The Internet of Things (IoT) is radically redefining just what it means to be connected. As such, it will present unmissable, undreamt-of possibilities for businesses all over the world; Accenture, for example, predicts that industrial IoT alone could add $14.2 trillion (£10 trillion) to the world economy over the next 15 years.
However, while the IoT opens up countless opportunities for innovation, it is the incentive of monetisation and profitability that will eventually drive investment. According to a recent Capgemini survey, 70 per cent of organisations don’t generate service revenues from their IoT solutions, making those who can offer a complete end-to-end IoT solution all the more valuable. The most common ways for organisations to work towards this and adapt to the challenges of integrating it into existing environments is by partnering to develop IoT solutions, making acquisitions, or developing open platforms or APIs.
New business models and revenue streams
As product lines get transformed to take advantage of Internet connectivity, manufacturers are also transforming their business models to enable innovation, flexibility and new revenue streams, in order to unlock the financial potential of IoT. Cashing in on the Internet of Things requires maturity of IoT solutions, and therefore also necessitates agility, data usage, and new approaches to billing by offering a variety of consumption and subscription-based business models.
According to Masanari Arai, co-founder and CEO of Kii Corporation, 'IoT monetisation is the next logical step in all conversations around IoT. IoT is not hardware invention anymore; instead of just selling hardware and getting one-time revenue, there is opportunity for organisations to receive monthly recurring revenue. This means that they won't have to worry about hardware cost. There will therefore be a priority business model shift, from focusing on such costs, to keeping retention.'
As Masanari points out, in order to achieve this motivation and retention, organisations (channel, distributor, device manufacturers, and tool providers) will have to address how they micro bill for their solution, and aim to share the recurring revenue. He notes that Kii is therefore 'working with device manufacturers to create an IoT cloud solution together, which will be distributed to the channel. We all share revenue for the monthly recurring charges, among channel, device manufacturers and us.'
Customer centricity and value proposition
As IoT develops, it brings with it a need for new business models, which derives from the emergence of a new, more demanding audience, who want what they want, when they want it, delivered how they want it. According to R 'Ray' Wang, Principal Analyst, Founder & Chairman at Constellation Research, Inc., 'We need to look at IoT in a different manner, from the customer experience angle. We need to stop thinking of IoT as sensors; organisations need to work out their business model for insights, and monetise by thinking about networked ecosystems. As organisations realise they are no longer selling products and services but delivering on experiences and outcomes, the shift to delivering on a brand promise requires the ability to deliver mass personalisation at scale. This is the heart of delivering digital business value. However, many of today’s customer experience discussion focuses on linear customer journeys across multiple channels and often discuss the need for delivering on omni-channel.'
We live in an era where we can fully utilise data usage in order to add value via personalisation, which is essential in order to achieve customer retention. 'In order to consider new revenue streams, organisations are depending on the channel, and therefore will have to understand the channel’s capability and implement appropriate sales training, as the channel can't sell something so complex by definition. They will need to understand end user behaviour, usually achieved by using an end user behaviour analytics tool. To do this, they must have a much focused solution in place for a much focused user segment such as kids, elderly people, and so on, and understand the buyer as well. In the case of kids or elderly for instance, the buyer is often a mum, or son and daughter, so that realisation can help target and market to them in a more efficient way', Arai added.
According to Arai, 'Essentially, there needs to be an end user value proposition, which differs from B2C to B2B solutions. In order to be in a position to offer this though, to be able to ask the end user to pay a monthly fee, the solution has to become an integral part of end users’ life by identifying end users’ pain points and offering a solution to resolve them. All participants in such an ecosystem have to motivate customers in order to keep retention, and ensure the service is improved over time.'
While many companies can offer a piece to the IoT puzzle, there’s still a big gap when organisations are asked to demonstrate a clear that a real benefit from a self-created, platform-driven solution, which can guarantee success. This was highlighted in a recent Telecoms.com survey, which revealed that a huge 86 per cent of operators say they’re not ready to launch or monetise IoT.
As Emil Berthelsen, Principal Analyst at Machina Research observed, 'We need to move beyond IoT as gadgets, and address the issues of privacy, security, benefits and advantages of IoT. When it comes to the biggest obstacles to IoT monetisation, it’s essential to differentiate between internal (e.g. business optimisation) and external (e.g. new customer services) factors. Furthermore, societal impacts are also crucial; there are some excellent examples out there from companies which are already monetising IoT internally and externally; for example, positive carbon impacts of IoT. Berthelsen concludes by commenting “However, it’s important to have the right platform in place to do so. Unlocking the potential of IoT comes when we truly network data between the Subnets of Things and mature our analytical abilities.'
Michael Westcott, Co-Founder, Smart IoT London
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