Internet of Things Business Models

In the business model framework proposed by Turber et al., (2014) [6], the context of the Internet of Things is based on service-dominant logic. This “who, where, and why” framework clearly shows that in the IoT, the firms are not the only ones producing value for the customers to buy, but rather all collaborators have some role in the production of value. As shown in our framework above, all the collaborators have their own indispensible role in its IoT ecosystem. With Reference is made to Figure 2 about the architecture of IoT, I summarize the involvement of each focal Company into each layer.
Focal Company
Digimobil Technology Ltd. & Rodsum Wireless Ltd.;
Megabyte Ltd.; HKC; Axon Labs Ltd.; Cenique; Fukui
Digimobil Technology Ltd. & Rodsum Wireless Ltd.;
Megabyte Ltd.; Hutchison; Cenique Hutchison
Digimobil Technology Ltd. & Rodsum Wireless Ltd.;
Megabyte Ltd.; HKC; Cenique; Fukui
Solution providers like HKC, and Megabyte involve sensors, information handling, and application layers.
Their services like augmented system integration with customization and software development. The after sales services can be augmented because the system status can be monitored & diagnosed remotely. Fukui worked with a technology enabler to apply RFID in their specific industry, and collaborated with several parties in the Ecosystem. They can extend the service to the whole industry and become a platform business. Axon labs provided a free App for download to build up a customer base first before any value capture. It invited several other related service providers to create synergy. This is a typical digital freemium business model. Cenique provides viewer profile analytic riding on the Cloud service provided by Hutchison. Their services can provide a direct target advertising platform for the merchants. Digimobil Technology and Rodsum Wireless extend the ownership model from the user to the service through access to product data and the ability to monitor the performance of the installed devices. Customer can even enjoy the model of “Pay as you go” or “Product as a Service” instead of a huge upfront payment. A hybrid model between a conventional customer ownership and product-asa-service, such as product sales bundled with service contract, or product sales bundled with performance based contract has been manifested. Almost all the cases are running on a close system to which third party taking over is difficult. Tremendous effort is required to learn the Industry domain, customization, and implementation.
Through all these case studies, it showed that the benefits of the collaborators are a great leap in operation efficiency, productivity, a strengthening in customer services, and new revenue streams.
Although the sample size is not big, the studies included user, vendor, system integration, and solution and service providers, while the applications are cross industries, thus the observations, and the lessons from the interviews are quite conclusive:
1) The technology breakthrough in miniaturization, energy efficiency of sensors enables a lot of portable devices, and thus convenient and real time IoT applications.
2) The development & deployment process is quite long or have gone through a Proof of Concept stage as there is no precedent in most of the applications. The advantage for the incumbents is high entry barrier if they can sustain the initial investment period.
3) Affordable wireless connectivity provides ubiquitous network connection for IoT devices.
4) As Cloud service is widely employed in most applications, it creates a common data storage platform for collaborators.
5) Sometimes external information is required in additional to the sensor data for holistic analysis. Some of these are open data such weather, traffic, and geo-mapping.
6) Integration with client back-end system is required in most cases.
7) All the developers/Integrators adopted either a get-ahead strategy in technology or get-ahead strategy in market while the clients mostly adopted a get-ahead strategy in market. The clients must buy in the idea, and the product/solution providers must accommodate more late-stage and post purchase design changes for the fine tuning after initial implementation.
8) The common tactics are digital or physical freemium, Product as Point of Sales, and Remote Usage and Condition Monitoring.
9) IoT applications may involve a lot of different appliances/devices with different control protocol.
10) After-sales services can be much more efficient compared with traditional system because of the internet connected nature of IoT. It can also share the workload of individual device through system optimization.
11) IoT adoption is not reaching a mass market yet; the network effect is confined to specific vertical market because a lot of customization, and thus the domain knowledge are required.
12) Retailers demonstrate the strengthening of customer relationships, marketing, and security through the adoption of IoT.
13) Although an open system which facilities connection to other devices through an open interface or API is feasible, closed system which aims to have customer purchase the whole system from a chosen solution provider is preferable.
14) The performance of the product shifts from the functionality of a discrete product to that of a broader system which consists of the connection network, data storage, system data analytics, and integration with the existing backend management system.
With a rapidly growing industry and huge potential revenue over the horizon, companies can see the great potential in the IoT but struggle on how to approach it. Not much data exists on how business operates within an IoT context, and so companies are reluctant to take the big leap into the IoT. Just as soon as the business potential was realized, so was the need for network-centric IoT business model framework. This article addresses this issue by revealing the successful business models of the IoT Awardees. With that, we also testified that the value proposition, knowledge requirement, and thus the competitive advantages have been changing in the supply side while a new era of IT-driven productivity growth is emerging in the demand side.

Every one can play their role in the IoT value-chain. It is so diverse that there is no clear monopoly. But if a company can control a very strong ecosystem, then this company has an advantage. However, different industry need different ecosystem of players. Thus, opportunity is still very big.

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