IoT and Changing Business Models
Internet of Things (IoT)Â is a network of things associated with each other and describes an ecosystem involving objects, connectivity and application/services. There are number of projections on the size of the market and $1 trillion-plus addition to economic activity as a result of IoT by 2020. This is a big number which is driving almost every firm.
Given the enthusiasm on the Internet of things just as the difficulties in this space, the importance of IoT business models and associations could not be overemphasized. It is very significant that the industry interacts in partnership to achieve the market objectives
IoT Business News predicts that the combined market for IoT containing hardware, software, systems integration and data and telecoms services is assumed to grow to $520 billion by 2021. That number represents more than 100 % rise on the $235 billion that was consumed in 2017. And the number of enterprises exploring new use cases is up to 60 % in 2018, compared with less than 40 % in 2016.
The business model requires to be depends upon how the products and the data generated by businesses can create additional income streams. The IoT has the potential to improve revenue, but only when businesses are ready to accept a new way of thinking and look at new options for income generation.
As the Internet of Things spreads, the involvement of IoT business model innovations are also increases. An organization’s business model sets out how it will generate and deliver value. Over the years, such models have improved in experience depending on advances in technology.
By implementing IoT, businesses can frequently analyze operations to recognize opportunities and errors and start with new strategies. Businesses can now be data-driven, with products and services outlined to be flexible and personalized to fulfill customer expectations.
The various models on which businesses are set upon and are becoming more dynamic and more connected within an ecosystem of the business, are the product and the consumer. What does this mean generally? Let’s take a look.
Changes to Buyer’s Journey
Understanding the buyer’s journey- The process that customers go through in decision to buy, has also been an essential part of any business strategy. While the buyer’s journey will continue to follow the common model at high level such as awareness, consideration, etc. the IoT has enlarged that journey which includes new phases of usage and the acceptance of new services.
The purchase is no longer the end of the buyer’s journey, but the emergence of an ongoing relationship in which the customer acquires value from the connected features of the product while the business acquires value from the data gathered about the customer’s utilization of the product, which is used to build a new products, services and functions. Businesses need to interpret this new standard and expand the methods of building relationships that remain strong throughout the multiple cycles.
 IoT Business Model – Value Chain
The IoT value chain describes the building blocks of IoT, how value is generated, who are the player and how they integrate with each other as a channel partner to deliver the value. The value chain is probably one of the most essential parts of IoT business model. It describes how the service is provided. IoT has an extremely complex value chain as a result of the fact it impacts a large number of process.
It’s no longer sufficient for a product to merely meet a customer’s short-term needs. Today’s customers are demanding more, from the very capabilities of the product to the accessibility of continual service.
Value is usually generated after the initial transaction, with businesses maintaining customer relationships by giving both service as well as improvements. The IoT is transforming the methods of value creation from a process of resolving existing requirements through a single product that remain the same over the time into a more predictive maintenance in which businesses must be more perceptive and able to address emerging needs, while also giving real-time updates and using data to continuously improve the service and function of the products.
Mainly, the partnership genesis is challenging when each of the establishment would consider itself more vital as compared to the other. In such a case, one of the most important questions for any kind of business fascinated in IoT is to find its position in the value chain.
The position in the value chain would describe its relevancy, importance and opportunity. The huge question is who will lead the IoT. The player who is acquiring the biggest pie of the value chain requires to ideally taking a lead in building partnerships. A glance at the value that could be targeted by various players, it is clear that the platform providers are best positioned to lead the IoT as they grab as much as 50% of the total chain value.
Looking at the IoT value chain as a pyramid, at the base there is IoT connected devices: phones, fitness bands, connected cars, smart homes and other devices on the consumer side; in industry, you have things such as building sensors, smart cities and connected factories etc. Stepping up one level from the base, brings in the network and connectivity which includes how devices are connected and interact. It’s also where service providers gather device and network data and upload this data to the cloud.
At the top of the value chain there are applications and services that are adjacent to the end users, enterprises and consumers. There are 5 key groups of players, such as device carriers, operators, platform providers, systems integrators and application carriers.
Device Providers
Device providers gain up to 10% of the value but is that they can also develop service based model for IoT? If they are able to do so, then they have that much of capability to seize another 10-20% of the total value. Without a service model, they will take advantage of the hype around IoT but they will rest just as a vendor. Best option for them is to get involved into generic partnerships with the lead player.Â
Operators
The operators are very essential as they provide the connectivity and have a head start with M2M as compared to others. Operators require to adopt the start-up culture as IoT business is moving very quickly. The mindset of an operator is depends on a well-built business environment (for example, an operator who gets near about 80% of revenue from annuity business).
IoT will drive larger data utilization but due to commoditization, connectivity is at risk of becoming one of the ‘non-value’ add component of the value chain. The risk of operators being reduced by simply the pipe (is the kind of equipment that correlate clouds and devices ) to the cloud, which will make cloud data movement easy.Â
Platform Providers
The platform is the key element of IoT that integrates the hardware, the connectivity, service providers and the vertical applications to provide industry-oriented IoT solutions. There are various types of IoT platforms such as the connectivity/M2M platform mainly focused on connecting the devices using telecommunications networks/SIM cards without that much focus on analytics or data processing, hardware oriented IoT platform, these types of platforms are likely the proprietary platforms initiated by device vendors, e.g. IoT Platforms that have been specifically developed for IoT, keeping the scale, product requirements in mind.
The winning mix is a platform that offers a device management, cloud-based storage, data visualization, analytics and ability to combine with 3rd party systems using API or SDK to be able to take a benefit of legacy systems along with broad range of other IoT software and hardware.
System Integrators
They have a huge role in the industrial internet of things. Not everything is plug-and-play out of the box and thus we need system integrators to make the particular components of IoT to communicate in one of the most ideal ways to the customer. The better option for the system integrators is to discover their particular opportunities and get involved into partnerships with large platforms players.
Application Providers
They are too small as a player and could not bring the partnerships by themselves. The achievement targets by significant IoT players are to capture the bigger pie of the value chain. Few industry-specific large application carriers are most probably run individually such as a CRM & Billing, Customer Care, Vertical Solutions erc.
The Changing Workforce
Because data from many areas of the business can be analyzed and estimated remotely, location is a quite less important factor in the manufacturing workforce. Improved utilization of robotics has reduced the need of physical labor, moving humans into higher value business roles.
Enhancing the number of software engineers or even software robots within the company can support businesses to make their processes smooth by improving services. Developments in machine learning and pattern recognition, interfaced with careful recruitment and training, could assist to switch a company’s perspective to prediction and analytics. Companies need to assemble data and alter accordingly to stay competitive and enhance customer experience by providing consumers what they need — reliability, efficiency and an accurate cost prediction.
Changes to Pricing Structures
Imagine the failure of one small, but crucial component in an industrial installation causing hours or days of downtime while the fault was traced and errors was fixed. If you imagine every part of installation being reserved and represented in a digital twin, which informes engineers that the machine requires maintenance in advance before it actually down with error and hampers the production. Such type of technology helps to cut operational costs as well as system downtime in factories and other industrial installations.
Earlier IoT business models were constructed on a path of profit that depends on selling products. More products sold equals to more profit. Thanks to the IoT, profits are more greatly reliant on recurring income.
Personalization, additional services and utilization-based pricing are all becoming the standard, as interprets how the additional partners in the Industrial IoT Ecosystem make money and support each other’s efforts. The IoT has the ability to enhance revenue, but only when businesses are willing to accept a new way of thinking and look at various new options for income generation.
The Internet of Things will surely continue to be a force for change in views of our lives, not the least of which is the way that businesses perform and plan for the future.
By understanding the influence that connected devices can have on a business, you’ll be better positioned for higher profits and a more successful enterprise with a significant ROI.