Blog Entry

Mar 17
2016 

Value Creation & IoT Monetization

I recently published a three-part article on SandHill.com, the first of which talks about building and monetizing an IoT-ready business in a new, disrupted world. I point out that while product innovation can drive significant growth in the IoT, more needs to be done to overcome fundamental business challenges such as monetizing distinctive value and maintaining a competitive advantage. In many cases, it is advisable to devote more resources to business model innovation than to pure product innovation, as it may have a greater impact on your profitability.

For example, when medical equipment companies saturated the large hospital market with MRIs and X-rays, they had fewer potential clients to whom they could sell their very expensive machines. By implementing pay-per-use/scan pricing models in their business, they were able to eliminate large upfront capex costs that smaller regional hospitals simply could not afford. This is a win-win situation, as smaller hospitals can opt to pay for only what they consume while the medical equipment companies continue to make money from a whole new market segment that was previously unavailable to them.

There are many ways to monetize your IoT offerings, whether you’re building a hardware device, developing software as a product or SaaS, offering a new service, or creating end-to-end solutions. The best approach will depend on your customers, first and foremost, but also the needs of your ecosystem and its participants. These can be determined by analyzing user behavior, perceived value, use cases, underlying technologies, and market dynamics.

Software monetization solutions that enable flexible licensing are essential to business model innovation. The benefits they offer are substantial; cost reduction and revenue enhancement make for a compelling value proposition. In addition, it is necessary to tie in customer value with your overall monetization strategy.

I recommend that you clearly define the distinctive customer value you can offer across the value chain, partner with the right players in the ecosystem, and integrate your entire offering into a cohesive value delivery system – all of which should take precedence over just developing more features and functionality. These and other best practices for ensuring success in the IoT can be found in my original article, available here.