Cost-Justifying IoT Business Models

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The eighth in a series taking a closer look at Arrayent’s Top 10 Predictions for 2017. No. 7: IoT in 2017…will force connected products manufacturers to justify the cost of connectivity to their purchasers and themselves through new IoT business models.

IoT Business ModelsWith the arrival of multiple low cost MCUs with onboard Wi-Fi, we are seeing more and more products with built-in connectivity. But the true cost of connecting and operating ‘always on’ connected products—while invisible—is not free. To drive this point home, think about who is called in the middle of the night when a number of products go offline? Or whose job is it to install a new security patch that is forced by a hosting provider? These are activities that are indeed invisible and not something that brand manufacturers have had to deal with in past years. Yet still, many connected products are being sold without any method to pay for keeping those products ‘live’ year after year. This may be fine for companies that are testing out new user experiences, but it is unsustainable at scale. Connected products represent a radical change from the ‘sell it and forget it’ modality that has existed at manufacturing companies for well over a hundred years.

We have predicted that 2017 will be the year we see new IoT business models—and price tags—emerge to address this imbalance. We believe manufacturers will start by creating concrete plans for why connected products will be more valuable to users and their companies, and how they will afford to financially support them for years into the future.

Since every connected device is a potential point-of-purchase, we see brands moving from transactional to service-oriented businesses, where nurturing and maintaining relationships with consumers can bring recurring revenue and a higher ROI over time. Interoperability with other ecosystems (our 2017 prediction no. 3), and bundling IoT devices with services (our 2017 prediction no. 7) are two ways to highlight greater value propositions as well as providing additional cost savings.

The key is to envision success with connected products from the very start. To help companies get started on the right foot, Arrayent offers a process to help company planners envision what life will be like for their business in a connected product world. Envisioning the business transformation necessary to successfully navigate IoT is the first step of the Arrayent A4 Program. Learn more by downloading our new eBook that outlines the A4 Program.

A4 starts with an Envision™ IoT Business Transformation Workshop for key company stakeholders, aimed at helping everyone envision how to make products and user experiences that will be better. We take IoT teams on a virtual business journey, identifying customer targets and real problems they are trying to solve. Then we encourage the teams to understand the potential value of having connected products and the impacts that will occur to their organization. We then work with them to identify the ‘what’ and ‘how’ of product features, but especially the ‘why’ and how that will impact their long-term product roadmaps and IoT business models.

We also frequently address the topic of evolving IoT business models and business transformation in this blog and at industry conferences. We will be speaking at Parks Associates’ CONNECTIONS™: The Premier Connected Home Conference in San Francisco at the Hyatt Regency San Francisco Airport on May 23-25, 2017. Our VP of Marketing, Peter Radsliff, will be participating in their pre-show workshop “
Industry Insights: Growth and Business Models” on Tuesday, May 23, from 9:45 – 10:45 a.m. The panel presentation session will build on Parks’ research and consumer data to discuss and analyze optimal business strategies and keys to marketing and selling smart home solutions. So continue to watch this space, and mark your calendar to join us at CONNECTIONS if you can. 

You can read all of our predictions for 2017 here. Be sure you are subscribed to our blog, newsletter and social media feeds as we expect to chronicle many future developments for consumer IoT technologies throughout 2017.