Accountants & Bean Counters: What The Internet of Things Means For You
Earlier this week we looked at how the emerging Internet of Things, when everyday objects become connected to the Web, will affect product managers and marketers. Today we look at some of the implications for accountants and bean counters - those people responsible for revenue and expenditure in companies.
A recent article by McKinsey, a consulting firm, outlined the business value of Internet-connected objects. In a nutshell, real time usage tracking enables companies to value their products and services much more efficiently.
McKinsey explained:
"Goods and services that self-monitor can be sold in much finer slices and much more efficiently. Rather than buy a product outright, or sign a long-term service contract, sensors can track actual usage, enabling customers to pay only for what they consume or even the value they receive. In some cases, what was once a weighty capital expenditure is transformed into a lighter-weight operating expense, when products are transformed into services."
It goes on to illustrate this 'product as a service' transition with an example from the insurance industry:
"...auto insurance companies now are experimenting with networked sensors installed in cars that allow them to price insurance based on actual driving behaviors (such as distance, speed, and where the car is driven) rather than blunter demographic characteristics (such as age or where a customer resides)."
This same model could be applied to car ownership. Why own a car when you can 'subscribe' to one as/when you need it? Indeed, the "car as a service" model is already being successfully deployed by Zipcar (we wrote about this back in March). With Zipcar you subscribe to a 'pay as you go' plan or a monthly plan. You may then borrow a car whenever you need to, at the most convenient location, in your own city or any other city where Zipcar is available.
It's worth pointing out the potentially negative impact on the consumer of these types of business models. As a commenter on the McKinsey article noted, if the driver of an owned or borrowed car happens to work in a part of town that gets more crime than other parts, then their insurance premiums will go up. For the owner of the car, the value of it will decrease over time due to its driving history. So while accountants may view Internet of Things as an enabler of more efficient pricing models, many consumers may think it's unfair and inequitable.
Bean counters at manufacturers and retailers should also take note of the trend towards using RFID and sensors in the supply chain. For example using RFID technology to monitor temperature when transporting flowers ensures that no short cuts are taken and that the product is optimal.
Let us know your further thoughts and ideas in the comments.
Top image: Esteban Cavrico
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I look forward to the article about the impact of the "Internet of Things" on consumer (the positive and negative). It's a brave new world you want us to live in.
Posted by: islandinthenet.com
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August 13, 2009 4:01 AM
That's coming soon! And it's not that I necessarily want us to live in this brave new world, it's coming whether we like it or not ;-)
Coming from healthcare IT this is a huge opportunity and could seriously disrupt the businesses of many huge medical companies. Current insurance billing practices reimburse to a doctors prescription. So in our case if a person is prescribed 100 glucose test strips by a doc, that is what is paid for. In a model like this insurance companies could reimburse for what is actually used.
This is a great opportunity for companies to save money. There is a sizable black market even for diabetes and other non-pharmaceutical supplies.
It is also another way to provide more value to the customer. In our case one of the biggest problems we see is people not taking advantage of the medical care provided to them, especially among seniors. This would create a "use it or lose it" incentive for people to actually follow their doctors prescription.
When talking and writing about the "Internet of Things" and custom manufacturing I ask people to think of their world pre-internet and post. It is hard for a lot of people to visualize the same scale of change happening in the world of products, but it is coming. Thanks for providing coverage and thought leadership!
This review really shares a very informative issue which most of us should really know.This is important for most of us especially to marketers and accountants for they are able to have an idea and new strategy on dealing business despite of the existence of internet,which it makes the business easy to access.
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why does something need to be 'owned' to have value? The value of assets held in common or in trust is higher than that of assets traded, because more people benefit from them for longer. And what value do you put on a species or the quality of our air if you have to price it and own it to demonstrate its worth?