The Internet of Things (IoT) continues to generate a huge amount of excitement in IT and business circles. People are all but breathless over the opportunities that are at our doorstep—and for good reason. The IoT represents a major growth opportunity for businesses—one that CIOs should begin pursuing now, while the sector is still developing.
Getting there, however, is another story. Before your organization can capitalize on the IoT, you need to take a step back and rethink some fundamental notions about the business—and be ready to change. In simple terms, to take full advantage of the opportunities brought by the IoT, you can’t do business as usual. Traditional business models aren’t going to get you there. Your success with IoT will depend on how adept you are at transforming your traditional business.
Let’s take the example of a manufacturer that is great at selling appliances. Today, this is a transaction-based business model. When the company sells an appliance, the transaction is often the only business it will do with the customer, and it will have little to no contact with the customer post-purchase.
Now let’s say the same appliance is a connected device that captures data on product usage, wear and tear, and the likelihood of certain components failing. When that data is fed back to the manufacturer via the IoT, the manufacturer has the opportunity to contact the customer to offer to service the appliance before it fails. This proactive approach to product maintenance opens the door to a broader business model and a better customer experience.
While that example is a simple one, it sheds light on the way the IoT can enable new business models that allow companies to capture revenue from the entire lifecycle of connected things, not just the initial sales transaction.
So how do you get there? Begin with a sharp focus on the following five critical success factors for capitalizing on the IoT. This isn’t an exhaustive list; it’s a starting point that helps put your organization on the path to new revenue streams, better customer experiences, and sharper business insights.
1: Explore new business models
You can’t go into the IoT era with traditional business models of the past and expect new growth. You need to explore new business models that build on the data gathered from connected things. You will want to explore opportunities in software, cloud, and services, and consider different, innovative business models like usage-based pricing. These new approaches allow you to turn the sale of a product into an ongoing revenue stream that spans the entire product lifecycle, not just at the time of purchase.
2. Address key IoT challenges
The IoT creates its own set of challenges in terms of security and data privacy, ecosystem fragmentation, interoperability, the convergence of operations technology and information technology, connectivity barriers, and a lack of standards.
For example, the IoT requires modern infrastructure that supports new connectivity needs and new processes, such as the ability to store, process, and analyze data at the edge, or the point of capture. Industry analysts estimate that 40 percent of IoT-generated data will be processed at the edge. Are you ready to move to edge analytics? For a look at steps you can take to address these sorts of IoT challenges, see my earlier blog Preparing for a World of 50 Billion Connected Things.
3. Provide comprehensive solutions
The IoT creates opportunities to shift your focus from providing components to now providing comprehensive solutions. To that end, define how you can offer comprehensive solutions. You might enrich your hardware offerings with security, software, or systems-integration services. This shift to a broader offering is important if you are going to transform from a component supplier to a solution provider, and avoid being commoditized. In the era of the IoT, disrupters who get it right can take over before you know it. You’ve got to be ready or risk losing your share of the market.
4. Focus on targeted verticals
The data generated by connected devices creates opportunities to expand into many new vertical industries. But you can’t go after every opportunity all at once. Determine the vertical industries that present your best opportunities—prioritize the verticals where you have the most credibility, and focus there.
The good news is that all the vertical industries have significant growth opportunities with IoT—from sports and gaming, to healthcare and fitness, to manufacturing and industrial automation, to retail and transportation. By connecting and analyzing data from your end-point devices, whether it’s data from RFID tags on clothes in a store or from a smart helmet on a connected worker, the IoT enables more real-time information so that your organization can improve efficiencies and increase value.
5. Engage with a broader ecosystem
To succeed with the IoT, you can’t go it alone. No single company can do it all. You need to establish new partners and engage with a broader ecosystem. Consider this point: In terms of its business, Amazon is more than a retailer; it has become an ecosystem that offers a wide variety of products and services as well as global, virtual shelf space to other businesses who have things to sell. Amazon would have never gotten to where it is today if it tried to do it all on its own.
This brings us back to a point I made at the outset: To succeed in the era of the IoT, you can’t settle for business as usual. You have to be ready to transform your traditional business model to position your company to succeed in a world with billions of connected things.
Don’t let this smart and connected world put you out of business. Take control by taking the steps necessary to seize the day.
Bridget Karlin is the managing director of the Internet of Things Group at Intel Corporation.
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