The prediction of 50 billion connected devices by 2020 has been used so often and frothily that we sometimes forget to ask, “Why?” It’s fun, it’s cool, and it’s technologically fascinating, but why, exactly, are we doing it?
The simple answer is because we can, but the deeper answer is because we have a need to connect and communicate. Then there’s the colder answer: to improve processes, track assets and save money. Useful, for sure, but ultimately unfulfilling and somewhat unrewarding, depending on where you fit in the corporation.
At the recent Mobile World Congress it became clear that the shift has finally begun toward more exciting and rewarding applications. The IoT is opening up completely new revenues streams and ultimately new businesses. For sure, this has been a goal of the IoT, and it’s been discussed abstractly and with the future in mind, but the future is here.
A recent conversation with the team at Flutura clarified this viewpoint. Flutura is turning IoT gateways into data analyzers at the edge that can enable new services such as diagnostics as a service or prognostics as a service. These types of services depend upon heavy-equipment vendors accurately sensing and modeling equipment status and behavior. The equipment can range from Texas oil wells to ice breakers in the Arctic.
Alternatively, IoT solution providers with domain expertise can help equipment vendors and customers understand the nature of the problem, work with Flutura or other software providers to identify the benefits of such a service, and scale that across an entire industry.
The potential of the IoT to enable these models is exciting and beneficial, and it helps many who have been displaced by the advancement of the IoT find new ways to apply their skills.
An engineer or technician, for example, versed in maintaining a piece of equipment in the field, may get replaced by remote diagnostics. However, if an IoT solutions provider sees the deep domain knowledge and can work with that engineer or technician to develop a whole new diagnostics-as-a-service model, everyone benefits.
Grey Heron Identifies New Revenue Models
The fascinating and detailed paper, “Monetizing the IoT: Show Me the Money,” written by Grey Heron and sponsored by Gemalto, identifies six things solution providers can do to leverage their ecosystem:
- Plan deep integration with ecosystem partners to reduce friction, leverage scarce resources, speed adoption and create competitive advantage.
- Intimately understand and quantify the value you are creating for customers/users/partners.
- Leverage your ecosystem partners to build to scale; this is a game of big numbers.
- Collect data across the ecosystem, own data, analyze data, monetize data.
- Identify alternate ways to deliver more value; for example, services instead of products.
- Align your internal teams and partners to ensure delivery of a coherent, unified IoT offering.
Ten key areas are driving the IoT ecosystem, and these are joined by six considerations for increasing revenue or creating new business models. (Image source: Grey Heron)
The paper underscores the importance of intellectual property (IP) licensing models and being flexible in how those are provided. “Business models based on capital expenditure, in which manufacturers charge up front for expensive hardware (like an MRI machine) and give the software away free, are outdated and limit the marketability of their products.”
The wide move to a subscription economy, piloted by the likes of Microsoft and Oracle, is now part of the future of the IoT. By adding subscription models to industrial (and consumer) devices, providers can monitor, customize and improve the customer experience, while also keeping them coming back for more. From a business perspective, this moves the expense from CAPEX to OPEX, which can be amortized over time, and which may be more appropriate from a budgeting and taxation point of view.
Of course, protection of the IP is paramount, and Grey Heron emphasizes that – which may also explain why Gemalto sponsored the paper. Rule No. 1: Protect your IP and know-how within codes such that it can’t be stolen or reverse engineered.
While Grey Heron doesn’t go as far as telling where to pick up your money, taking stock of your ecosystem in light of the six considerations given above, will help take your ideation from the ground floor of saving money, to the blue sky of enabling new businesses and sustainable growth in an era where everything has changed, utterly. “A terrible beauty,” indeed.