There are 20 billion connected IoT devices at present and the number is likely to rise to 75.4 billion in 2025, according to IHS Markit. With actionable insights from IOT data, all participants in an IoT ecosystem can not only improve decision making but also build new business models or revamp existing ones to increase profitability and growth.
For instance, in an IoT ecosystem involving an automobile seller, insurers, and coolant manufacturers, the automobile retailer is the primary participant, while the insurers and coolant producers are secondary participants. Although the customer who buys a car goes through only one purchase cycle with the primary participant – the retailer – she might have multiple purchase cycles with the insurer and coolant manufacturer. The primary participant in this case invests in the IoT infrastructure and collects data on the actions and choices of the buyer. The secondary participant merely uses the data from the primary participant’s IoT infrastructure. This brings us to a key question: is the IoT ecosystem a zero-sum game?
How you capitalize on IoT investments matters more than how much you invest
Worldwide spending on IoT is expected to grow from USD800 billion in 2017 to USD1.4 trillion in 2021, according to IDC. It is not the quantum of investment that will separate the IoT winners from the followers, but rather their choice of investment avenue and how they capitalize on it. So how can primary and secondary participants mutually drive value from an IoT ecosystem?
If you are a primary participant, build alliances and become a data custodian
Let us examine a few use cases to see how primary participants can drive value from the IoT ecosystem. The ability to forge alliances is a leading success factor. HP, through its Instant Ink campaign, has connected ‘ink level’ sensors to its printers. When the ink is close to depletion, HP uses the sensor data to automatically supply customers with cartridges through its channel partners – the secondary participants. What is the benefit of such a syndicated approach? First, it serves a larger customer base and improves overall customer service. Second, the primary participant can share data with select secondary participants for a premium. The alliance ensures data and customer insights for secondary participants, giving them a competitive advantage.
You can also derive actionable customer insights from the collected IoT data sets to help secondary participants improve their offerings. This helps them offer exclusive services and move from a product-centric model to a customer-centric one. As an exclusive partnership limits the customers’ choice to buy products from secondary participants on other platforms, secondary participants must study the market to ensure the benefits of exclusiveness.
You can also collect data beyond the point of purchase and monetize the data by selling it to select stakeholders along the value chain. But, you must protect sensitive data, ensure privacy, and assess security risks thoroughly. If a secondary participant has a strong brand, you can also share data with the secondary participant to leverage its brand equity.
If you are a secondary participant, fine tune marketing and sales strategies
Secondary participants can also build IoT-based business models to drive value from the ecosystem. You can buy data from primary participants to create customer-centric marketing and sales strategies. Consider an IoT ecosystem involving a refrigerator manufacturer and associated products and services providers. With data flowing from the connected refrigerator, grocery and power retailers can accurately study consumption patterns to fine tune marketing, sales, and procurement strategies.
In an IoT ecosystem, a secondary participant such as an energy retailer can enter into alliances with multiple primary participants such as thermostat, air conditioner, and television manufacturers to draw consumption data and offer better discounts and services while enhancing planning.
If you are entering a new market, you can ally your business with primary participants that have established brands in order to build your brand. For example, a new diagnostics services brand can collaborate with an established wearables manufacturer to offer services exclusively through the wearables brand, at a discount, to leverage its established market base.
Driving value from the IoT ecosystem is all about using data to increase customer satisfaction and loyalty
For participants, driving value from an IoT ecosystem is all about providing contextual and customized products and services to increase customer satisfaction and loyalty. To gain optimal benefit from the ecosystem and enhance efficiency and agility, it is important for both primary and secondary participants to collaborate with each other, and unlearn old processes while learning new ones