Despite industry utilizing the internet for communications to “things” far before the advent of the Internet of Things (IoT) terminology, much focus was put on the consumer market as the general IoT began to develop. This could be due to innovators focusing on the perceived higher volume of “things” required for the consumer market or the ability for the average innovator to have a deeper understanding of consumer requirements. Regardless of the reasoning, as the Industrial Internet of Things (IIoT) divulged from IoT, the technology sector generally encompassed “industrial” as anything not considered to be in the consumer IoT. This is a short-sighted view as the industrial markets' technology demands vary by market segment and even further by application within the market segments. In this article, we discuss some methods IIoT marketers and product managers can use to position their solutions for success in the industrial market segments.
Market Segmentation Considerations for IIoT
The concept of industrial market segmentation is highly subjective, complex, and perhaps does not get the depth of attention it deserves. The rapid growth of IoT and the latent development of the IIoT, provided attractive opportunities for many innovators competing within consumer IoT to migrate towards IIoT, many underestimating the depth of knowledge required for a technology solution to take off in the industrial markets. Perhaps this is the reason for the generalization of the industrial term in the IIoT in the first place.
Segmenting industrial markets is complex because dynamic market drivers emerge due to pressure from demographics, regulation, innovation, and other economic variables. Consider for a moment, the dynamics of the food and beverage (F&B) market. The F&B market can broadly be separated into several main segments such as prepared foods, dairy, meats, beverage, agriculture, etc. Further segmentation might separate for example, “beverage” into craft and large-scale due to the varying market drivers between them. Traditional drivers still exist for many large-scale producers surrounding quality, brand protection, and environmental sustainability. However, with consumer awareness increasing, trends to purchase local, organic, and/or non-GMO, have presented opportunities for small, startup, craft producers. Craft producers will place very different priorities on their drivers and factors in purchasing decisions; often early in the startup phase. Because of these variations, an IIoT product may not have the same fit between the market sub-segments, even if it is functionally the same.
Tailoring IIoT Solutions to Market Needs
I suggest that, in general, IIoT solutions will fall towards one side of an application continuum with “high volume / reproducibility” on one end and “implementation intensive and variable customization” on the other. There are a number of qualitative attributes that might factor into the ends of the continuum (see figure below). Understanding your target market’s positioning on the continuum will help you tailor the product’s commercial model for success. You might find that the product can simply have enough flexibility built into the model to supply the needs of all of your target markets. However, you might also find that the best approach is to brand and package a product completely different for each segment despite the functional technology being the same or very similar.
A continuum for your business might contain the same or different attributes and approaches to market segmentation will vary. Regardless, placing the market segments and products on the continuum will likely result in improved decision making throughout product development and lifecycle management. Be cautious not to generalize market segmentation too much. As with the beverage example discussed earlier, stopping at “beverage” would leave a product potentially positioned very poorly in a large part of the market.
Product Development: Ideation to Commercialization
Once your solution passes the ideation phase, and presumably you have generated enough business justification for it to provide value to the targeted market(s), the hard work of development begins. Chances are that the idea for the product originated from a realized opportunity to fill a value gap in an application. It’s unlikely however that the details of how that product should be positioned and transacted have been completely vetted; nor that all possible applications for the product have been identified.
It’s rare for all of the detailed marketing required for a full commercial model to be complete prior to any development. This would also cripple a product’s ability to reach the market in a timely fashion. As development progresses, the details of positioning and modeling the solution in the target markets should be moving in parallel. It’s important to not underestimate the amount of effort required to build a complete model for a new product.
Marketers and product managers must consider some key items during the development process. Placing these items on the application continuum will identify with clarity what gaps might need to be filled prior to commercial launch. Some considerations:
- Target market's segments and sub-segments position
- Other (untargeted) market's position
- Product’s intended position (at least initially)
- Competing products
- Organizational considerations (such as ability to finance, transactional preferences, etc)
If development is moving in parallel, then feedback should occur with development to adjust the products position to align with the target markets.
Let’s exercise this by furthering the example of the craft and large-scale beverage markets. Ideation may have identified a need your organization could fill in the large-scale market. However, throughout analysis, you find that the craft market will move higher volume and that your organization does not contain the resources to assist throughout the difficult implementations in the large-scale market. While the outcome in this example might seem obvious, when adding multitudes of markets, segments, and sub-segments the complexity increases.
Market (Re)Positioning Throughout Product Lifecycle
As markets and the IIoT evolve, new opportunities may present themselves for existing products. It is as important to consider the changes in the marketplace as it is to manage the dynamics of the product itself. This outward facing viewpoint may present new opportunities for an otherwise aging product. It’s also just as likely for a market’s dynamics to change causing a detrimental impact to an otherwise healthy product’s revenue.
Marketers and product managers might periodically evaluate and reposition the following items on the continuum:
- Targeted market segments for changes
- Market segments not targeted for emerging changes
- Product’s position based on emerging technological enhancements, changes in supply chain, organizational changes, etc
- Competing products and emerging technologies
This creates a dynamic analysis of the product’s position against the targeted markets and competing products. As gaps begin to display in the completed continuum, actions can be taken by marketers and product managers to either protect or enhance a product’s position or to evaluate an end of life process.
The speed of change for IoT and IIoT is rapid. Industrial market trends do not typically change quickly, but their depth is extensive and dynamics impacting them do exist. Whether you subscribe to the theory that the IIoT is beginning to display a dichotomy or not, the reality is that the needs of the industrial market segments are variable in a very dynamic environment. The reasoning for any lag in uptake of an existing or emerging IIoT solution is likely far beyond the value the technology could bring on its own. For any IIoT solution to gain traction, the entire end to end experience must be tailored for the clients in the target markets.