Thresholds in M2M

You know you spend a lot of time explaining to customers the “thresholds of business”.  What is “TOB”?  Generally, most companies (whether it be a hardware manufacturer or a cellular carrier) have a minimum threshold of volume to allow for customers to obtain a direct relationship, and to bypass the channel/distribution.  For hardware manufacturers, it may be a certain number of units bought and for some carrier services, it may be that they have to commit to a certain volume/dollar amount before they can deal directly.  I am pretty sure that they exist universally in all industries, but customers in the M2M space seem to enjoy eschewing those TOB in favor of direct relationships with vendors more than most.

It doesn't matter what part of the supply chain you choose, there will be thresholds. Want to deal with a carrier on subscriptions? ... You will need to agree to minimum numbers and amounts of billing.  Want to deal with a manufacturer? ... Same thing, you will face rigid delivery schedules and purchase minimums in order to do so.

Why do these thresholds exist?  It's really about bandwidth in our industry.  OEMs and carriers do not have enough staff or time to help every customer directly (at least for some programs) and they have metrics that guide their sales teams towards those ends (namely....support big opportunities directly and filter smaller opportunities to the channel).

Incredibly, not every bit of subscription service is profitable particularly when there is pre or post sales support required... which there almost always is.  Support is the main driver of all the thresholds in our industry.  It isn't so much that the overall quantity is low, but more that the amount of support required to get the product to market may not justify the use of expensive resources at the OEM/Carrier.

Not many folks think about support when they approach the supply chain.  Usually customers say, “I want to build 10,000 units. What is my price?”   They can be astounded that they are sent to specialists in distribution to handle their support; to assist with financial requirements and offer logistic support and that the company does not choose to deal directly with them. In the distribution model, these three issues keep the wheels of progress moving because distribution usually provides these services to companies for virtually the same cost to the customer but a greatly reduced cost to the OEM or carrier.

With the move towards lowering down costs, OEM/Carriers are likely to increase this trend going forward.  Customers who deal with distributors (especially good ones) are starting to see the overall value that they provide, and not just the purchase price.


 

One SIM for all countries…as they said in the 70s “far out man”

I hear a lot these days from customers and vendors alike about having one SIM for all countries. It’s actually a really good concept - you can deploy in any of 170 countries in the world using only one SIM and one platform to manage the subscriptions.

So who does this one SIM concept really appeal to? It appeals to automotive companies who are in Europe, Asia and North America. In other words, very large multinational companies with huge infrastructures and resources to manage the relationship.

So who does this one SIM concept not appeal to? Ironically, it does not appeal to very large multinational companies with huge infrastructures and resources. Why you ask? Well, on the surface it seems like a no brainer, but if you consider for a moment the issues a customer could have, then it starts to break down.

Customers will have a problem with connectivity in the car, as an example....

They will not know if it is a hardware problem or a cellular connectivity issue. They will take it to their dealer, because our good friend “Siri” will be of no use to them if they are off line. How would the customer know which provider to call? How would the customer know that they need to call the manufacturer (because that’s in the car handbook and no one, I mean no one, reads those things)?

Now you have a simple or complex problem depending on your geography. If you are fortunate to live in a country where the deal with the carrier was struck (or in a place where the carrier has its own network), you could receive excellent service. However, if you happen to be in another country, it is entirely possible that you will not solve the problem very efficiently. What will the mechanic try to diagnose first? It would probably be connectivity or firmware, not hardware, so that means someone is going to touch the guts of the electronics in the car. How does this seem better than talking to AT&T if you are in North America or O2 if you are in Prague? I mean that’s my first call – to the carrier and have someone ping the device. Can you imagine a situation where this might not work out well – i.e. calling Vodafone from Prague or Telefonica from Wisconsin?  Service and support will be the only metrics by which customers have to judge the quality of service.  What happens if they have to deal with a carrier they don’t know?  I am fairly certain that you will see a lot of disclaimers like: "Please note that functionalities may vary somewhat depending on country and car models”. This will turn into a service and support train wreck.

There won’t be any real time or resource savings.

Another efficiency gained on this logic is that there is one form factor for GSM and CDMA with respect to cellular modules. In different terms, you could spin one board and have a Verizon and AT&T version of your product. The problem is that very few companies have the expertise to get both networks approved, let alone "designed in". This is one of the pitches that manufacturers make – it’s the same footprint. Well that’s terrific...the only problem being that the pin out is completely different, so there are no real time or resource savings to be had.

It’s like dual SIM phones as well. If you travel it’s supposed to be fantastic, but whom really has the time to bother, and how much are you saving? Roaming is going away faster than a speeding locomotive. If I have learned anything these past 20 years in the M2M business, I have learned that you should do one thing well and constantly improve it…not try to design the perfect product with all the flexibility built in from the get go . I have never seen a product that works well in every country on GSM or CDMA while also intelligently switching to the cheapest phone service depending on a person’s location. I don’t think I ever will.

My advice, stay in your swim lane and become a leader in that space versus trying to master all the lanes and drowning. And don’t get caught up in all the hype that’s good for the manufacturer, but bad for the customer.


 

M2M Market: Top 5 Reasons for High Attrition

Did you ever ask yourself ...

“I wonder where that company that I was talking to several years ago ended up?” 

Chances are if it was in the M2M space, they are no longer in business.

Whether the company was acquired or went out of business on its own, there is no doubt that there is a very high attrition rate in the world of M2M. 

Why is that, you may ask? 
That is a really good question and here's how I see it:
 

1. M2M ain’t easy, baby!  Let's face it ... I said 20 years ago that we weren't selling chocolate bars and I meant it.  The product is very technical and the environment to deploy can be very bureaucratic. That makes it difficult to have a watershed year in our industry. Companies who are superstars today may have their positions challenged by the next company to come along because the scale (and, to some extent, the size of deployments of products and services) of our industry has not yet reached that elastic portion of the demand curve.

2. It is not possible to make money if you just challenge for your slice of the market. It is critical to chase 100% of the Total Available Market (TAM). If you currently can’t pursue 100% of your TAM for any reason, you need to find out ways that you can overcome this. This needs to be a core focus for any company to be successful.

3. People generally have flawed business plans. I am very much in favour of having plans and constantly changing them to suit the business environment...and when I say change, I really mean tweak.  Look …what was great 20 years ago is not viable today, and once you start shrinking, its already too late. It is best to have a core business objective and expertise and continually tweak your approach to keep innovating and growing.

4. Businesses are not committed to the space....Look, M2M is hot and sexy now, so everyone is in jumping on the bandwagon ...but where were you when this thing was born?   If you weren’t in M2M then….you probably will not be there in the later stages either since you won’t have the technical or logistical chops to be involved.  It took many years of trial and error to get companies to acquire that level of knowledge that they have in this space, so if you don’t “buy it”, you won’t have it.  This also answers the question of “why do I see the same people at every industry event I go to?”  It’s an unhealthy metric of our industry.

5. A lot of customers have wasted valuable resources on whims ... and by valuable resources, I mean money, and by whims, I mean re-inventing things that have already been perfected.  The trick is to find some new “secret sauce”, but don’t try to make your secret sauce from someone else’s who has been making that brand of secret sauce for the past 10 years.

I was looking at business cards on my desk and searched to see if any of those companies were still around and low and behold, there they were GONE (old Irish word play)!