IoT is no longer a blank spot on the map for many companies. In fact, the Internet of Things is already being used on a large scale in companies in a wide range of industries. Many IoT pioneering projects however remain stuck in the pilot phase. These often costly experiences have led to a rethink: the focus is no longer on purely technical feasibility, but on the value that such a project should generate. Let us explain why this is exactly the right approach.
Why a Business Case is More Important Than Technology
When companies started to think about digital, IoT-based business models, it was only about the technical feasibility of such projects. The so-called “PoC”, short for “Proof of Concept”, was the focus of interest. The time for trial and error is now over. IoT has now firmly established itself in many companies. At the same time, companies have paid out a lot of money for less successful projects.
These experiences have led to a change of perspective among decision-makers and those responsible. Especially in times of crisis, expenditure is looked at more closely than before, projects should therefore no longer be carried out for their own sake, but should contribute a concrete, measurable business success. In other words: streamline processes to save costs or generate new revenues. PoC alone is no longer sufficient for this. The actual needs of a new IoT business model must therefore be established as precisely as possible in advance and it must be determined what value it can generate for the company. At the same time, however, it is also necessary to calculate what is at all feasible. Taken together, this means that the PoV – i.e. the “Proof of Value” – now plays the decisive role.
Profit before feasibility
The value added at the end of the process chain is greatest when the benefits of a business model are already known before project development and there is certainty that customer needs can be satisfied with that new product or service. New business ideas should start with the pain points, i.e. the problem points and needs of potential users and customers. Even before a project starts, it must therefore be analyzed who the target group is and where exactly their challenges lie. It is also important to know what the future user is prepared to pay for digital products and additional services.
As far back as 2001, the Agile Manifesto for Software Development emphasized that the customer, or rather customer satisfaction, must always be at the center of new developments. This guiding principle also applies here: first of all, it should always be asked why a project should be realized, what the goal is and how it can benefit the customer. Only then does the how follow, i.e. the technical feasibility.
Good planning is essential
If you want to build a successful business model – whether it is aimed at optimizing internal processes or offering new services on the market – you should pay attention to several points. In addition to a good structure, a clearly defined business case is a valuable basis for promising IoT projects. The ultimate goal in project planning should therefore not be to prove technical feasibility: Real motivation in the sense of generating added value is essential for designing and successfully implementing IoT projects.
One of the key points for achieving business value is the orientation towards clearly defined KPIs and milestones. This makes it possible to transparently track whether the business model is already on the right track – and in case of doubt, it can also be used to identify early on whether a project needs to be adjusted or even terminated. In this way, IoT projects are not continued simply because people believe in them, but because they demonstrably generate real added value.
Last but not least, agile and iterative work is also part of the recipe for success. Sufficient time for adjustments, feedback and testing should be planned right from the beginning. Just as in project planning, in testing it is also important to proceed in a goal-oriented manner – in other words, to continuously evaluate whether something is successful or not on the basis of clearly formulated hypotheses and key figures.
Roadmap to a Successful IoT Business Model
Assessment of the proof of value depends crucially on the right approach to the development of a business model. An example of guidance for this is provided by our practical guide IoT Business Model Innovation which accompanies you step by step on on the way to your IoT business model and uses real-life use cases to show how a promising IoT project with tangible business value is developed.