The Internet of Things creates business opportunities like never before

In terms of business models, the Internet of Things (IoT) shift is generating unprecedented opportunities that can be seized by companies to develop new services, enhance productivity and efficiency, improve real-time decision making, solve critical problems, and develop new and innovative user experiences.

Basically, IoT represents a tremendous opportunity for various types of companies, including IoT application and service providers, IoT platform providers and integrators, telecom operators and software vendors. According to some estimates, M2M (machine to machine) communications alone will generate approximately EUR 714 billion in revenues by 2020, and many IoT vertical segments are expected to experience a double-digit growth in the upcoming years.

Among the most prospective domains are consumer electronics, automotive, and healthcare, as well as intelligent buildings and utilities. Increasingly sophisticated devices and apps are enabling businesses, government agencies and other institutions to collect information and act on it in ways that promises to redefine technology and business.

Just recently I attended a SalesForce conference in Boston, MA and learned that Phillips was working with SalesForce in integrating their Electric Toothbrush with SalesForce. This toothbrush analyzes if you are brushing your teeth the right way, how long and when you brush your teeth and will start to make recommendations based on user behavior.  SalesForce is one example we will hear often as a IoT platform provider.

Relevant data at your feet

Almost anything and everything (from milk cartons and medical equipment to bridges, vehicles and power generators) can be equipped with sensors that collect and transmit data about consumption, usage patterns, location and much more. The IoT promises to help manufacturers, health care providers, the military, retailers etc. understand the world in ways that weren’t possible only a few years ago.

The ability to extract data from a wide range of objects and devices helps businesses analyze information and gain far better insights. Instead of making educated guesses, it’s possible to tap into data and analytics in order to understand patterns, trends and behavior in a more thorough and comprehensive way. In terms of business value, this data is very complimentary to the data generated by operations, sales, marketing, finance and other departments in the enterprise.

Challenges to face if you want an IoT business

While many companies have explored home automation, connected car, and wearable accessories, the practical realities of building and scaling an ecosystem of connected products and services are more challenging than most business managers realize. More specifically, in order to build a successful IoT business, a company must keep in mind the following challenges:

• Adapt your visions to real customer needs – It’s really exciting to imagine scenarios in which previously analog products come to life, and they all turn “smart.” But remember that the most compelling value proposition usually starts with a focus on a single customer needs. Whether your IoT vision revolves around cars, thermostats, or anything else, make sure you are focusing on a real problem to which real customers want a better solution. Then you can start figuring out how that problem can be solved in a simple, intuitive, “smart” way.

• Integrate hardware and software capabilities – Designing connected experiences requires the integration of very different development skill sets and processes like: hardware production, product design, engineering, digital and software design etc. The implication for most companies is that they rarely have both hardware and software capabilities, becoming a huge challenge that many large businesses encounter in their IoT journeys.

• Be open to different business models – The IoT is changing the way companies make money. Hardware companies traditionally drive profits by balancing product revenues with the costs associated with materials, manufacturing, and fulfillment. On the other side, digital companies usually leverage service business models with recurring revenue streams. For connected devices, the two worlds must meet: the hardware company has to begin accounting for the costs of tracking data and supporting a service, while the software company has to start managing the costs of making and distributing physical products.

In the end, it’s crucial to formulate a strategy for the IoT. It’s important to begin thinking about how to connect devices or sell products that fit into a larger ecosystem of intelligent devices. This means identifying opportunities and problems that connected technologies can solve and understanding how they can provide deeper insights into a business, including customer touch points. One thing is clear: the IoT will play a major role in the future of business.

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