AIoT: Transformations through Innovative Business Models and Smart Value Chains

When AI and IoT come together, we transcend beyond a ‘connected world’. We move towards building businesses of the future with smarter, insightful, and life-changing experiences. Adoption of sensor technology into the physical products, combined with artificial intelligence and data analytics, have opened numerous #AIoTOpportunities across industries. Predictive maintenance, remote monitoring and asset performance management are just a few use cases that are now a reality in many organizations. The benefits of AIoT must not be simply associated to one specific business activity, but rather businesses gain from an entire smarter ecosystem. This article aims at providing an insight into the product lifecycle and the business model innovations made possible because of the connectivity and the cognitive capabilities of AIoT.

AIoT = Artificial Intelligence + Internet of Things

The added smartness from AIoT impacts multiple stages along a product’s value chain. The benefits accrue as early as in the design phase, where the team gains from the field performance data analytics. Manufacturing processes can be completely transformed with the objective of higher productivity, automation of mundane tasks, improved quality, and faster scalability of operations. #AIoT also enriches sales and aftermarket phase by establishing a higher level of customer intimacy.

Consider an instance of a sale transaction based on a non-digital foundation. In such scenarios, there is not much interaction between the seller and the buyer and the seller doesn’t get up-to-date information about the actual usage of the product. Apart from the routine after-sales services which are mostly non-digital in nature, the alignment of the product lifecycle and the customer journey is non-existent. Such transactions provide very few insights about the product’s performance in the field leaving narrow scope for future product improvements. AIoT, being the tech-enabler, modifies this scenario by aligning the customer journey information with product lifecycle management, using real-time data-driven insights. This enhances the visibility across the value chain, thus helping the organizations build the foundation for their strategic goals.

Impact on Business

• AIoT driven OEMs would be able to transform stakes in the aftermarket segment because of user-centered approach in designing, building, and launching cutting-edge solutions.

• Organization can deploy product performance data at multiple areas of the value chain. This data can also be classified and analyzed with other important data such as real-time customer feedback, that would enable organizations to improve based on a continuous feedback cycle.

• With the product usage knowledge companies can reposition themselves by offering new features, update existing features or even retiring a few unwanted services.

• With use cases such as predictive maintenance, supply chain optimization and quality assurance, OEMs are becoming more service-centric while carving their paths towards new ways of revenue generation.

With the advent of AIoT, organizations are now progressing from traditional product-oriented to more service-oriented business models. These service-centric business models provide organizations with steady recurring revenue streams that are more definite and more predictable. Examples of this service-centric business model can be manifested in industrial products like pumps, batteries, or seals, where AIoT has enabled a transformation from selling pumps to offering “maintenance of pumps as a service”.

Digital add-ons have conceptualized another business model, where add-ons are offered along with the core product or service during the purchase or as an after-service. Customers pay premium for extra features like product extensions, individual customization or even any additional digital attributes or services.

AIoT has also made “Pay Per Use” or “Pay as you go” business model gain wide recognition in the recent years, even though this model has existed for a very long time. Real-time monitoring of the usage of the product/service allows for a more effective pricing, where customers get charged for specific usage only. So instead of paying a fixed rate, customers pay in accordance with their consumption.

AIoT has also introduced to the world many other business models such as “Object Self-service”. Take the example of a printer. This AIoT enabled printer places order autonomously for the cartridges, based on the fill level and the prices of such cartridges in the market.

Conception of these new innovative business models reduces the steps in value chains of businesses. When combined with inherent layers of intelligence in the value chains, these models positively transform the way businesses operate, helping them provide more value to customers.

At Bosch, we are trying to achieve the best of the both worlds, i.e. a holistic view of the entire value chain and as-a-service business model for a humble black tire. Vast majority of the tires, run with improper inflation, resulting in accidents, lesser mileage, unexpected tire bursts and faster wear and tear. From an operating cost perspective, tire maintenance and repair accounts for the most significant cost for a fleet operator. Besides, a damage or a failure in the tire can lead to unplanned vehicle downtime resulting in additional costs and burden.

Bosch’s proprietary Connected Tire provides fleet operators with crucial tire data in real time, for example, tire pressure, wear and tear, number of kilometers travelled, tire load, etc. This smart tire with its predictive maintenance technology, investigates faults and alerts the users enabling them to be proactive in taking necessary decisions before any breakdowns, thus optimizing costs.

IoT enabled ecosystem also allows participation and interaction of various other stakeholders such as auto insurance companies, software companies, dealers, repair workshops and the OEMs themselves.

It is not to be overlooked that tire manufactures themselves can explore innovative business models such as monetizing important tire data to a broader set of customers. Critical tire parameters in that case would be kilometers travelled, tire wear and tear or fuel efficiency.

This innovative business model of selling kilometers instead of just selling tires could be the one breakthrough innovation that the tire industry has been waiting for.

Thus, smart connected products are changing the fundamentals of value creation for customers and at Bosch we proudly say, “We can connect anything, except broken hearts”.

Authors:

Mr. Raghavendra Kulkarni, Business Head - Innovation Strategies, Digital Engineering, Bosch SDS (Raghavendra.Kulkarni@de.bosch.com)

Ms. Tanmayee Jahagirdar, Master Thesis Student, Intern, Digital Engineering, Bosch SDS

Special Mention:

Uday Prabhu, Head of IoT Business, Bosch SDS

(UdayHaleangadi.Prabhu@in.bosch.com)