Consumers buy refrigerators to extend the shelf life of foods and to serve cold drinks during the summer months. They buy a car so they can optimally move from point to point. People and businesses buy their products (in most cases) to meet their needs, but this could be solved in other ways than just by purchasing a product.
Globalization resulted in lower profitability of products due to fiercer competition. Refrigerators from different manufacturers differ more or less only by brand name, and manufacturers can only differentiate with the price. However, only by reducing the price, companies can no longer survive or provide revenue to shareholders, so they look for new business models.
Services achieve a higher margin, so many manufacturing companies choose to offer their products as a service. This has an additional effect - companies get regular monthly revenue instead of a one-off payment for selling the product.
Changing consumer habits are telling us that people prefer sharing economy over product ownership. This is opening the whole new way to new business models. Solving a consumer problem as a service also means that the manufacturer can add services to the basic product. And earn more money. This is called servitization. It can be offered by the manufacturer or by an independent service provider.
Let me just list a few examples based on this principle:
Providing a very high level of service to the customers, however, requires manufacturers to be able to monitor and control the performance of products remotely, so that they can take action in the event of defects and irregularities.
The rapid development of IoT and its incorporation into products itself allows manufacturers to closely monitor consumer behavior and understand their needs, expectations, and challenges. Engineers and designers will no longer have to guess how their products work in practice, as they will be able to collect and see actual data. This way they will be able to identify their customers' habits and adapt to them with new products or services.
*For further reading we recommend our blog - IIoT is Business Driven and vice versa