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    The IoT's transformative power

    New business models


    The Internet of Things (IoT) is reconfiguring industries from the inside out. That's not merely because of its tremendous economic impact, which McKinsey projects to be at least $3.9 trillion by 2025. It's also because the IoT makes entirely new business models possible, while radically enhancing and disrupting others.
    Here's a small sample of the IoT's transformative power and the new opportunities it's creating.

    The "as-a-service" revolution


    Increasingly, all kinds of businesses want to replace their discrete, one-off sales model with an ongoing, subscription services-based model that combines products and value-added services within the framework of a long-term relationship. Subscription models can be better for both business and customers. Businesses get more consistent and recurrent revenue streams. Customers no longer have to make big capital investments, and they get the ability to easily scale their capacities up or down, as well as access to superior support and service.

    In recent years, advances in cloud computing, connectivity, and related technologies have made all that possible, and the "as-a-service" business model was born. It started with software-as-a-service (SaaS) but quickly became about more than just software.

    The IoT has given this already powerful new business model a shot in the arm.

    Adding precise, low-cost, always-connected IoT sensors and monitoring devices to the products that you sell and install enhances the types of services you can provide. The real-time and historical data that IoT devices generate allows you to do preventive maintenance, for example. Automated alerting and even predictive maintenance become possible, too. All this makes the technological investment associated with the IoT worthwhile.

    For an illustration of how powerful the IoT-enabled as-a-service business model can be, consider the transformation of Edison Electric Co. The venerable electric equipment company, founded in 1890, was able to thoroughly transform its business model with the help of the IoT. Now it makes wireless sensors that manufacturing plants can install on pipes and conveyor elements — to monitor vibration, pressure, flow, and temperature. These sensors, which plant operators or vendors monitor remotely, can improve productivity, not to mention help prevent hazardous incidents.

    A perfect circle


    Closely related to the as-a-service concept is the sustainable circular economy that the IoT enables.

    Circular business models emphasize the maintenance and refurbishment of components at every stage of manufacture, sale, and utilization: the point is to use rather than own, create rather than waste, and recycle rather than discard. By contrast, classic linear economic models focus on the final value created at customer delivery, de-emphasizing losses due to waste and disposal.

    The IoT helps circular models function and flow by making it more feasible to repair or remanufacture components before they reach the point of catastrophic failure. When parts are removed, IoT tags make it easier to inventory viable salvage and reintegrate them into the normal value chain. It's sustainability by design.

    An innovative lighting installation at Amsterdam's Schiphol Airport, one of the world's most sustainable airports, combines these two concepts — as-a-service and circularity. Instead of purchasing a lighting system, the airport has purchased the light, which is provided to them as a service. The sustainable luminaires that hang above the passenger' heads have been designed to allow easy repair or to be sent back to the manufacturer for replacement.

    The personalization of everything


    If you've been following the IoT for any length of time you've probably read all the stories you'll ever need to read about smart technology that configures temperature and lighting to the preferences of a room's occupants. Those smart buildings are technological marvels that make for great examples, but personalization's potential is much greater.


    Shared public displays located everywhere from living rooms to restaurants and conference rooms can change their content automatically based on viewer preferences. For example, your IoT fitness tracker could also communicate your media preferences to nearby beacons. This could influence the main screen's program, or just tailor the information in the news ticker to focus on financial, sporting, weather, or general interest topics relevant to you. It's the power of crowdsourcing, without lifting a finger.


    Similarly, jukeboxes can dynamically change their genre based on the known tastes of everyone within earshot. Think of a group Pandora playlist created in real-time and constantly updated as people come and go. And personalization doesn't just mean consumer. Precision agriculture helps farmers optimize planting and harvesting to reduce waste and improve yields. Smarter city grids with IoT sensors are changing everything from traffic patterns to parking layouts to garbage collection schedules. Imagine avoiding sorry we missed you door tags because the truck knows the recipient will be home in just a few minutes, and can adjust the route to accommodate that change.

    New ways to share


    Every few years a new technology enables a radical shift in how much we can share digitally, and how we benefit from that sharing. Connecting desktop computers via the Internet in the 1990s represented a massive shift: no longer were computers discrete islands, as they had been previously. Then came affordable mobile phones, followed a few years later by text messaging.

    Widespread public Wi-Fi increased the connectedness of personal computers by orders of magnitude: we can connect, and share from, anywhere. Mobile phones evolved into smartphones, and integrated cameras and high-speed data further expanded what we could share and learn.

    Largely, if not exclusively, as a result of these advances in connectivity was born the so-called sharing economy: an economic model defined by peer-to-peer transactions enabled by online platforms.

    The IoT is driving the next step forward in the sharing economy, and businesses that unlock that potential will create and define new markets, just as the social media and app pioneers of the past decade have done. One potential source of sharing economy benefits is distributed computing, like that organized through the University of California's BOINC project since 2002. Distributed computing carves up large data processing problems and sends them off to a widespread network of participants to solve.

    Many IoT devices have computing power well beyond what they need to conduct their core tasks, and those extra cycles could be valuable to the right entrepreneur. Bitcoin puts under-utilized computers to work "mining" — that is, compiling bitcoin transaction data into "blocks" to add to the blockchain, the distributed ledger technology that undergirds cryptocurrency. There are also opportunities to act as a data broker between IoT devices and central servers, sorting through high volumes of mostly repetitive data to find the hidden gems.

    Context-driven business


    Ever been thwarted by these kinds of dismissive remarks from your customers?

    “You just don't understand the situation on the ground."
    “You don't understand how these people live."

    What could your business do with nearly unlimited insight into any customer context? What customized solutions could you develop, and how could you strengthen relationships after an initial sale, if you could truly understand how your customers live and work? IoT-driven insights are making such understanding a reality.

    Consider usage-based insurance (UBI), which in the auto industry charges drivers and fleet owners based on how they drive, instead of charging a flat fee over a specified period of time. Monitoring usage data passed along by IoT-connected devices, underwriters take into account how much a vehicle is driven; whether it's driven under urban conditions in which the potential for a fender-bender is high, or on empty country roads; how rapidly the car tends to accelerate; how hard it brakes and takes corners; and so on. Industry watcher IHS Automotive expects 142 million consumers to have UBI-based policies by 2023. UBI here relies, of course, on connected cars' ability to pass along data via the IoT.

    The IoT is also a strong play for regulatory compliance. Compliance implies context awareness, as it requires that you operate according to the rules that apply to your particular situation. IoT sensors can help professionals keep an eye on the movement of hazardous materials and vulnerable workers throughout an entire value chain. For example, Verizon's Cold Chain provides item-by-item monitoring of the location and temperature of highly sensitive products, such as injectable pharmaceuticals, as they move through the supply chain.

    It's another example of the new possibilities that the IoT is creating for business — possibilities that businesses must be prepared for.

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