IoT enabled Business Models
Business models valuable for one business vertical may be applicable across completely different areas. Recent research suggests that a comprehensive list of business model patterns will cover the bulk of conventional business domains. The patterns have been repeatedly recognised as recurring patterns in sectors of chemicals, construction tools, machinery, electricity metering, software, audio tech, health care, telecom, etc.
IoT technologies offer completely new business models that are also applicable to almost any industry and can be used in combination with traditional business model patterns. For inspiration, the following table introduces IoT-based business models that are part of Glaze’s Business Innovation and Development Framework:
|Digitally charged products|
1. Physical freemium: Physical products are sold with free digital service (e.g., free apps, software updates); it is anticipated that some customers would be willing to pay extra for premium services.
2. Digital add-on: Physical products are sold very inexpensively, but customers can purchase/activate various digital services at high margins (e.g., software programs, additional functionalities).
3. Digital lock-in: Physical products are protected to be used with other digital services via sensorbased, digital handshake to limit compatibility, prevent counterfeits, etc.
4. Product as point of sales: Physical products offer digital sales and marketing services; the customer can consume the content either directly or via smart devices (i.e., tablets, phones). An example would be any object carrying digital advertising.
5. Object self-service: Physical products can autonomously place orders online. For example, a heating system automatically and independently orders oil to refill the tank.
6. Remote usage and condition monitoring: Physical products can transmit data about their usage, status, or environment; An example would be Brother (computer accessories manufacturer), which started to invoice only the pages actually printed.
|Sensor as a service|
1. Data itself is the key resource and primary currency
2. Shared and traded within the IoT ecosystem
Digital maturity model
The following paragraphs from Glaze’s Business Innovation and Development Framework elaborates firstly on low hanging fruits by adding IoT elements to existing products. However, the most valuable findings from “Near Enhancements” towards “Future Greenfield” on will unfold along the road of testing customers’ reaction to new business models – or when novel business models emerge while stakeholders and partners digest and mature collected usage data.
Initial digital opportunities emerge when tracking and building knowledge of the product’s actual use. Improve operational efficiency by forecasting maintenance scheduling and optimising logistics internally as a quality tool as well as benefitting customers who in turn experience fewer incidents.
Additionally, bundling product sales with service subscriptions create new product offers and allow feedback from actual usage to form input for continued product improvement in R&D.
Based on specific insights of usage new value propositions with quantifyable financial results can be offered and the current products extended with integrated service contracts. Consequently when advancing from shipping artifacts in boxes to negotiating service and parts replacement contracts, the traditional boundaries between the outcome of manufacturing and services industries are blurred.
Autonomous pull economy refers to integrated systems where continuous optimisation of processes are based entirely on automation, including demand driven call for e.g. parts replacement calculated and conducted to minimise down time.
Monitoring and measuring productivity, production quality and the status of the product in operation will enhance and expand the value of existing business:
Any device enabled with sensors and a battery can connect and report its operational condition regularly. If large quantities are reporting their nominal state and exceptions to the cloud, advanced analytics will be able to identify correlating patterns which may reveal novel insights and prediction of unknown early signals and indications prior to break-down. The following figure illustrates the principle of predictive maintenance (PdM) receiving early indicators on defects:
KONE proclaimed they “will use IBM’s Watson IoT Cloud Platform to collect and store equipment data, build applications and develop new solutions. The platform will gather data from sensors and systems connected to elevators, escalators, doors and turnstiles in KONE’s maintenance base.”
The manufacturer exemplifies the capability as they now dispatch technicians prior to errors materialising. E.g. a slight delay detected in the door opening sequence is statistically recognisable as an indicator for something that will halt the system.
Measure waiting time and efficiencies along the supply and distribution chain – tagging devices and calculating value lost by unsuspected delays. Resources can be managed and coordinated with the ordering process to manufacture just-in-time.
Consistent dashboard delivers complete and up-to-date information on overall performance for assets on their way in or out of manufacturing or handling facilities.
Maersk Remote Container Management
The system installed so far in 250.000+ refrigerated containers monitors individual units including location, power status, ventilation, temperature and humidity settings and activates an alarm if doors are opened or other trigger parameters are exceeded.
Once in operation a set of derived advantages from the overall cloud analytics provide fuel savings & ability to minimising waiting time. Pre-trip inspections are performed auto¬matically by calculating the condition the container is expected to arrive at the inspection point instead of stacking up empty containers pending manual inspection.
Controlling and modifying atmospheric composition and temperature in a fruit shipment prior to arrival at the destination renders ripening in a separate storage unnecessary. Comparing cloud data benchmarks of each harbour’s efficiency and quality delivered according to agreed SLA with operator on timing, power supply statistics, etc.
Performance across multiple build lines or even factories can be measured and compared in real time. Control loops along the manufacturing can be used for computation of optimised handling, for faster time cycles and still minimising faults.
New operations can be accelerated by Augmented Reality support for factory workers to visualise instructions in the actual context, together with Virtual Reality – expected to grow at a 5 Year CAGR above 100%.
Grundfos Augmented Reality assembly guide
The pump manufacturer Grundfos has developed a visual service guide to assist operators in the production line mounting delicate details.
Viewing the pump through smart glasses or the camera of an iPad, the correct part can be overlaid visually with a CAD drawing as reference along with step-by-step instructions. Every assembly step is monitored to optimise accuracy and timing.
Updated product design and manufacturing processes measured against quality plans can be simulated and validated before changes are implemented.
Traceable design & manufacturing master data follows the product’s full lifecycle and allows technicians to know latest information on parts and service history.
Caterpillar heavy machinery
Caterpillar is using advanced statistics to predict when to replace critical machinery components in anticipation of mechanical failure. It is a lease business model that penalises inactivity due to quality issue. It does so by predicting the endurance of critical components from calculated lifecycle tracking thereby enabling a technician to replace a gear box with a renovated unit ahead of the construction company’s plans to use the machinery extensively.
New Product Services
Collecting data on a vast amount of deployed products allow for a change in business models. Further than just selling and shipping the product, build recurring revenues by a proactive approach to bundling with service subscriptions. Feeding back sensor and usage data will allow R&D to continue the improvement of the product originally shipped making the in-market assets a live laboratory.
Customers can obtain runtime data on their products installed, thus enabling remote monitoring and distributing software updates on-line to replace routine service technician visits.
Farming and irrigation
Crop farmers may be dependent on hundreds of pumps, valves and sensors to detect, and controllers for calculating the demand for irrigation. Rather than visiting any separate installation frequently to verify normal operation a data relaying system saves valuable time and fuel as the farmer receives continuous feedback via a graphical dashboard equipped with relevant gauges and highlight status indicators across a map display. Firmware of the controllers or optimised parameters can be distributed over-the-air.
A business model subscribing to a service, e.g. where production machinery is looked after and complies with the latest precision maintenance practices. Despite the skills of the maintenance manager and his staff the demands to this function is tighter than ever before. Equipment maintenance is becoming more complicated because of ongoing technical advances and environmental and safety laws are increasingly strict.
Entirely new products and business models can be offered based on revelations from analysis of run-time data. The value of the data originating from intimate knowledge of the customer’s operation may exceed the original value of the physical product; hence the services model becomes a long term partnership reducing the risk of switching to another supplier.
Brüel & Kjaer calibration microphones
Brüel & Kjær produces world class calibration and reference microphones and contracted with Sydney Airport operational and air traffic control compliance, reporting violations on night landing curfew as well as detecting engine reversing which is allowed purely for emergency braking.
B&K has built a business area selling noise composition and level emphasised by predominant wind directions; environmental statistics contributing e.g. to real estate value estimation around 230 airports on five continents.
Outcome-based & autonomous pull economy
The managed control of all data from manufacturing via distribution to actual operation will generate an unprecedented insight in how products live their lives which can be fed back to automated quality demands in sourcing and setting optimal conditions for manufacturing and handling.
Companies may integrate single inventions with their existing products. Amazon’s B2C Dash-button used to program a simple delivery task – for instance mail-ordering washing detergent by pushing an internet connected button glued to the washing machine – can easily integrate with more complex machinery.
As a common denominator the companies mentioned in this brief list of examples have built new – or extended existing – business lines to create profitable digital services. The risk of experimentation can be managed and isolated until digital value has been validated to a degree justifying more thorough changes to maximise ideas and opportunities identified.
GE, Rolls Royce engine lease business model
Both GE and Rolls-Royce are now operating from a lease model selling engine thrust and flying time as a product rather than the engine itself. Their incentive is to minimise fuel consumption and keeping the engines running for airline companies.
The upside will be on the continuous recurring revenues from the lease and maintenance model as well as a common goal with their customers to keep the aircrafts’ active duty cycle as efficient as possible.
Brother Office Printers pay by print – integrated with Amazon ‘Dash’
More than 45 different Brother Office Printer models can order their own toner when need for re-fill using an integrated version of Amazon Dash Replenishment System. The manufacturer hence preserves the supply service.
The lease model of the printer is based on a count of printed pages rather than a purchase of the printer itself. For years printers have been particularly inexpensive while the cost was imposed on the toner. This model further removes the Capex of the printer making it a pure as-a-service.
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