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Business Models for IoT

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Now that we’ve focused on implementation strategies, let’s move on to the final step in this activity where we’ll look at choosing the right IoT-enabled business model. We’ll look at the following:

  • How to think about the business of IoT.
  • How IoT can enhance your product or business.
  • The key aspects of an IoT business model and how to decide what you might need in yours.
  • Decorative image showing two people in a discussion in sitting at their laptops

    Do you want upfront revenue or a continuous revenue stream? Can you charge more for your product because it’s highly differentiated? Knowing the answers to these and other questions will help you determine which business model is right for your IoT solution.

    In this step:

    • You’ll investigate the different approaches your business can take in the transition to IoT.
    • You’ll look at examples of business models to implement IoT.

    If you’re not an active participant in a business, think about a business you regularly engage with, such as a postal service or utility company. You’ll use this company or business as you work through the exercise below.

    Success with IoT starts with the right strategy

    Have a look at the following articles:

    Now consider the following as you think about a business model for your solution:

    1. When you think about your business, which of the four models from the article above would be most relevant?

    2. Based on your answer to question 1, in what ways could you implement that model to improve your business? Think specifically of goals an IoT solution could help you reach or problems it could help you solve in that specific area.

    3. Ideally, you’ll want to focus on one or two of the models described on the page. It’s generally not possible to do everything described all at once.

    4. Describe the pros and cons of different models.

    Choose the right IoT-enabled business model

    Consider the following questions as you develop your business model:

    • Which business model best applies to the goals you want to reach or problems you want to solve for your business?

    • Why did you choose that model? Be as specific as you can; use your answer to define how you will implement an IoT solution to address your business needs.

    • Would more than one model work for your business? If so, in what order would you implement the model for your business, and why? Answering these questions can help you develop a long-term approach to your IoT solution. You may want to implement more than one business model in stages depending on the needs of your business.

    • Are there business models described on the page that would be out of scope for your IoT solution? If so, why wouldn’t you include them? Answering these questions will help refine what architects call ‘non-goals’ which are things you don’t want to distract you from focusing on what’s important.

    Start your IoT Engines

    While this is focused on Microsoft’s offering, consider how you’d implement IoT as a general technology solution for the business you’re considering. As you think about putting an IoT-enabled business model together, use the information you gathered in the previous sections to describe the following:

    • The goals you want to achieve and the problems you want to solve with IoT as it relates to your specific business.

    • The relationship between cost and benefit in implementing an IoT solution. This will involve analysing all the resources and expenditures you’ll need for an IoT solution, and whether the benefits your business will derive from implementing the solution will offset those costs.

    • How you’ll sell an IoT solution to business stakeholders and partners. While an IoT-enabled business may sound modern; in theory, a solid business model will have to show why an IoT solution makes sense for your business. This is related to the previous consideration on cost but this consideration goes beyond cost and involves aspects such as company culture, core values and priorities, and similar aspects. Your business model should address these considerations.

    • How your IoT solution will be perceived by your customers. You may have to consider if an IoT solution is good for your business overall even if it makes financial sense. For example, some businesses may work with customers who are unfamiliar with or sceptical of using devices that collect data. You may have to consider if implementing IoT for your customers would be perceived as a security or privacy risk even if no real risk is involved. You’ll have to consider how to message this.

    • What you need to get started. A solid business model will address the specific steps involved in getting an IoT solution off the ground. As we saw in earlier lessons in this activity, this will involve a prototyping and testing phase as well as a full analysis of the costs, the team needed, and how the project will progress once the initial stage is complete.

    • How you maintain the solution over the long term. We studied this in previous steps in the course and this consideration involves taking a long-term approach to an IoT solution. A business model should not only address the immediate concerns of getting a solution implemented but how the business will maintain and operationalise the solution over the long term.

    In the next activity, we’ll explore how IoT functions in different business scenarios.

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    Microsoft Future Ready: Fundamentals of Internet of Things (IoT)

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