Smart Systems and Internet of Things Business Model Design and Innovation
Players in the consumer focused IoT market space like Google and SalesForce are driving new smart systems and Internet of Things platform models. What these models all have in common is that they are not traditional product-focused approaches; they are based on collaboration, participative product development and smart services innovation, and are organized and leveraged with a common business and technical platform.
Unlike the B2C world, M2M applications have evolved in a context where applications such as remote monitoring and support for equipment have been tied closely to equipment service contracts. For most product OEMs today, remote services and M2M systems have largely been focused on simple remote diagnostics and simple tracking/location services – in large part because of technical complexities and business model challenges with connected product `rategies.
Existing technology has proven cumbersome and costly to apply with many conflicting protocols and incomplete component-based solutions. The challenges of developing applications and integrating diverse devices onto networks in an interoperable manner have been big adoption hurdles. The inability of today’s popular enterprise IT systems to interoperate with distributed heterogeneous device environments is an obstacle that we are finally overcoming.
Return from simple applications, while extremely valuable, is limited primarily to the manufacturer’s service delivery efficiency. Contrary to what current market offerings depict, however, the value of connectivity does not have to end with just simple applications focused on a single class of device or machine.
Harbor Research has just finished a research and analysis report focused on new business model innovation opportunities for product OEMs. This research work was sponsored by ThingWorx and underscores the fact that there are nearly infinite opportunities for manufacturers to develop innovative connected product business models.
As technologies mature and open standards become the norm, applications based on deeper, peer-to-peer interactions between devices, systems and people will drive more “compound” and dynamic value streams. This opens up new collaborative business model opportunities that have the potential to drive much greater value for the customer.
These new business model opportunities are much closer in many respects to the consumer-driven models described earlier, and can provide many lessons for the “cloistered” equipment manufacturers in B2B arenas. The business benefits of large-scale open collaboration in the B2B arena are just beginning to be recognized.
Moving from “Simple” to “Compound” applications involves multiple collaborating systems with significant interactions between and among devices, systems and people. No longer is the focus solely on the product supplier’s ability to deliver support for their product efficiently. Rather, value is brought to the customer through business process automation and optimization. Examples include:
- Business Model Transformation – selling results, outcomes or performance – not equipment;
- New Value-Added Services – providing peer benchmarking, targeted personalization services, predictive systems optimization based on analytics and modeling;
- Product Design and Engineering Insights – collecting machine operating history across an entire generation of machines to determine priorities for future designs;
- Sales, Fulfillment and Supply Chain Services – developing a better understanding of installed base characteristics and behaviors for predictive modeling of demand for channel partners and ecosystem participants;
- Ecosystem Orchestration – developing brokerage services for multiple, parallel vendors for orchestration of services around machines and systems;
- New User Experience Design – designing more effective machines and/or systems based on a more intimate understanding machine behaviors and how users interact with the system; and,
- Installed Base Support Services – helping customers maintain installed systems and equipment on a collective or systemic basis through careful management of configurations, installed products contracts management and life cycle management.
In both our research as well as our consulting work focused on designing new business models, we have observed many new and creative value added services and business design innovation opportunities which, for the most part, often appear to “aggressive” or “risky” for the typical B2B players.
To create and capture value, companies will need to recognize the new opportunities for innovation driven by collaboration and participation—from customers, from partners, from your own people. This will require new thinking.
The smart systems we are describing here have no managerial hierarchy, command and control decision-making or proprietary ownership of ideas. These new value networks will be self-organized by people and companies who are motivated to explore and develop ideas they care deeply about. Collaborative innovation will extend beyond ideas about new products and services to the very manner in which business is conducted. To discover, design and develop smart systems, organizations will need new tools and methods.