The internet of things is growing faster than we can blink. According to a 2016 Verizon market report, the IoT market is expected to grow from $591.7 billion in 2014 to $1.3 trillion in 2019. Additionally, the install base of IoT endpoints is expected to surpass 25.6 billion by 2019 and hit 30 billion by 2020.
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This continued, rapid growth in IoT has created a world of limitless opportunity for businesses from nearly every category — from healthcare to fitness wearables to smart home appliances to connected cars to the industrial shop floor. No matter their differences, all of these companies have one thing in common: the ability to connect “things” and enable new business models as never seen before.
But operating a successful IoT business requires a lot more than offering a niche technology. It requires figuring out how to monetize that technology too, and this involves learning from past IoT mistakes.
With the collective ecosystem around IoT utilization expanding, figuring out how to create new revenue models and bill for these services — and do so quickly — is more important now than ever. Businesses that are doing this effectively are using elastic digital infrastructures to quickly adapt to changing market conditions and capture, measure and monetize all the massive amounts of data that IoT provides. Businesses that are doing this poorly are failing to future-cast for market changes and relying on old billing paradigms that don’t sync with new IoT infrastructures.
Case in point: Revolv entered the smart home market in 2012 with a control system that allows users to control all of their connected devices from a single hub. It quickly rose in popularity and value and was acquired by Nest in late 2014. However, it soon became evident that one of Revolv’s fundamental challenges was making money at the hub level. In April of this year, the company announced it would be disabled and would discontinue its line of smart home devices. Revlov CEO Tim Enwall, mentioned that one of his main takeaways was the company’s failure to future-cast changes in the IoT market and establish a recurring revenue model that worked.
Learning from IoT mistakes
Revolv teaches us a lot about what not to do when driving an IoT business. First and foremost that there’s no such thing as a “free lunch” in IoT — companies cannot launch new connected products and services without a clear path to sustainability.
Second, it’s critical for companies to be able to offer new pricing and packaging options that not only drive adoption and revenue in the present, but also account for potential changes in the future. Long-term profit in IoT ultimately begins and ends with an agile, adaptable monetization platform. And that platform should use development methodologies coupled with very short and parallel sprint schedules to assure it can adapt immediately to new client requests or develop innovative approaches to monetization in advance of market needs.
When planning an IoT initiative, companies need to think creatively and implement an agile monetization engine from the get-go. And while there are many differences, all agile monetization engines should encompass the same characteristics. They should not only allow for rapid time-to-market, but also re-enable the bundling of subscriptions as well as the ability to charge for any usage or consumption event. Furthermore, they should be able to calculate in real-time variables to dynamically maximize revenue. Uber does this brilliantly — it made surge pricing a household name whereas in reality this is dynamic supply and demand pricing in real-time. IoT initiatives should be able to capitalize on dynamic pricing as well, but it requires having the right monetization platform in place.
Perhaps the most important thing for companies to know about entering the IoT realm is this: the possibilities are limitless. Service offerings across all areas of the IoT are inherently different — some are wrapping services around capabilities and data while others are capturing revenue based on how specific sensors are being utilized. No matter the service, companies need to think differently about how they can derive value out of their products. The more creative companies are in how they package and price, the more opportunity they create to maximize revenue.
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