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How to design IoT products and services strategically

The internet of things has reached mainstream status on the evidence that corporate managers and business unit heads from established businesses (as distinct from startups) are responding to the strategic implications of IoT.

All too often, however, their approach is technology led. It is reminiscent of the way that organizations reacted to the commercial internet some 20 years ago. Today’s preoccupation is with connectivity and selecting the “right” technology from different wireless alternatives. To some extent, technology suppliers are inflating the merits of different approaches. First mover, proprietary offerings (LoRa, Ingenu, SigFox) are trying to advance their solutions relative to the lumbering response of the mobile industry (LTE-M, NB-IoT family of technologies).

The focus on technology is a missed opportunity for businesses to leapfrog to new sources of innovation and business strategy. How much more might businesses achieve by working back from commercialization and innovation ideas to define their technology needs?

Consider how many businesses develop their IoT solutions at present. The process begins by finding some way to “test the waters.” This involves adding connectivity to an existing product or sensor and using the data to enable an IoT application. Many organizations find value simply from visualizing the data that their products report back. Often, this triggers some interesting insights (e.g., product usage patterns) which can lead to a follow-up action (e.g., to introduce product design enhancements, to adjust maintenance procedures, to interact with the end user etc.).

With a successful proof of concept, an organization would then roll out its solution operationally, taking the first steps to “build IoT into the business.” This involves modifying operational procedures and introducing new technologies, such as an IoT platform, to manage and support a population of connected devices. An example of a self-contained IoT solution in the smart city context is a “smart” streetlight solution that dynamically alters streetlights while reducing energy consumption and maintenance costs.


Over time and with greater experience, many organizations wonder, “What else can IoT do?” They may decide to support multiple IoT applications. Or they may develop new applications and improve the performance of existing ones by integrating third-party data. Interoperating across multiple (siloed) applications exposes yet another set of possibilities.

Eventually, businesses start to think about ecosystems (closed and open variants) which are the basis for collaboration with partners to make their connected devices accessible to external IoT applications. Ecosystems, which are also known as multisided business models, also expose new prospects to monetize data through innovative application opportunities.

This bottom-up experimentation, from device to multisided applications, tends to be highly tactical. In going through the process of “testing the waters,” an organization is likely to tie itself to a single-technology, proprietary approach through a narrowly scoped in-house development project or by partnering with an off-the-shelf vendor solution. Investment outlay would be an overriding consideration. At the point of operational deployment, its IoT platform would contain the bare minimum of elements needed to deploy and manage a population of connected devices. Typically, these would include software-based tools to manage service activation, connectivity service quality, remote-device profiles, application development and the user interface. And finally, any expansion of the initial application would rely on systems integration investments to graft on new features.

Organizations that recognize the full potential of IoT take a different approach. They build on a long-term vision, deploying investment resources intelligently to anticipate future needs. By prioritizing value creation, to the right-hand side of the illustration, organizations can explore new ways of doing business based on the many different commercial concepts that IoT can enable. Examples include better use of data along the supply chain and data sharing with non-traditional business partners, including those from other business sectors, to enable new services and revenue streams. In practical terms, this implies the need for common data models and technologies to enforce commercial and legal policies around data ownership and monetization.

Working back, the strategic approach to “building IoT into the business” favors an IoT platform whose capabilities are designed to be extended over time. This means having the ability to:

  • Accommodate a growing number of sensor types;
  • Function as a data exchange that can handle multiple data feeds (own and third-party sources); and
  • Support new business models (e.g., alternative pricing schemes, sharing and monetization of IoT data with multiple partners via configurable commercial and privacy policies).

Applying this perspective means that the choice of technologies to create an early application is influenced less by pure cost considerations and more by total cost of ownership, technology-neutral and open standard factors.

With IoT becoming a fixture on the competitive landscape, very few organizations will escape its influence or the resulting impact on business operations, product roadmaps and technology investment plans.

Businesses can choose to invest for the long term, applying lessons from the commercial internet era. They can focus less on connectivity and more on preparing for new service concepts to capitalize on their connected products. The risk of acting tactically is to under-leverage investments and overlook chances to capitalize on innovative business opportunities.

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