The inversion factor: Creating experience more than products
While companies within the internet of things (IoT) focus on products, Sanjay Sarma says the focus should shift to creating customer experiences.
Chances are by the time this is read, some information will already be out of date, since this is about the internet of things. That’s Sanjay Sarma’s workplace. It’s always been about connectivity, but now, the professor of mechanical engineering and vice president for Open Learning says that the arena holds new opportunities for companies who can think bigger and shift away from simply making products to creating all-encompassing experiences. It’s a transition that involves risk and puts a premium on letting ideas grow, while delaying profits. Sarma has laid out that approach, an inversion mentality, in his new book. The game plan might not appeal to every company, but the ubiquity of both the IoT and customer expectations makes it a necessity for future profitability. The good news is ample technology already exists. The key ingredient is supporting the process. “Anyone who can create and visualize these experiences has an opportunity to really seize business sectors like never before,” he says.
Sarma started in the IoT field at MIT about 20 years ago, first working with radio frequency identification. The sensors could track items, something small like paper towels, and a colleague coined internet of things, a kind of catch-all term, to encompass the wide-ranging ability to connect everything to the at-the-time burgeoning online world. But Sarma says that what he also saw, and what he’s focused his research on, was the inefficiency – buildings with lights constantly on regardless of occupancy; poorly signaled street intersections filled with cars and pollution. Those resources could be marshaled, waste could be eliminated, and people could be offered a greater experience and quality of life, he says.
Anyone who can create and visualize these experiences has an opportunity to really seize business sectors like never before.
That’s the jump that’s presenting itself, and the IoT is part of a larger movement, which is the basis for his new book, The Inversion Factor. It’s a design principle and a new business approach, going from asking customers to come to and understand a product to having the company create and offer an experience, one that the customer may have never imagined wanting, Sarma says. Zipcar is a prime example. Rental cars have been housed in central lots in order to exchange keys and check mileage. The company used the IoT and did away with that. Amazon continues to do it with Echo, but it first had to transform the company. It developed the Kindle and the Kindle applications – which ate into the need for a Kindle – and the company went from being a book seller to owning the reading experience, he says.
It’s possible for any company to do, but not easy. Age or industry isn’t a deciding factor. Startups tend to have an advantage. They’re not wedded to platforms or conventions, but established companies have the benefit of existing resources and a customer base to test ideas on, Sarma says. Regardless, certain elements need to be in place. The product has to be connected. It needs to compose a new function for the consumer. It needs to be intelligent with an ability to adapt. It finally has to integrate fluidly into a customer’s life. As an example, the coffee maker wouldn’t just turn on at a programmed time or be able report the weather, but it would be able to take the person’s blood pressure and select a pod with the appropriate amount of caffeine. “It’s an immersive experience where everything just works,” Sarma says.
The intuitive, immersed coffee pot is something of the endpoint. The journey for any company often has to start by making a leap and trying something, anything. “Get going,” Sarma says. “Start hacking.” After the initial step, companies have to bolster the intent with the right mix of people. Sarma says it’s “a form of schizophrenia.” On the one hand, there’s the need to have creative types who are up to speed on connectivity and have the What If? mentality to ignore existing boundaries in order to conceive.
On the other hand, smart, conservative management has to exist. In effect, it’s making sure that the adult voice is in the room that will build a solid infrastructure and keep an eye on shortcomings, such as the easy-to-overlook security breaches. As an example, Airbnb is great, but not if the computer system locks people out or is easy to compromise. Ultimately, executives have to be responsible while giving people the license to follow ideas, then nurturing and protecting those ideas, pretty much treating them like babies. They need a chance to play and grow without facing tough questions too early in the process, so “they can take the next step, then the next step,” Sarma says.
Ultimately, executives have to be responsible while giving people the license to follow ideas, then nurturing and protecting those ideas, pretty much treating them like babies. They need a chance to play and grow without facing tough questions too early in the process.
This involves a high risk-tolerance. Again, Amazon provides a lesson. When the company was developing the Echo, it delayed expectation of profits because the idea had to be tested, and the crowd ended up helping to innovate around the platform, something that couldn’t have been predicted. Such a timeline requires not micromanaging the bottom line. “Next year’s profits may be the enemy to your five-year existence,” he says.
And the upshot for the patience? Look at the iPhone. It started as a communications device. Now it can monitor home security, or be used as a level when assembling furniture, an example of how the accelerometer and squareness of the device combined to compose a new function. Apple has made it central to the customer’s existence, and while it’s still a communications device, it’s also a productivity tool. It’s that kind of flexibility and functionality that ultimately protects any company when it innovates, Sarma says. And for that, the company can charge $1,000 for the latest model.
There are unavoidable risks. That comes with innovation and that’s not a surprising reality in the business world. But with the oncoming opportunities that Sarma writes about in The Inversion Factor, there’s another reality that isn’t as widely accepted: There really isn’t an alternative.
The IoT is omnipresent. Customers already have an expectation of experience based on actual experiences, i.e., Amazon, Lyft, Uber, Zipcar, and more examples constantly pop up in people’s newsfeeds. It’s the new lens to view the world, Sarma says. In short, no business is beyond the reach of innovation, and avoiding the transition or pretending it doesn’t have to exist isn’t a viable plan. “Status quo is not status quo,” Sarma says. “You’re just standing on a treadmill that’s going backwards and you just haven’t noticed.”
For further detail on the topic, read Sanjay Sarma's latest book The Inverstion Factor, How The Internet Changes Everything which explores why companies need to move away from a "product first" orientation to pursuing innovation based on customer need.