, all the people involved in service touch points need to act as ambassadors for your company.

Questions to ask

  • What is the impact on sales people and incentives?
  • With increased end-user contact, how do we ensure customer service?
  • Are new distributors needed to reach new segments?
  • How do we best collect user feedback to provide better services?

IT systems

Adopting a PaaS business model does not necessarily require a major IT overhaul. A better approach is to incementailly add layers to your existing systems. Piecing together various components and technologies requires an end-to-end solution that can manage system integration.

Questions to ask

  • What new systems and capabilities are needed?
  • What are the new technologies, infrastructure and skills you need to have in place?
  • How do we manage data ownership, privacy and security?

Partners

In-house or outsource? This is the big question that must be answered as you go forward with your PaaS journey. When deciding on who to partner with, you need to consider cost, skills and competencies, time to market, scalability, control of key activities and data ownership.

Questions to ask

  • What should be done in-house versus provided by partners?
  • How do we define our role in an IoT ecosystem?  

This text is produced by Northstream and commissioned by Telenor Connexion.

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Full Report: From product to a connected product-as-a-service

One of the biggest opportunities within the IoT is the possibility of transforming a company’s business model to offer a connected service, instead of selling an actual product.

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