The 'Internet of Things' Is Changing the Way We Look at the Global Product Value Chain The IoT will allow for unprecedented interactions between manufacturers and consumers. Are you ready?

By Rex Chen

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The traditional product value chain has been shaken up with the unstoppable spread of globalization and the universal commodification of goods and services. Globalization has forced companies to adjust and respond.

Related: 4 Reasons to Be Excited by the 'Internet of Things'

In fact, Internet of Things (IoT) products are playing a pivotal role in the alteration of B2C relationships, delivery channels and product pricing, and their continued proliferation is shaping the very nature of how we look at the product value chain.

The "Internet of things" refers to objects that can communicate among one other through a network. IoT is becoming prolific and commonplace in everyday objects. And, with experts predicting that the IoT network will consist of some 50 billion devices by 2020, those devices will only become more and more ubiquitous. The IoT revolution is truly just beginning, and it will most certainly will be televised!

Here are four changes coming:

1. IoT allows for unprecedented interactions between manufacturers and consumers.

Credit the interconnectedness of IoT products, letting them, in turn, connect the buyer with the seller. By opening new channels for B2C communication, IoT products are providing manufacturers an invaluable opportunity to reshape a dusty and outdated product value chain. Interacting directly with consumers gives us valuable insights on products; and consumer feedback will help us mold future business and product strategies.

Coffee giant Starbucks put this idea to action when it launched My Starbucks Idea. "Idea" is an outreach website where customers can submit ideas on how to improve the overall Starbucks experience. To date, the site has received more than 200,000 suggestions, and the company has implemented several, from energy-saving LED bulbs to convenient lunch wraps.

While this idea is a bit grandiose and presumably difficult to scale, the intent (and resulting customer satisfaction) is certainly worth consideration, and with help from the IoT's proliferation, it can be more effectively implemented.

2. Improved B2C communications won't benefit just manufacturers.

Improving and prioritizing B2C communications is also a critical component to boosting loyalty and repeat business from consumers. According to IBM, 80 percent of consumers surveyed said they felt that brands didn't know them as individuals.

That statistic suggests that considerable opportunity exists to capitalize on increased communication -- and that brands that succeed in this regard will enjoy a considerable advantage over those who don't.

Related: 8 Ways the 'Internet of Things' Will Impact Your Everyday Life

3. IoT products allow for a unique and modern approach to both cross-selling and upselling.

At our IoT product development company, TikTeck, for example, we sell LED smart bulbs for $9.99 apiece. A smart bulb is just one component in the IoT-populated landscape of automated homes, and it's a fantastic first step to drawing in curious consumers interested in IoT products because of their low-cost barrier.

Once those cosumers have tried (and hopefully enjoyed) our bulb, they're much more likely to come back and try our other IoT offerings, and they're much more likely to create a fully functioning and streamlined "smart" environment in their homes. Meanwhile, we can gather data on usage metrics and consumer behavior, to predict what kind of products people may need; and we can offer them directly through the cloud or our IoT apps.

That's a fantastic cross-selling opportunity, and it's considerably simpler, thanks to the new IoT product value chain.

Also, there's more than just cross-selling possible here: There's also plenty of simplified upselling possible with IoT products. We can sell a fully functioning, feature-heavy product for a very affordable amount, but we can also offer premium features that are restricted behind a pay wall or subscription requirement. That way, consumers can try our products at a low upfront cost, and if they like what we're offering, they'll pay more to access more.

This consumer-direct relationship isn't possible without a low-cost barrier and direct communication tools through apps or cloud computing.

4. Upselling and IoT proliferation can lead to a 'free-mium' business model.

Given this promise of recouping capital through alternative revenues, manufacturers will be able to deliver their product directly to consumers at a very low (potentially zero) cost. This "free-mium" model means that value isn't inherently attached only to the product itself, but to the actual, real-world use of the product. Monetization will come in the form of upgrades, subscriptions, product services or native (in-app) advertising. This will allow manufacturers to innovate by focusing on intangible features, products and applications.


Challenges will arise as the product value chain shifts toward the future. Product differentiation will be crucial for manufacturers, and they will need cost-effective and proven development capabilities, with fast turnaround.

Consumers, remember, are impatient: They want instant gratification, and that patience is only going to grow thinner as processing, handling and shipping becomes automated and streamlined. Manufacturers will need a supply chain that can handle both big and small orders. Those who can't handle these things will be replaced by those who can.

Overall, a revamped product value chain will not eliminate the importance of digital and social media marketing. In fact, it will most likely increase it. It's one thing to develop a good product. But getting consumers to take notice is a whole other beast.

Related: Out of the Loop on the Internet of Things? Here's a Brief Guide.

The future is exciting, and as connectivity and IoT spreads like wildfire, businesses and manufacturers that wish to succeed on a global scale will need to be at the frontline of the product-value chain.

Wavy Line
Rex Chen

Founder of TikTeck,

Rex Chen is the founder of TikTeck, a new brand launched at CES offering consumers “Factory Technology Direct” IoT, smart home and health/wellness gadgets priced at 30-70 percent less than comparable/competitive products. For the last 10 years Chen has held an executive role in IoT product development and manufacturing businesses and is now launching TikTeck to cut out the middle man and bypass traditional retail channels to offer the same high-quality gadgets direct to consumers at a fraction of the cost.


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