Why are IoT Business Models Important?

As the Internet of Things (IoT) spreads, the implications for business model innovation are huge. Filling out well-known frameworks and streamlining established business models won’t be enough. To take advantage of new, cloud-based opportunities, today’s companies will need to fundamentally rethink their ideas regarding business models. The industrial players are moving so slowly to evolve their business model designs they risk implementing solution concepts developed in the late 1990’s by about 2020.

Apple, Google, Amazon and others present an interesting case for how B2B companies should be thinking about designing and developing smart services business models.   Players like Apple and Google have developed a business design mode that pulls together technologies from multiple domains and packages that solution in a way that wins buyer acceptance. Add to this the momentum and creativity these players are creating within their communities of users and developers — they are all driving entirely new forms of collaboration, content and peer product development.

Albert Shum, Partner Director of UX Design at Microsoft, notes: “Business models are about creating experiences of value. And with the IoT, you can really look at how the customer looks at an experience—from when I’m walking through a store, buying a product, and using it—and ultimately figure out what more can I do with it and what service can renew the experience and give it new life.” To foster a conversation about the potential implications of connected experiences for designers, technologists, and business people, Albert’s team at Microsoft recently released a short film documentary called “Connecting: Makers.”

Some highlights of the connected business include:

• Business Model Transformation – selling results, outcomes or performance – not equipment;
• New Value-Added Services – providing peer benchmarking, targeted personalization services, predictive systems optimization based on analytics and modeling;
• Product Design and Engineering Insights – collecting machine operating history across an entire generation of machines to determine priorities for future designs;
• Sales, Fulfillment, and Supply Chain Services – developing a better understanding of installed base characteristics and behaviors for predictive modeling of demand for channel partners and ecosystem participants;
• Ecosystem Orchestration – developing brokerage services for multiple, parallel vendors for orchestration of services around machines and systems;
• New User Experience Design – designing more effective machines and/or systems based on a more intimate understanding machine behaviors and how users interact with the system; and,
• Installed Base Support Services – helping customers maintain installed systems and equipment on a collective or systemic basis through careful management of configurations, installed products contracts management and life cycle management.