Apr 9, 2013

IoT Business Models

A few weeks ago, I had the pleasure to be a stimulus speaker at a New Digital Economics event in San Francisco. I spoke about IoT Business Models during a full day session - entitled Digital Things – which was devoted to new opportunities from the ‘Internet of Things’.

Digital Things ran in parallel to sessions on Digital Commerce and Digital Entertainment so there was definite competition for conference delegates. As a measure of how seriously Silicon Valley is taking the IoT market, the Digital Things session drew by far the largest audience.

Since the IoT market is still comparatively underdeveloped in commercial terms, my presentation focused on lessons learned from the M2M market. In particular, I highlighted several insights from the business strategies that service suppliers and providers are implementing.

M2M service providers – hardware and technology vendors, mainstream and specialist service providers, integrators etc. - are employing a variety of strategies in the M2M market. A common theme to their actions is to ‘compress’ or vertically integrate along the traditionally fragmented value chain; This was previously described in my post about corporate initiatives. For example, partnerships involving two or more companies in adjoining parts of the value chain can reduce complexity and costs when implementing M2M solutions. Improved coordination along the value chain can shorten the ‘time to market’ while offering greater confidence and certainty to non-telecoms. companies that are looking to adopt M2M connectivity. And, there is greater scope for innovation as knowledge barriers start to break down.

The IoT market differs from the M2M market. IoT involves services that exploit data from multiple sensors and connected devices that may initially have been deployed for separate and unrelated purposes.

To illustrate this point, the middle image in the following exhibit shows the case of a set of services delivered in a home. These services – home automation, smart metering and assisted living – would each be deployed for a specific application purpose. The ability to combine data across services could result in a higher quality of services (through improved information integrity) as well as new service opportunities (e.g. home security, wellness monitoring).

So, which types of company and business models will prevail in the IoT market?
  • One possibility for how IoT services will develop takes the form of over the top (OTT) providers. Companies would leverage data (subject to the data being accessible) from multiple sources to create and supply new services (which carries the threat of disenfranchising existing silo providers).

  • Drawing on the concept of ‘value-chain’ compression in M2M, there will be analogous opportunities, horizontally across value chains as shown in the right-most image of the illustration above.
The challenge for companies in the ‘new’ value chain is to understand where value might be concentrated – e.g. customer interface, billing engine, customer and connected device identity management, etc. – and how this translates into potential control points to orchestrate the value chain.


  1. 16 March 2022 update

    In the latest CEO talks episode, Sigve Brekke sits down with the CEO and co-founder of Working Group Two (WG2) to discuss how technologies are disrupting existing business models while at the same time providing businesses with new platforms for future growth. WG2 mobile technology company aims to make traditional mobile telecom services better and more relevant for end-users by deploying Internet tools and technologies on top of traditional mobile telco infrastructure.


  2. 13 Oct 2022 update

    Discussion of Teclo role in the Metaverse and 6G

    Those expecting remote surgery by robotic doctors have been disappointed that 5G has been business-as-usual mobile broadband for most operators, Gabriel said. The short-termism of this is now being seen around the world, she adds, citing the declining average revenue per user (ARPU) of Korean operators after just two years of growth. If operators don’t start building the underlying pieces of 6G, it’s possible the next generation could be developed separately from the 5G ecosystem, and be primarily driven by cloud and Internet communities, Gabriel warned.

    There is still time for telcos to grab the ‘bull’ by the horns and build systems that ensure the 6G business models become the natural successors to what they put in place today. This would leave them with ‘a central role in the chain’, said Gabriel. Meanwhile telcos are approaching 6G through two different paths. One is the incremental route in steadily building out capabilities such as low latency, edge and slicing for industrial clients. The other is the consumer-focused, mobile broadband-centric path until the latter part of the decade, when the 6G roadmap becomes clearer. The good news for mobile operators, according. principal analyst Martin Scott, is that there are multiple potential roles for them in the 6G metaverse era. They could provide connectivity both inside and outside the home, curating content experiences and supplying computing capability, a critical enabler. Will they be giving the content providers a free lift there still? If so, who’s going. fund that?