We've heard so much about the Internet of Things (IoT) but one topic within the business dialogue that needs to be addressed is how the IoT is disrupting the C-suite. Over the past three years, I have worked with and observed executives struggling to meet the IoT expectations of shareholders and customers alike. Recently I have been working with IoT start-up CEOs and CTOs, both locally and in Silicon Valley, who do not come to the game with what I would call the baggage of traditional product businesses.
The IoT experience is similar to what I observed during the dot-com evolution, but different in that it is not just about a new technology, but how entire business models have to change because of the technology. Every member of the C-suite is at risk unless they make behavior or educational changes in response to the demands of the IoT.
Change, of course, starts at the top. CEOs have to become more tech-savvy and collaborative. Technology is going to enter and change every facet of the business and become a part of the company's core offerings. Personal experience with social network applications, transformative offerings like Uber, and the customer service expectations of the digital economy will help the CEO understand the changing expectations of their users. If they are not aware of how analytics applications like Mixpanel and Kissmetrics are going to affect the daily operations of their business, they need to get help from someone who does.
Strategy has to be collaborative because of the complexity of the technology integration and speed with which it changes. Therefore, collaboration has to replace competition. CEOs need to engage digital business models every day to prepare themselves to make the investment and decisions necessary to guide their company and meet IoT shareholder expectations — that today often look more like venture capital expectations.
CFOs must adapt to the new demands of the digital business model in terms of accounting and revenue. CFOs have to become comfortable with the fact that their revenue is going to be determined by their customers' usage behavior, not their operations and sales teams. Their ability to forecast will be determined by how well the R&D and marketing teams work together to design their products to drive adoption and avoid churn. Acquiring new processes for accounting, forecasting and valuation of both business and investments will be required for the successful CFO of a digital business.
One of the more dramatic transformations for IoT companies, in my opinion, is that of the chief marketing officer. The real-time nature of IoT creates the need for real-time market data and market-driven feature changes. Think about how often your favorite app changes on your iPhone. That is not just because they are fixing bugs. They are tweaking their value propositions based on real-time market data derived from new analytics engines. Think about how you find out about trending applications and new digital offerings. The IoT connects the marketing of the product to the delivery and experience of the product. CMOs now have the opportunity to incorporate the duties of a CDO — chief digital officer — and will need to become fluent in both IT and operations.
COOs must become capable of making or facilitating IT decisions, and they must step up their game on the collection, analysis and use of big data. IT and traditional operation process functions are no longer C-level functions but will report to the leader of operational technology. In the same way the IoT is forcing CEOs to become more tech savvy, the COO will have to become digital tech operations savvy. They will rely on their CTOs to help them transfer new products and technology into operations. They will have to become familiar with both digital marketing and big data analytics to understand how to drive growth and avoid churn in the delivery of their digital offerings. They will be in a race with the CMOs to gather or develop the fundamental domain knowledge necessary to move from big data gathering to big data analytics. The transformation from producing gross profit from selling products to gross profit from the analysis of the data from the use of those products will be critical.
As the CTO of a company helping many customers create new IoT offerings, I see my peers under increasing pressure to adapt to this new technology. However, the IoT has given CTOs the opportunity to take a more critical role in the success of their companies. CTOs can no longer avoid the day-to-day financials and market data of the business. The IoT is a seamless and complete integration of a business model with a technology deployment. If the CTO does not understand what users will pay for and how both revenue and costs scale with customer use of the product, they will not be able to choose the right technologies to create products that expand the business.
Like it or not, the Internet of Things is changing how business is done.