Our founder Tim Ogilvie recently wrote his thoughts on IoT and the 5 main business model archetypes that come from IoT offerings:
In 1999 I founded a company that promised to put your physical mailbox on the Internet. It never happened. But the company we created is still going nearly 17 years later. And the Internet of Things that we envisioned is alive and well.
I could lament that our company (Brivo Systems) pivoted, then pivoted again. But as any entrepreneur will tell you, if your company is still around 17 years later, that’s a win.
More importantly, Brivo affords me the gift of perspective. In 1999, we didn’t know what we didn't know. But now the success patterns of the Internet of Things are clear. It’s time to heed them.
The past six years, in particular, have revealed some universal truths about IoT, including:
- When you combine a product and a service, you get a service
- Value chains fail; value clusters succeed; value networks thrive
- APIs are stronger than NDAs
- Data is the oil of IoT, as both lubricant and propellant
Universal truths can serve as strategic signposts for IoT projects. But a set of principles is not the same as a map. Should we open the platform to multiple app developers? Which revenue model should we use? How do we defend our position in the ecosystem? These questions typically elicit a trial-and-error approach.
But a deeper look reveals there is more to the patterns. IoT business configurations adhere to a small handful of natural archetypes, with limited variation within each archetype. The archetypes are based on a single element of an IoT solution: what job does it do for the user?
Peer Insight has observed five distinct jobs that IoT solutions do, and five resulting business model archetypes, as shown here.
These archetypes can help firms plan and develop new IoT offerings in two ways.
First, each archetype leads to a predictable business configuration pattern. We have mapped each configuration to see which IP strategies, partnership structures, and revenue models are optimal for that archetype.
Second, and more fundamentally, the IoT archetypes can help us evaluate scenarios and make better strategic choices. If your IoT concept could manifest as either a “Consumption Optimizer” or a “Service Enhancer”, for example, which one should you design? It depends upon which one favors your firm’s role in the long run. On our projects, we combine (1) an IoT analogies library with (2) a reverse income statement analysis to compare the scenarios.
The emergence of IoT success patterns makes this an exciting time. Finally, firms can engage in IoT business design just as you employ technology builders. The keys are:
- Develop the business model in parallel;
- Frame the alternatives using the demonstrated patterns of success; and
- Design and execute affordable in-market validation experiments to validate your choices.
“Tall order,” you say? Maybe, but it’s gotten a lot easier than when I first tackled the problem back in 1999.
Questions? Comments? You can reach me at togilvie@(at)peerinsight.com.