To monetize IoT data, start here
Monetizing IoT data is a hot topic these days. The other hot topics like security get mindshare because no one wants to be hacked (a very bad thing). IoT data monetization, on the other hand, gets mindshare because everyone wants to grow (a very good thing). But how should you start thinking about monetizing IoT data? There are numerous posts online on different monetization models — I won’t cover those. Instead, I’ll present 3 key things you should know before you embark on a data monetization strategy of your own.
#1: Know your market
I like Gartner’s take on the IoT market. IoT is not a product but really a set of 3 markets. Your data monetization strategy will largely depend on which market you play in.
Figure 1: According to Gartner, IoT is not a product….but a set of markets
Each IoT market demonstrates very different dynamics. A successful monetization strategy will need to account for the dynamics of that market.
Take consumer IoT. When marketing a consumer IoT device, the device manufacturer offers (essentially) the same product to thousands and (hopefully) millions of consumers.
Consumers are more price sensitive, and these days, most people expect a free service (As a side note, how many digital services do you actually pay for?). In addition, the purchase-to-use process needs to be super easy (think: you’re grandma should be able to do it). Currently, consumer IoT products follow a time-and-tested business model that was designed decades ago for standalone / offline products: Pay an upfront one-time fee for the product, after the initial transaction there’s usually no ongoing relationship with the manufacturer (aka Sell and Forget model). This worked for offline products , however, it doesn’t work for IoT products where consumers expect continual improvements (aka Connect and Improve model) and you need to absorb the cloud costs associated with connectivity and improvements. How you monetize your consumer IoT product depends a lot on the consumer willingness to pay. As an example, take a look at the recent backlash when Chamberlain decided to charge for their IFTTT recipes. The dynamics of the consumer market affects your IoT monetization strategy.
In Industrial and Commercial IoT, on the other hand, you see lot more diversity — many bespoke machines and processes used to solve the same problem in different manufacturing environments. In addition, Industrial or Commercial IoT projects are negotiated B2B contracts. By smart and savvy sales and business executives. And lawyers. As a result, you have more room to experiment. As long as you can craft a creative business model and convince your enterprise customer to sign the contract, you have room to innovate in monetizing your data. For example, you can choose to adopt an outcome based model, receiving payments when certain performance targets are met. As long as the model is profitable for both you and your customer, you’re good to go.
Knowing the dynamics of the IoT market you play in is a good starting point to define your IoT data monetization strategy.
#2: Know your outcomes
IoT is all about improving business outcomes. And data monetization is about putting data to good use in achieving those improved outcomes. Data monetization doesn’t always mean more dollars earned (direct monetization), it can also reflect cost reductions or process improvements which indirectly lead to higher line throughput, and therefore higher revenues (indirect monetization)
Knowing your outcomes is key as it will help you understand what data you need, what to do with it, and the potential pitfalls or challenges in acquiring it and transforming it into the outcomes you desire.
For example, in Consumer IoT, consumers are concerned about the privacy of their data. Knowing exactly what value you bring to the consumer (the outcome — could be more convenience in daily life), will help you explain what data you need and how it will be used. Not only will it help you with upcoming GDPR (Global Data Protection Regulation) and other data privacy regulations, it will help consumers trust you to share their data with you.
In Industrial or Commercial IoT, the outcomes can be more easily defined / observed. For example, improve line throughput by 20%. Or reduce patient return visits by 10%. Or reduce support calls by 25%. Knowing how you intend to affect the status quo will help you design the appropriate digital twin, or thread, or whatever the term du-jour, and the necessary infrastructure (sensors, data, machine learning models, etc) to actually achieve it.
Knowing your outcomes will help you define a north star for your data monetization strategy.
#3: Know your limits
Companies entering IoT are either digital natives (born in the digital age without any legacy baggage) such as Ring Video Doorbell, or traditional enterprises in business for many decades. Each faces unique challenges as they grow their foothold in IoT.
A digital native targeting consumers has to rise above a lot of noise. There are many IoT products. Why should a consumer choose yours? Knowing your limits in terms of marketing, product development velocity, differentiation, etc are key to winning in consumer IoT.
A traditional enterprise on the other hand might have legacy technology that may not lend itself to the digital world. Many don’t have the systems or processes to implement subscription plans. Crafting a new business model that charges per outcome might require a lot of back end work. It might also involve changing well established processes (the ones that made them successful over their history).
In addition, decision makers at traditional companies grew up in the traditional, offline world. They might personally need to transform their knowledge and understanding of the new digital world to win in it.
Knowing your limits will help you implement a feasible plan that delivers results.
Knowing your market, the impact you desire, and your ability to deliver it are key to a successful IoT data monetization strategy. Knowing these, you can develop the right business model and implement the necessary technology to achieve the outcome you desire.
All opinions are my own. Credits for icons: https://thenounproject.com/search/?q=factory&i=32127 by Icon Solid, https://thenounproject.com/search/?q=home&i=78862 by Vicons Design, https://thenounproject.com/search/?q=cities&i=266406 by Nakul Dhaka