IoT technology is quickly becoming vital to business everywhere. IoT makes it possible to create and develop new business models quickly and at scale, triggering a digital transformation in nearly every industry.
A good IoT business model is one that supports a viable business for customers and delivers value easily and efficiently. The IoT business model you choose or create is only restricted by your creativity and willingness to try.
Here are the top IoT business models we've seen this year.
1. Platform business model
The platform-based business model combines manufacturers and consumers in the marketplace to benefit both. The key to it is interoperability and interconnection of the devices and the business to generate revenue from related transactions.
Amazon and its Alexa voice recognition platform is a good example of this, as Amazon generates data through Alexa and then uses it to sell related products to consumers. Amazon charges third-party vendors and developers to create and release services on the platform, increasing its revenue and market reach.
2. Subscription model
Businesses can use the always-on connectivity of IoT devices to develop a recurring revenue business or subscription model. Like the as-a-service business model for technology, an IoT subscription model enables you to deliver continuous value to customers for a regular fee.
The IoT device breaks down the barrier between you and your customers, helping you foster an active relationship instead of a transactional one. Your device gathers more data about customers over time, giving you the chance to provide valuable features and products tailored to their unique needs.
3. Pay-per-usage model
Active sensors on your IoT devices mean you can regularly monitor your customer's environment to see how much they use your product or service. This gives you an opportunity to use a pay-per-usage business model where you charge them for the amount of time they actively interact with your product.
Many auto insurance companies are jumping into this model by offering a mileage-based insurance plan to customers. People don't pay for the IoT device installed on their car that tracks their driving usage and habits; they pay for the lower rates based on the data they generate on the device.
4. Asset-sharing model
Many industries have big expenditures when it comes to vital equipment. They want to be sure they're going to use the equipment enough to merit the expense. An asset-sharing business model for IoT could help with this by helping businesses sell their extra capacity back to the market. That way, each business pays a reduced price for the equipment and can still use it. Businesses could use this model on their own assets or as their main business by renting out large assets for sharing.
5. Asset-tracking model
Connected devices in the supply chain help businesses identify, monitor and track assets in real time. It helps them protect in-field assets from loss or theft while monitoring for maintenance purposes. With the data generated by connected devices on these assets, businesses can check on their status regularly and know when to repair, fix or replace assets before they fail. This business model can also track the supply chain to identify inefficiencies, optimize workflows and increase visibility into usage.
6. Outcome-based model
The idea for this model is for customers to pay for the outcome of the IoT product, not the product itself. Many of the models discussed here are outcome-based, as they focus more on what customers gain from the device, rather than the device itself.
Self-monitoring products that can automatically reorder replacement parts or create a service request are good examples of this. Think of the HP printers that reorder ink cartridges automatically when you're nearly out of ink or the industrial company whose products automatically book a service call when they're not working optimally.
7. Compliance model
Compliance tracking is vital to many industries and costs a lot of time, effort and money. Depending on the industry, there might be significant checks that must be done for safety, environmental or legal reasons. Deploying IoT devices into the field can help reduce the cost of compliance by making your business more responsive to changes before they become a problem.
8. Data-driven model
A popular IoT business model is the data-driven model powered by the data generated by your devices. You build a product that provides value to customers and collects data that you can use for other products or sell to a third party. This model works well if you have many devices out in the field collecting data and if you've notified customers that you're using their data for this.
There are many ways to use this business model outside of the classic online shopping model -- where consumers get product suggestions based on their browsing or purchase history. For example, in office buildings, energy efficiency devices can monitor energy consumption and be used by landlords to manage HVAC and energy usage throughout the day. This data can also be sold to utility companies for forecasting purposes as they manage the local energy grid.
9. Service-adjacent model
In this model, your business offers a service that enhances the use of the IoT device but doesn't necessarily sell the device itself. The device is the enabler of your service, not the main point of your business.
For example, you use an IoT device to monitor a network or system, predict maintenance timelines and sell a maintenance contract to customers. You don't create or develop the device. You might not even install the device but know of it and how it's used in the industry. You could partner with an IoT manufacturer to create a service industry that supports it.
There are many ways to incorporate IoT into your business model. Many businesses are combining them in creative ways to maximize their opportunities and diversify their revenue streams. You can be an IoT vendor, provider or partner, generating new revenues as you deliver more value to your customers.