An article from Harvard Business Review (written back in 2005) is still perfectly relevant for thinking about strategy approaches for today’s Internet of Things (IoT) business models. Entitled the “Four Strategies for the Age of Smart Services” authors Glen Allmendinger and Ralph Lobreglia wrote of lessons perfectly applicable to sorting through IoT business model strategy development.
G2Speaks has reviewed the four suggested strategies and matched them each with current-day role models to illustrate this current relevance and spark further discussions.
Embedded Innovator Strategy
This is the most product-centric of the business models. Customers will perceive the physical product as the primary source of value and they will continue to expect the product to be supported as it always has in the past. However, because the embedded innovator has built intelligence and communications into its products, the product becomes a “silent intelligence” tool for enabling expansion of the business beyond just the product. Today, the Smartphone is a near perfect example of an embedded innovator product just as the TiVo DVR or VHS/Betamax VCR’s were back in the day.
Apple as an Embedded Innovator Example
Apple is largely an embedded innovator. Leveraging “just” the iPhone, which consumers act upon as a physical product, they have built themselves an ecosystem where the sum of the parts, apps, music, movies, etc. are more valuable to them than the phone itself.
Now, with Apple Health, they are attempting to expand their ecosystem again though this time by leaning into more of an aggregation mode. Apple Health was introduced with iOS 8 to enable multiple third-party apps to be queried, their data gathered in one central point, appropriate analytics applied, and a dashboard presentation to be custom made to the consumer’s wish. Apple Health is the digital equivalent of the doctor’s patient folder; an aggregation of all the health tidbits collected by various people, places and procedures.
Google of course has introduced its own app called Google Fit to deliver similar capabilities to Apple Health. However, because Google is not approaching it from the embedded innovator’s product perspective, they will face the tougher challenge in gaining market acceptance. Remember that previously, Google introduced Google Health just as Microsoft also introduced Health Vault and both struggled to gain traction without an embedded innovator’s product to shepherd them forward.
In this model, a single key product typically is still the dominant gateway to more business. However, the model gets stretched to include all the related aspects of the product. Instead of just selling the product, there is installation, training, financing, replenishment of expendables, customization for personal style, ongoing hardware enhancement, ongoing software upgrades and on and on and on.
GE as an Industrial Solutionist Example
General Electric Aviation (GE) and their jet engine business is a perfect example of a Solutionist mode as they have shifted from an embedded innovator model (selling “just” engines) to a Solutionist model where all the surrounding aspects of the jet engine are also product-ized. With a dizzying array of sensors deployed on every jet engine, GE can provide data on the each engine that far exceeds the competition. All that data can then be turned into actionable tactics that minimize cost and maximize runtime to the benefit of the airplane owner.
iControl Networks as a Consumer Solutionist Example
Have you been following what iControl Networks has been doing? They recently partnered with IndieGoGo to enable any start-up to utilize the iControl platform to more quickly bring the start-up’s idea to market via a support incubator they have established and full access to the iControl’s foundational Smart Home platform.
This is a solutionist approach as iControl recognizes that pushing their technology as an industry standard is an uphill battle and one that will not likely result in a royalty stream for them. Instead, they are hoping that if they “enable” others by offering their platform to start-ups, they will achieve market reach via leverage. This is a smart move for iControl Networks though only time will tell as to their success.
What similarly positioned platform play for start-ups to leverage can you bring to bear?
When a single product solution doesn’t cut it, what do you do? You aggregate! Sometimes the data you can draw from your primary product is only of marginal additional value. However, once that data is coupled with data drawn from other products (aggregation) you may get a big win in functionality that can be priced, marketed and sold as a much bigger deal.
In the Smart Home space, it’s sort of, kind of cool that a light bulb can be turned on or off automatically by programmed schedule. However, it’s really cool when the lights in the house respond to movement, auto-magically turning on at the right intensity based on the registered activity and other variables.
Remember the first time you walked into a hotel and the lights automatically turned on as you strolled down the hallway to your room? In the modern Smart Home, the full lighting solution gets even better when it interacts with internal and external data. Your movement within the house, adjusted for time of day, temperature, humidity, and all sorts of other data points, is key to creating an optimized lighting experience.
Lowe’s as an Aggregator Example
Lowe’s Home Improvement Stores, a do-it-yourself store, gets the IoT for the Smart Home.
Lowe’s requires any Smart Home connected device they sell to work with their IRIS hub. The idea is to ensure consumers of system compatibility via Lowe’s Iris for door sensors, cams, leak and motion detectors, garage door openers, door locks and on and on. The Iris platform offers basic home security and automation products that work together with a Smartphone or tablet app that integrates all the various modules. Iris supports Z wave, ZigBee, Wi-Fi devices and most anything else that can talk Iris.
Of course, it’s also always about building an ecosystem for Lowe’s. This business model approach is really a nice dual play for Lowes. Without having to develop and manufacture, they sell all the various sensors and devices which Lowe’s certifies to work with Iris and then they sell Iris as an application.
Iris does not alert police or fire and it’s not actually monitored by live personnel, it’s all automated. However, Lowe’s offers a $10 a month option that enables Iris sensors to interact with one another instead of just alarming thus providing truly automated scenarios that link multiple devices together. Voice command was recently added as an additional up-charge to the Iris app and it has received resounding consumer support.
Today, it is possible to succeed in Smart Devices simply by providing intelligent devices that play well with others. When you create a product that can contribute valuable data or enhanced functionality to other connected products, you are pursuing a synergist’s model.
Telefonica as a Synergist Example
The 300 million customer strong Telefonica, the number one Spanish multinational by market capitalization and one of the largest private telecommunications companies in the world, has introduced an end-to-end platform enabling product and services to be built and monetized via the Internet of things.
Called “Thinking Things” it consists of intelligent, stackable, hardware modules with different capabilities via sensors, actuators, power and connectivity options and all of which can be “stacked” together to get the product functions desired.
The idea is to cut right to the heart of the issue and quickly get devices into the field collecting data on any variety of things. This Synergist model has a high likelihood of success for Telefonica as they also have (from their core business) global connectivity to bring to the party. All of these modules communicate over a 2G network which Telefonica will gladly sell you for about €100 per year.
With data acquisition assured via the modules, and data transport via their network, the data analysis will be left to their starter software and system API’s upon which others can build full-fledged solutions. Telefonica wants this to be an open ecosystem in which any object can be connected to the Internet (preferably via their network). If they are right this could be the mother lode equivalent for all cable and Telco operators everywhere to pursue.
The Smart Home market and the larger IoT market support multiple, simultaneous business model strategies. The key is to evaluate your specific abilities and then think through how best to drive change in your industry; not just by thinking about faster and better ways to do what you already do, consider as well how to use your abilities to disrupt entire ecosystems with the bold new thinking that the IoT enables.
G2Speaks is ready to help.