Leading companies around the world use the Internet of Things (IoT) as an innovative way forward. In fact, The World Bank sees the potential economic impact of the IoT in 2025 reaching $11.1 trillion. However, even a simple model — sell a device with IoT capabilities — brings a deceptively complex challenge: monetization.
A recent Cisco study found that 70 percent of organizations do not generate service revenues from their IoT solutions because they lack the technology and business model to make them profitable. Here are six steps for successfully monetizing IoT.
Step One: Deploy a device with app lifecycle management
Applications transformed the way people interact with all types of devices. From smartphones to dog collars, software and IoT paved the way for companies to develop new and thoughtful integrations.
Regardless of the device type or industry, companies need the flexibility to update and manage their smart device lineup for the lifetime of its ownership. Apple, for example, consistently updates iPhones’ operating systems, thereby supporting the demand of new, innovative applications.
Step Two: Define communication through cloud networks
Connected devices need a communication layer that ensures they can send and receive data, as well as updates. Adapting to this need, businesses are transitioning from legacy back-end management systems to versatile and efficient cloud networking systems.
For smart devices in and around the home, WiFi networks, for example, facilitate the communication layer. Devices like smart alarms, security cameras, and locks utilize this communication layer for ongoing sending and receiving of information to larger networks of IoT device clouds, improving performance while optimizing and predicting trends. This type of data sharing improves platforms and user experiences across a range of interconnected devices, but only becomes prevalent as IoT ecosystems mature.
Step Three: Make software distribution the backbone of user experience
Cloud connectivity enables companies to update apps and services as developers add or edit features. With a digital asset management platform, manufacturers provide customers with only the most up-to date digital experiences. Tesla, recently averted the costly dealership repair of nearly 30,000 vehicles that had an issue with a charging plug software bug with an OTA update.
With software distribution and over-the-air updating incorporated into devices, companies can improve device performance and services based on data collected from user analytics and data gathered from integrated clouds.
However, device OEMs first need a platform or system capable of defining the trends and insights needed for improving a device. With these insights, actionable items are applied to devices through software and system updates. These insights are also beneficial for developers and partners, ensuring that they continually meet customer expectations for the lifetime of the device and/or service.
Step Four: Establish an ecosystem of partners and providers
A strong ecosystem of developers and innovative software enhances the “stickiness” of devices. Fitbit, for example, offers a dedicated suite of apps for its fitness tracker wearables. This IoT ecosystem creates a richer, more-personalized user experience ensuring the ongoing appeal to customers long after purchase.
Aside from program considerations like developer support, partner recruitment, documentation and more, organizations must deploy sophisticated and flexible ecosystem-powering technology. The easier the development and onboarding of new software and services, the more valuable the ecosystem becomes.
Step Five: Launch a marketplace for your customers
Device manufacturers must facilitate the way customers find, buy, and manage new apps, software, and services for their devices. Creating a dedicated marketplace to showcase relevant products and services not only ensures customers are aware of the latest solutions for their devices, but also builds loyalty.
Google Play, for example, serves as a hub showcasing all of their offerings, allowing users to browse and download applications developed with their Android software. This central channel intrinsically becomes a critical piece in understanding user behavior and the in-demand content and services.
Step Six: Monetize your ecosystem and marketplace
Much like smartphones, consumers want to not only download free software, but also purchase new apps or subscribe to additional services for the lifetime of their device.
Manufacturers support this by tailoring marketplace content according to end user profiles. Matching services to customer groups evolves the marketplace into both a discovery hub for consumers and a tailored connected experience.
In addition, commerce capabilities—such as subscription billing, invoicing, and refunds—are critical to driving monetization and personalization. A scalable billing platform, capable of handling the taxation and currency of multiple regions and countries worldwide, will be flexible enough to grow with an organization and its changing business needs. Adaptable solutions see far less risk as the marketplace grows and new business models like pay-per-use, subscription and more are implemented.
Organizations that approach IoT with a cohesive strategy that bring together developers and customers under one ecosystem will successfully monetize IoT.
Written by Dan Saks, Co-CEO and President at AppDirect.