Continuing our series “Business Model Innovation for the Internet of Things”. After looking at the fundamentals and success factors of the business model design process in Part 1, in Part 2, we show in which innovation dimensions new IoT business models can be classified.
Studies such as those by Crisp Research make it clear – the Internet of Things has grown up, the trial and error period is over: German companies no longer focus on testing the possibilities of IoT in the form of initial prototypes on a project basis, but rather on developing innovative and scalable IoT business models. By 2020, the majority of German companies are looking to generate around 10 percent of their sales with the help of IoT-based business models.
The Internet of Things is now used in almost all industries in a variety of ways: from Industry 4.0 in manufacturing, to new products enhanced by IoT features, to entirely new IoT-based digital business models and services. Before you start developing concrete IoT business ideas, you should first decide which dimensions of innovation you want to focus on for your business model.
Process Innovation, Product Innovation, Business Model Innovation
The subject of process innovation has been the focus of classic production companies featuring IoT technologies and innovations, keyword Industry 4.0. The aim is to make processes – whether in logistics, building management or production – more flexible, more efficient and smoother in order to save costs and increase productivity. A popular example of this is predictive maintenance: Based on IoT, defects and wear and tear on machines and systems can be predicted and remedied before a breakdown and production stop occurs. With the help of IoT platforms, service technicians are no longer required on site. Instead, machine data can be accessed worldwide, and technical problems solved via Remote Service.
Use Case: Smart Maintenance through Feinmonitoring
For its presses and production lines, Feintool International Holding AG was looking for an IoT solution that allowed maintenance intervals to be optimized, thereby reducing downtime to a minimum. A web-based monitoring and analysis platform was made available based on Device Insight’s IoT platform CENTERSIGHT. In this way, defects and warnings could be displayed in the dashboard in real time, causes of downtime could be evaluated and predictions could be made for necessary maintenance. Defects can be identified and addressed before the machine breaks down. Thanks to the Remote Service function, service technicians are no longer required on site in order to access machines.
In contrast to process innovation, product innovation – as the name suggests – refers to completely new IoT-based products. Well-known examples of this can be found above all in the Smart Home context. These include home assistants such as Amazon Alexa. Another example is smart door locks, for which a large number of suppliers now exist on the market. However, the area of product innovation also includes IoT-based apps and digital services.
Use Case: All Vehicle Data at a Glance
Device Insight implemented an IoT solution for a worldwide leading importer of automobiles and commercial vehicles which collects and networks vehicle data via a central platform. A mobile app provides the driver with useful data and information, such as error messages, upcoming inspections or tips for optimizing fuel consumption. If necessary, the breakdown service can be called via the app or a workshop appointment can be arranged. The app also eliminates the need for a conventional driver’s logbook, because business, commuting and private mileage can be tracked electronically if required.
Business Model Innovation
The term IoT Business Model Innovation in the narrower sense is used when a completely new business or payment model is created based on the Internet of Things. This includes, among other things, models for use-based billing. The engine manufacturer Rolls-Royce, for example, no longer sells jet turbines in terms of size and number, it has developed the paid model “Power by the Hour”. The customer is invoiced for the procurement, installation and maintenance of aircraft engines according to consumption in the form of engine hours. The car sharing model established by Daimler, BMW and Sixt, among others, is also based on IoT and opens a completely new mobility service for the customer.
Use Case: Pay per Cup
One of Device Insight’s customers, one of the world’s largest system catering companies, sells its coffee not only through its own cafés, but also via coffee vending machines in filling stations or shopping centers. The company relies on the “Pay per Cup” business model. The coffee machine is provided free of charge to the filling station operator. In return, the company receives a financial stake in every coffee sold. This is possible because all vending machines are connected to an IoT platform based on CENTERSIGHT, which makes it easy to read out the use data as well as other status data of the device.
These examples illustrate just how diverse the possibilities for new IoT business models are. During the Discovery or Exploration phase of the business innovation process, companies should therefore be clear as to which area and which dimension of innovation their IoT business ideas should target.
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Source title image: iStock / SARINYAPINNGAM
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