The emphasis on digital transformation has been fuelling the rise of many advanced technologies, such as the Internet of Things (IoT). You can witness many other technologies, such as artificial intelligence, alongside the increasing significance of data and connectivity technologies. However, IoT has grabbed the attention of many experts in the tech community for viable reasons. Therefore, IoT business models have become one of the prominent priorities for organizations that want to leverage IoT technology for their benefit.
Businesses must tap into the dynamics of the evolving IoT market landscape and implement innovative use cases with IoT. At the same time, businesses have to identify the differences between regular business models and the ones suited for IoT. The following discussion helps you understand the significance of an IoT business model and the top examples of business models.
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What is the Importance of IoT Business Models?
Before you seek the top business models for IoT, you need to understand IoT and its relevance for businesses. Internet of Things technology involves a network of interconnected ‘things’ or computing devices as well as modern objects used in the daily lives of people. The network of devices stays connected to the internet for retrieving and sending data among them. IoT can find applications in almost every industry for enabling the use of technology to introduce smarter and more efficient services. The IoT technology market can be worth $1.4 trillion by 2026 and could generate more than $10 trillion annually for businesses all over the world. How does an IoT business model matter in this scenario?
You are less likely to implement a business plan for an IoT startup in the absence of a comprehensive business model. Almost everyone is interested in developing new and innovative IoT projects and businesses without any thought to ways for generating money. The lack of a comprehensively defined IoT business model could limit the business perspective of an IoT project. What can you expect in an IoT business model? The business model of an organization showcases a description of the rationale for creating, delivering, and capturing value. In the case of an IoT business model, you have to emphasize the ‘value’ element for users and business owners.
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Value of IoT
Is it possible to define value in an IoT business model by adding sensors to existing products? Well, that is what most of the Internet of Things business models would show you. However, most IoT businesses have failed in gaining traction in the market. On the contrary, an IoT business model must focus on the two critical elements of value and connectivity. Business models for an IoT company would emphasize the practices and mechanisms for capturing and delivering value to users. At the same time, an IoT business model must also feature viable implications for capitalizing on the facility of round-the-clock connectivity to offer innovative value.
The benefits of top IoT business models include seamless access to performance data and insights alongside better mechanisms for problem reporting. In addition, a properly defined IoT business model could also offer a comprehensive foundation for the development of new products and solutions according to usage patterns. The business models for an IoT company show the way to achieving profits with the fluidity in communication, feedback loop, and data synergy among devices.
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Types of IoT Business Models
The obvious highlight for initiatives to incorporate IoT in your business would point at the unlimited opportunities. You can use the top IoT models as an inspiration for designing your business model. At the same time, the scope for continuous innovation also suggests the possibilities for adding new features and functionalities. Here are some of the popular business models for IoT companies and their distinct traits.
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Subscription-based Business Model
The foremost answer to “How many types of business models are there for IoT?” would shed the limelight on the subscription-based model. IoT solutions could offer round-the-clock connectivity for customers, offering a formidable instrument for developing a business model to facilitate recurring revenue. Rather than opting for a one-time sale, IoT businesses could choose the subscription model. Customers have to pay a fee to avail the benefits of continuous value through the IoT network. Subscription models could help in introducing IoT in the “as a Service” business model.
The foremost advantage of a subscription-based business plan for IoT startups could point at the multiple creative ways for monetizing IT solutions. IoT businesses could feature not only a monthly subscription but also offer premium upgrades and access to paid exclusive features. The biggest benefit of the subscription-based IoT business model focuses on the development of active relationships with customers. IoT solutions can complement the subscription-based model as businesses can gather more data regarding user behavior. As a result, the subscription business model allows the opportunity to learn more about customers and deliver the value they want.
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The list of business models for IoT companies also includes the asset-sharing model. One of the prominent concerns in offering expensive IoT equipment to users is evident in the abilities of customers for utilizing the equipment at its full potential. Therefore, the asset-sharing model could serve as useful for IoT businesses with many plausible value advantages. Common examples of asset sharing have been observed in car-sharing businesses, such as Uber Pool. IoT can solve the problem of superfluous charges for resources which you don’t use most of the time. The Internet of Things has introduced new solutions such as shared drones, virtual power plants, and self-driving cars.
Asset-sharing business model for IoT companies revolves around leveraging surplus resources. The primary objective of the asset-sharing business model revolves around the maximum and efficient use of IoT products throughout multiple platforms. Customers have to pay reduced prices alongside achieving faster market penetration for IoT businesses. The advantages of such top IoT business models are evident in the efficient usage of resources. Customers could procure the assets they need for desired uses without paying for the whole system. At the same time, IoT businesses could come up with innovative approaches for the monetization of surplus resources.
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Monetization of IoT Data
The next top addition among IoT business models deals with the monetization of IoT data. You can find the most valuable component in IoT systems with the comprehensive data you can collect and obtain relevant insights. Who could be your potential customers in such business models? The top IoT models based on the monetization of IoT data can help in procuring big customers such as Facebook or LinkedIn. The centralized companies work on collecting a massive volume of data, generally for free, alongside providing value to the user. Most important of all, centralized companies monetize user data, which is generally leveraged for the promotion of different products and services.
The business model followed by Facebook, LinkedIn and other centralized companies could also serve useful for IoT companies. Data monetization for IoT business models would work by developing a solution capable of providing value to end users. On the other hand, IoT businesses can also collect valuable data of users and sell it to third-party agents for profit. The best example of a data-monetization business model would emphasize the facility of IoT devices for free. With the limited barriers to procuring IoT devices, the business could have more devices on the market for obtaining user data. You can associate the business model with a network effect, where more devices determine the attractiveness of your data for third parties.
The different examples of data monetization approaches for Internet of Things business models also showcase the efficiency of monetizing IoT data. One of the prominent instances of IoT businesses using a data monetization approach refers to energy efficiency devices. Such devices could monitor the energy consumption of the devices and offer aggregated data to utilities or other service providers. In addition, you can also explore examples of devices that work on monitoring driving habits. Insurance companies can use aggregated data from these devices to learn about the driving patterns of their customers. The effectiveness of such business models is evident in serving as an extension of the core business. As long as your customers are aware of the monetization of their data and you safeguard their privacy, the data monetization model facilitates exclusive benefits.
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Results-Based Business Model
The results-based or outcome-based business model for IoT companies is an innovative type of business model suited for IoT products. It is an innovative business model which showcases an innovative approach to generating revenue for IoT solutions. The basic idea underlying the outcome-based business model focuses on customers paying for the benefit or outcomes offered by products. In this business model, the IoT product itself does not serve any direct monetization benefits.
IoT companies can come up with various innovative methods to define an outcome-based business model. Customers would pay for the benefits they would receive from an IoT product or solution. As a result, it can reduce the perceived risks of purchase alongside increasing the possibilities of garnering more clients. In addition, the outcome-based model is one of the top IoT models for ensuring recurring revenue for businesses.
The responses to “How many types of business models are there for IoT?” would also include the pay-per-use model. With the facility of active sensors in an IoT network, businesses could monitor customer behavior and usage patterns. As a result, IoT businesses could identify the amount of time for which customers use their solutions. In such cases, the pay-per-use model serves crucial benefits as businesses charge customers for the amount of time they use the IoT solutions.
Some automobile insurance companies have adopted the pay-per-use model through mileage-based insurance plans. Customers don’t have to pay for the IoT devices installed in their vehicles to monitor their driving habits. On the contrary, customers pay for the assurance of lower rates according to data generated on their devices. As a customer, you don’t have to pay for the IoT device when you are not driving your car. One of the formidable examples of such business models for IoT companies is the case of Rolls-Royce. The luxury car manufacturer uses the TotalCare program as an example of a pay-per-use business model in IoT. Rolls-Royce checks the flying hours of planes with IoT sensors in real-time and charges airlines accordingly while retaining engine ownership.
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Another prominent example among the top IoT business models would point to the asset-tracking business model. Connected devices within the supply chain could support businesses in the real-time identification, monitoring and tracking of assets. As a result, IoT businesses could avoid the loss or theft of assets alongside monitoring IoT networks for maintenance objectives. Businesses could recognize the ideal maintenance and repair schedules to fix or replace vital assets before they show discrepancies.
The most popular example of an asset-tracking model is Sierra Wireless which uses high-value IoT asset-tracking platforms for monitoring cold-chain cargo. It serves as a valuable proposition amidst the mounting pressure on the cold-chain cargo industry. Companies could use asset-tracking IoT sensors alongside online tracking platforms to ensure complete visibility of their cargo. The advantages of asset-tracking Internet of Things business models support the maintenance of integrity for cold-chain cargo. For example, carriers could use IoT capabilities to maintain required temperatures alongside ensuring faster response to issues.
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The list of IoT business models presents multiple opportunities for defining the future of your IoT businesses. One of the foremost setbacks for IoT businesses and startups is evident in the lack of a business model. How do you adapt your business model to the use of new technology? The answer is evident in your requirements from an IoT business and how you plan on creating and delivering value. Most IoT startups do not know how they can capture or deliver value to users. Once you recognize the needs of your users, it is easier to choose a business model for your IoT businesses. On the other hand, it is also important to seek business model innovation in IoT while safeguarding user privacy. Learn more about IoT and how you can combine it with other technologies to create viable business ideas now.