How to build an IoT business model

The most valuable companies in the world today leverage digital technologies to disrupt conventional markets and create new markets. All IoT business model configurations involve the servitization of data, processes, and / or products.

IoT business models can be highly differentiated but they all involve iterations of one or more of the three common business model variants.

18 Business Model Archetypes that can be utilized

IoT business models can realize significant benefits in both market performance and operations performance. The value that IoT solutions generate can both be monetized through external customers and provided to internal customers to maximize the aggregate benefit.

Five principles are important to consider when developing IoT business models

1. Align business model to overall company strategy: To ensure strategic fit, validate at an early stage whether and how the opportunity contributes to the overall company strategy. This can be done in the idea selection phase, using checklists that represent key values or strategic goals of the company.

2. Identify key drivers of value: Adopt a user-centered approach when defining the IoT offering, starting by defining the value proposition and assessing which parts of the solution are central to the value proposition.

3. Assign tasks to internal and external stakeholders according to their capabilities: To minimize costs and efforts and maximize value, use a resource-based view to allocate resources. Determine what capabilities are required for the IoT offering and which stakeholder can best provide them. Do not aim to build the entire stack if partners are available.

4. Future-proof business models at an early stage: Consider how to ensure sustained economic viability of the business model as early as possible. Aspects might include data rights, technological evolution, human resources, or network dynamics. Expect both the solution and the external dynamics to evolve constantly.

5. Document and validate assumptions that have an impact on the business model: Throughout business model development process, many assumptions are made about target groups, market size, user acceptance, technical feasibility, costs, etc. It is crucial to document them and to explore on how much they affect the business model.

 

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