Analysts predict that the long-heralded Internet of Things will emerge in a big way in the final half of the decade, and will become a major part of everyday life by the year 2020. It’s not just going to have an impact on the way people live; it’s also going to have a strong and permanent effect on the business world, both inside and outside the technology sector. In particular, the Internet of Things is expected to change the business model innovation landscape; the current status quo isn’t expected to last, and companies that cling to it can likely expect to go the way of the dinosaur.
Specifically, the Internet of Things is going to spawn a new generation of cloud-based business opportunities, and it’s going to forever alter the way businesses need to conceptualize their approaches to value creation and value capture. Understanding how the future landscape will differ from the current one is the key to positioning your company for success in the world of the Internet of Things.
As a concept, value creation centers on the way in which a company infuses its products or services with value for which a customer is willing to pay. According to traditional approaches, value was creating by detecting a need or deficiency within the current market, then creating a product or service to fill it. While this way of thinking will never entirely go away, it is in for a significant facelift in the years ahead.
Think about the ways in which competing products and services typically lined up. Product or service A had features X, Y and Z, while product or service B tried to outdo their competition by offering features D, E and F. However, this model only really works in the old so-called “one and done” way of selling things. In a world where updates are available over the Internet and manufacturers can track product usage in near-real time, the “one and done” model doesn’t really work anymore.
What’s more is that there is more synergy between products than ever before. Think of the “smart home” technologies which are currently on the market, and the ones which will be by the time 2020 arrives. Your thermostat and your light bulbs will be able to communicate. Your toaster and your coffee maker will share a network connection. Companies that see and seize the opportunities created by this interconnectedness and symbiosis will be at an inherent advantage.
Similarly, long-standing approaches to value capture are going to change. Value capture is the way in which a company prices and positions its products and services within a market to maximize their revenue potential. Just as an increasingly connected world is forcing changes to traditional value capture paradigms, successful next-generation value capture strategies will also have to leverage Internet and connectivity technologies.
In current approaches to value capture, the means of generating profit depends on selling the end consumer a new product or service. In the future, it will revolve more around generating recurrent revenue from a single sale.
Similarly, a company’s control points will change. Right now, companies thrive on branding, intellectual property ownership and commodity ownership. In the years ahead, they will be much more dependent on networking and connecting products, and the consumer’s ability to personalize their experience.
Finally, capabilities development is going to shift from one which leverages currently existing resources, competencies and processes to one which mirrors the activities of successful competitors. In other words, companies will be less reliant on their own internal resources and more reliant on external trends in the industry in which they operate.
Monetization is changing, particularly in the world of consumer products. Is your company going to change with it, or risk being badly outperformed by competitors who beat you to the punch?