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Value Check! — The Impact of the Internet of Things (IoT) on Business Models

Value Check Internet of Things.001

@ 2014 by Value Communication AG, Mainz/Germany

 

ValueLearnings:
• IoT is crucial for any kind of Business Model Innovation
• IoT will increase profit and growth via Value Creation and Value Capture
• IoT follows the rules of Value Innovation by the Big 5-C approach

 

By Şükran Ceren Salalı, Value Art&Communication Fellow

Gordon Hui, who leads the business design & strategy practice at Smart Design in United States and England, just published a blog post called How the Internet of Things Changes Business Models concerning with the relationship between the Internet of Things and existing business models.

According to Hui, today`s business model innovation is hugely affected by the Internet of Things (IoT) which includes value creation and value capture which are two main points for companies in order to increase their profits.

Value creation plays an important role to provide activities for companies in order to increase their offering and to support customer willingness to pay as a main business model. Moreover, value capture provides strategies that help companies to maximize their profits from discrete product sales by setting the right price which means also the monetization of customer value.

Real-time and Over-the-Air updates

The changes that based on value creation and value capture can be counted in many steps related with the traditional product mindset. Through value creation, addressing real-time and emergent news in a predictive manner rather than in a reactive manner, benefiting from over-the-air updates instead of focusing solely the product itself, and also using information convergence more than using single point data help companies to adapt the right business strategies for a healthier customer relationship and better profits. When it comes to value capture, enabling recurring revenue, adding personalization and context and also understanding how other business partners make money encourage companies to maximize their profits.

Hui also quotes Zach Supalla`s, the CEO of Spark (an open source IoT platform), words; “With the IoT, you can’t think of a company in a vacuum. The market stack is deeper than traditional products; you need to think about how your company will monetize your product and how your product will allow others to generate and collect value, too.” In other words, Supalla draws attention to the point that the value of IoT is huge enough to connect profits from different products each other.

ValueAdvice: Connect Innovation to Profit

What Andreas Weber suggests in How to Survive the Innovation Dilemma is a principle called `the Big 5-C´ that contains content, connectivity, consumers & brands, community and creativity. The Value Innovation strategy also contains the function of IoT by highlighting the importance of connectivity and consumer&brands, which are exactly serve for the same mission to create value in business strategies in order to support customer willingness and maximize company profits.

 

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In Brief:  What does „Internet of Things (IoT)“ mean?

The Internet of Things (IoT, also Cloud of Things or CoT) includes objects, animals or people are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.

The Internet of Things can be a person with a heart monitor implant, a farm animal with a biochip transponder, an automobile that has built-in sensors to alert the driver when tire pressure is low — or any other natural or man-made object that can be assigned an IP address and provided with the ability to transfer data over a network.

The Internet of Things has been most closely associated with machine-to-machine (M2M) communication in manufacturing and power, oil and gas utilities, also enabling advanced applications like a Smart Grid.

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