Koninklijke Philips has come a long way since the Philips family began making light bulbs in the Dutch city of Eindhoven in 1891. Today the company focuses on healthcare, but it wants to do more than just build and sell medical products. The Financial Times recently quoted Philips CEO Frans van Houten:

“In the future, most of [our] products will have services bundled with them, where we can either give support to the patient, or we give support to the doctor, and where we take co-accountability for the results and the impact that these products will deliver.” (Forrester’s emphasis)

Photograph of a bank vault in Paris.This shift to business relationships based on “outcome” or “value” rather than the simple sale of a lump of steel and plastic is something we see becoming increasingly interesting. In “From Grease To Code: Industrial Giants Bet Their Future On Software,” Paul Miller explored some of the ways that manufacturing organizations are reimagining themselves and their purpose. It’s a theme that also comes up a lot in our ongoing internet of things (IoT) research. According to Forrester survey data, 67% of global mobility decision makers in the manufacturing sector agree that IoT enables new types of business models. But only 15% currently prioritize moving from a product-based to service-based relationship with their customers. So why this disconnect between recognition and action?

We’ll be exploring that, and more, in a webinar on February 20: The Perils And Pitfalls Of IoT Pricing, From Subscription To Outcome. Please join us.

The webinar draws on themes we’ve been encountering throughout our research, and it’s an area that we continue to explore. During our work on last year’s evaluation, “The Forrester Wave: Industrial IoT Software Platforms, Q3 2018, for example, we saw a range of different pricing models being used for those platforms. Vendor responses to the pricing questions in that Wave were analyzed in a recent report, “Evaluate Industrial IoT Software Platform Pricing Models To Ensure Long-Term Fit.” We then took a closer look at the specific question of outcome- and value-based pricing and cast the net wider than just the participants in the Wave. The result of that — and some possible explanations for the big gap between recognition of the value and action to capitalize upon it — was just published as “IoT Ignites Interest In Outcome-Based Pricing In Manufacturing.”

Business leaders may well be interested in outcome-based pricing, but a number of knotty problems must be overcome if they’re to make it work — and that takes time, effort, money, and focus.

If you want to discuss any of this in more detail, or if you have examples of your own to share, please do get in touch. As always, Forrester clients can schedule an inquiry call to ask about this. Anyone can schedule a briefing to tell us what they’re doing.

(Image source: Renaud d’Avout, via Wikimedia Commons)