Consumers are reaching a tipping point in their relationship with tools that were just recently considered “next-generation.” For example, the perception of artificial intelligence (AI) has changed from the supercomputers seen in movies and television to virtual assistants like Siri or Alexa who can help organize the day. Connected devices and connecting to the wider Internet of Things (IoT) are now the norm. In fact, according to a recent study (CSG), nine out of ten consumers already have some type of IoT connected device, and 40 percent of consumers surveyed see the benefit of using the IoT in the home. The early stages of mass consumer adoption of the IoT are here.
For organizations and businesses, the prime opportunity is to develop new markets on a global scale. New generations of consumers are embracing digital, and the next billion internet users (WSJ) are coming online through proliferation of affordable smart phones, free Wi-Fi and data-only networks. While this audience still hasn’t reached the same level of connectivity as their developed counterparts, it will only be a short wait until emerging markets move past smart phone adoption, and fully embrace connected devices.
Another sign of the impending global connectivity are Smart City initiatives, the precursor to fully integrated Smart Societies. They are popping up worldwide, carrying with them many goals centered on improving the life of citizens. Investments are being fueled by the potential of using technology to solve urban problems and by the ability to monitor and interpret the state and usage of city assets.
With advanced networks and data-generating sensors becoming part of the urban planning fabric from transportation to healthcare, cities can monitor and analyze everything from water levels, energy usage, traffic flows and security cameras; or help residents navigate traffic, report potholes and vote. Committing resources to an analytics-first approach to city planning and development will be crucial in the coming years. As the majority of the population is projected to migrate from rural towns to cities by 2050, cities will need to be take on an entirely new level of self-sufficiency.
As the world becomes increasingly connected, cities and organizations are weighing many different approaches to reap the potential of the IoT, but beyond funding the initial investment required to install infrastructure, the sustainability of the continuous expenditure required as technology rapidly evolves must also be considered. There are the three key factors to successful participation in (and monetization of) the connected economy:
Building the Right Foundations
Changing, or in some cases introducing, a business model to better take advantage of the IoT isn’t as simple as putting new technologies in place or charging a credit card for a monthly recurring subscription. Business models must support the flexible nature of the IoT and tie usage policies and the collection of data to the commercial structure. IoT, at its very core, rewards organizations that align ecosystems and partnerships to introduce new value-added services. How those relationships evolve is critical, requiring more flexibility in back-office systems to support these models. As one in five consumers (CSG) believe the IoT will be essential to one’s life in five years, the starting gun has already been fired.
Organizations, whether cities or other businesses in the value chain, will require cloud-based digital business support systems to manage data collection, mediation and analysis processes through to revenue invoicing and supplier settlements on a massive scale to ensure financially sustainability for connected infrastructures. In fact, according to Gartner, in 2018 alone there will be 2.3 billion connected things used in smart cities. With so many systems that need to operate seamlessly, the cloud enables the flexibility required to ensure effective movement and analysis of information.
Critical to success is leveraging cloud-based digital enablement platforms to work from a low cost and a quick to market infrastructure. Cloud-based platforms can deliver functionality as a stable Software-as-a-Service with the regular updates needed for fast-moving technology and emerging standards – as well as operating in highly scalable, geographically dispersed environments. A cloud-based approach also provides the ability to experiment with business models that are uniquely positioned to yield results in a changing socio and technological landscape. The integration with cloud-based provisioning, activation, collection and analysis solutions will provide the framework to deliver the smart city consumer experience.
Bringing Along the Right Partners
Supporting the devices, people and services that are, and will be, connected by the IoT requires a multi-dimensional business model comprised of an increasingly complex web of partners and connected ecosystems. IHS projects there will 125 billion connected devices as part of our daily lives by 2030. As many businesses are learning today, IoT-enablement is a truly massive endeavor, one that doesn’t have to be tackled alone. By outsourcing certain functions to the experts, businesses can focus on what matters: the consumer.
Every connected device and corresponding service brings new opportunities to extract revenue through not just that device’s connection, but by managing the ecosystem of partners, and truly building a connected set of service environments. Many of the companies looking to move into IoT have never had to think about the onboarding, management and monetization of the end consumer – be it an individual or enterprise. This has traditionally been the job of a retail partner, or third-party distributor. As the IoT changes the world and introduces new complexities, ecosystems of partners must align to enable digital services to the global community, to reach new customers and to compete with borderless tech giants like Amazon and Google.
From collection and analyzation to ensuring privacy and ultimate value to the consumer – there are a thousand moving parts that need to work together cohesively. The job is simply too big for a single actor to own. It requires an entire village of experts and service providers to ensure that standards are being met, while still creating the engaging experiences consumers expect from a connected community.
Long-term monetization must be at the heart of every connected strategy. A key mentality shift includes thinking of ‘everything as a service.’ Take, for example, the humble plug-in air freshener. In an IoT model, the air freshener has a sensor which detects when product levels are running low, prompting a message to the owner’s mobile app, asking whether they would like a refill added to their shopping cart on Amazon. As the IoT and AI become fully integrated, it will understand preferences and eventually make these purchasing decisions automatically. This model drives revenue by transforming something traditionally thought of as a product into a refill service, expanding recurring revenue avenues for partners in the value chain.
For smart cities, consider ‘transportation as a service.’ In a smart city model, public transportation can be summoned at will much like an Uber model, but peak demand needs can also be continually monitored to ensure that transportation options such as bussing, or commuter trains are available where and when they are most needed.
Ultimately, there is no one-size fits all solution to effectively monetizing in a fully connected economy. Companies that embrace a “fast” mentality when it comes to launching, learning, failing and scaling, while also experimenting with a variety of innovative B2C, B2B and B2B2X business models, will experience the most success.
It’s Just the Beginning
As consumers continue to develop their relationship with the Internet of Things, we will see the universe of connected things expand from today’s wearables and one-off connected devices, to fully connected living environments popping up all over the world. To keep the connected ecosystem functioning, means putting a monetization strategy at the heart of every approach, and bringing along an ecosystem of connected partners that together, deliver the complete experience that makes life easy and efficient for all.
Ian Watterson, Head of Americas and Asia-Pacific at CSG
Image Credit: Ekaphon Maneechot / Shutterstock