IoT Business Models: How You Can Benefit From Them
Hearing about IoT business models for the first time may lead to some confusion. After all, common questions that may come to mind are: Are these any different from regular business models? How? And most importantly, what specific characteristics set them apart?
To answer these questions, let’s start by defining what IoT is so you get a better understanding of the impact it can have on organizations – and how your business can profit from it.
An Introduction To IoT And IoT Business Models
IoT stands for the Internet of Things. The term refers to the interconnection of computing devices and modern everyday objects using the Internet to retrieve and send data between each other.
From connecting your speakers to your phone to play your favorite songs to syncing your mattress to your computer to keep track of the quality of your sleep, IoT can be applied to any industry as a way to enable technology users to lead smarter, more efficient lives.
This interconnectivity and data exchange between devices is the secret sauce behind IoT business models and is what brings a myriad of benefits for both companies and users alike when implemented as part of a business strategy.
Some of these benefits include:
- Performance data and insights. Devices connected to the internet can keep track of performance data and insights that can be reviewed by their owner afterward. This data can also be sent to the development team/company for use in the continuous improvement of the product and its future iterations, creating a win-win scenario for both the manufacturer and their clients.
- Problem reporting. When a device connected to the internet presents a particular problem, like shutting down when executing a specific task, it can send instant feedback to the product team that allows them to understand the error and the condition in which it occurs. This lets them evaluate the situation and perform troubleshooting actions, like releasing a software update to ensure the same error is fixed for all existing users.
- Development of new products. A device designed with IoT in mind can track its users’ usage patterns. This helps development teams figure out and predict their users’ needs and use it as a source of inspiration for the development of new products.
IoT business models represent how companies can profit from the fluid communication, data synergy, and feedback loop between devices to conceive better products and services.
By 2025, it’s estimated that IoT will be responsible for generating over $10 trillion per year for businesses worldwide, according to Indian IT multinational HCL Technologies. Embracing IoT is also an effective way to create more diversified and future-friendly revenue streams that simultaneously provide additional value to users and customers.
Examples Of IoT Business Models
When referring to the different ways you can incorporate IoT into your business, the sky’s the limit. After all, IoT business models are the brainchild of continuous innovation, meaning they include both the best practices we already know, and everything we have yet to come up with. To share with you some inspiration, here are some examples of popular business models for IoT that you probably already interact with in your daily life.
Subscription models help businesses grant access to their clients to specific products or services through monthly or yearly memberships. Instead of a one-time, single-payment sale, it’s become common to charge a recurring fee in exchange for providing continuous value, support, and upgrades. Incorporating a subscription model allows you to develop a stream of recurring revenue to cover costs, and expenses, and turn it into a somewhat predictable source of cash inflow.
Revenue from a subscription model can grow easily as more users are onboarded, but also requires that you provide excellent service consistently to keep users interested and prevent churn. Common examples of subscription services include software as a service (SaaS), hardware as a service (HaaS), and monitoring as a service (MaaS).
Outcome Based Model
The outcome-based model is another one of the most popular and widely accepted IoT business models in the tech industry since it’s considered a win-win situation. Under the outcome-based model, customers only pay for the actual benefit they obtain from using a product or service. This reduces the perceived risk of purchase and makes it more likely for prospects to convert into clients.
The outcome-based model can also become a source of recurring revenue for your business, although a slightly unpredictable one at that. Even if a customer needs to use the same product or service on a weekly/monthly basis, the usage and amount charged may vary each time.
The asset-sharing model revolves around not necessarily owning a device, but paying only for how much you use a product, and selling your excess capacity back into the market.
The goal of the asset-sharing model is to maximize the usage of an IoT product across multiple customers. This lets you penetrate the market faster since customers pay a reduced price to use your product instead of a single customer having to pay its full price.
A clear example of the asset-sharing model can be found in the sustainable transportation industry – specifically, scooter rentals made available in big cities by companies such as Bolt. Through this service, you only pay for the distance you travel every time you ride a scooter. After parking it anywhere in the city, other users can pick it up and ride it wherever they need it.
A data-driven model takes advantage of the biggest premise behind IoT business models: how devices connect to the internet, track usage, and generate user data en masse.
In a data-driven model, the most important customer is not the end-user of a product or service, but whoever’s willing to pay for their usage data, which they can use as a source of business intelligence in the development of their products and services.
A somewhat obvious example of companies using a data-driven model is found in social media. Social media apps and companies tend to provide free services in exchange for the right to monetize your user data by selling it to third parties.
How IoT Business Models Can Benefit Your Business
Implementing IoT and IoT business models brings a plethora of benefits to your business. Among the most significant are the ability to deploy products faster, iterate on them quickly, and make better, more informed data-driven decisions.
Using IoT to provide digital solutions also reduces operational costs and allows you to scale in a cost-efficient way, without high upfront investments or long bureaucratic procedures. This is great if you’re looking to provide services worldwide or pursue a global business expansion with your product.
Depending on which of the IoT business models you pick, you can also grow your business revenue relatively fast since it’s easier to onboard new customers using IoT solutions.
Lastly, with IoT, you have a full view of the devices connected to your products. This brings the opportunity to build long-term relationships and a loyal customer base out of your clients, deliver an exceptional customer experience/support, and overall, make your customers feel heard and closer to you.
While embracing digital transformation poses many challenges for large businesses, it’s one of the key components that build resilience and teach you how to innovate in times of adversity. Having this type of data at your disposal unlocks new layers of intelligence you can use to merge the real and digital worlds in ways we have yet to imagine.
Unsure Where To Start With IoT Business Models? 3 IoT Agencies That Can Help
If you’ve just learned about IoT business models, it’s normal to not know where to start and how to incorporate them into your business to increase your number of revenue streams.
In those cases, it’s better to rely on seasoned experts with a proven track record of helping businesses implement subscription services, outcome-based products, and other novel solutions that act as a bridge between the digital and physical worlds.
Below you’ll find our 3 picks chosen from the available vendors in the Pangea.ai universe who possess a wealth of experience in the IoT domain:
FXBITS is an agency founded in 2018 and based in Cluj-Napoca, Romania whose staff consists of 20 full-time developers. They provide New Product Development services and have previously worked on projects with clients in the medical, health care, and industrial automation industries.
As of now, FXBITS has completed 3 projects within Pangea.ai and their hourly rate can range between €55-€99 depending on the project’s scope and the needs of their clients
Tech387 is another development company proficient in IoT business models with headquarters in Sarajevo, Bosnia, and Herzegovina. They specialize in New Product Development and Support & Maintenance services, and they have mostly worked with companies in the automotive, financial services, and computer software industries.
Tech387 currently employs 45 people full-time, their hourly rate goes from €30-€60, and so far they’ve completed 5 projects through Pangea.ai.
CNJ is an agency founded in Ljubljana, Slovenia in 2012. They’ve provided their customers with IoT, New Product Development, and Support & Maintenance services for over 10 years, mostly focusing on the social organization, electronic manufacturing, and consumer goods sectors.
Their current hourly rate ranges from €35-€85. They’re made up of 17 full-time employees, and have, as of now, completed 24 projects in Pangea.ai.
Q1. What is the IoT business model?
An IoT business model is any potential revenue stream made possible thanks to the seamless internet connectivity between smartphones, tablets, laptops, and similar devices. There’s a big chance you use services derived from an IoT business model daily to make your life more convenient. Some practical examples include subscription services (such as SaaS), geolocation services, and cloud storage, among others.
By 2050, an estimated 24 billion devices will be interconnected through the internet, as noted by Swedish telecommunications multinational Ericsson. This includes everyday objects like streetlights, thermostats, electricity meters, fitness trackers, and cars.
Q2. What are the 6 levels of IoT?
Seven elements make up any properly-functioning IoT system: device, resource, controller service, database, web service, analysis component, and application. How these elements interact with each other and the number of nodes in the system determines its level of complexity.
All IoT systems can be classified within the 6 following levels based on their complexity: the sounding level, the network layer, the service level, the interface level, scalability, and cloud-based edge computing, according to information from the industry 4.0 blog Industery.
Q3. How IoT can evolve new business models?
Relying on IoT is one of the best ways to make your products and services available on a global scale. Doing so accelerates the time it takes to deploy new features, products, and ideas to your customer base. Furthermore, implementing IoT is a great way to capitalize on emerging consumer trends, stay up to date with your industry’s best practices, and future-proof your business, according to Scottish IoT innovation center CENSIS.
Need help selecting the right company?
We will do the work for you, all for free.
Tell us what you need