Challenges of Monetizing the Internet of Things in 2018

The Internet of Things has already begun to change the way businesses generate revenue. Gartner predicts that the world will host 20 billion connected devices by 2020, all of which can redefine how the we conduct business with the flow of information.

 

Revenue models are going to change in the B2C, B2B, and even B2G spaces. The Internet of Things represents a huge opportunity to monetize everyday actions and behaviours.

 

Having said that, those organizations need to solve these fundamental challenges to realize those monetization opportunities over the next three to seven years.

Traditional SaaS and Subscription Billing Solutions Are Not Competitive Enough for the Internet of Things Market

 

Subscription revenue models have become popular among eCommerce and SaaS providers alike, but they remain rigid.  Most businesses provide multiple tiers of services or plans, with telecommunications companies being the best example. Currently, customers must fit into one plan out of many, limiting what they can access and afford.

 

The challenge with this model is to capture business in the spaces between those plans. Most customers simply do not fit into a one-size-fits-all plan. More to the point: companies leave money on the table because they haven’t implemented the infrastructure to bill customers according to what they use.

 

Billing models under the Internet of Things need to connect billions of devices—and all of their individual components—with a financial infrastructure built to accommodate them from the ground-up.

Unifying Fractured Financial Architecture

Most of the world operates with fragmented billing architecture that requires manual work and rigid plans for both B2B and B2C customers, but competitive enterprises can’t scale further without an integrated hub for customer billing.

 

For example, telecom companies charge a single user for a single amount of data on a single phone, or a family plan on the complex end of the spectrum.  That’s simply not enough to stay competitive or profitable in the IoT space. All industries involving information will adopt billing structures that will let them scale up further, driving competitive standards for every organization.

 

Companies have the opportunity to optimize customer usage pricing, to analyze big data in real time, and to work strategically with manufacturing partners to optimize products and services with information feedback loops that update dashboard metrics as well as granular usage details. Solving that challenge will entail offering fluid plans and pricing. Service providers need to adopt financial structures that integrate with their own systems to offer personal pricing at scale, but pricing that also fits different regional and socio-economic standards all across the world.

Customers in 2018 Demand Flexible, Usage-Appropriate Pricing

 

Economies of scale have been synonymous with standardized products since Henry Ford created the Model T, but tailored solutions will stand at the center of scalable revenue models in the Internet of Things.

 

The sheer amount of data flowing between devices will give enterprises enough insights to offer tailored—and therefore competitive—value and pricing in a wide range of industries:

  • Connected Car
  • Telematics
  • Connected Homes
  • Smart Cities
  • Fleet Management
  • Connected Health

The average customer doesn’t want to be overcharged for using five extra megabytes on their data plans every month, and no one wants to pay for services they haven’t used. Similarly, facility managers don’t want to pay for energy they don’t need in off-hours, either.

 

The end user demands pricing that matches their usage, and maintaining the status quo won’t remain an option for long. Competitors will attempt to disrupt traditional billing structures in every major industry, if only to acquire a larger share of the market.  Organizations who resist this run the risk of being permanently disrupted.

How IoT Companies Can Solve This Challenge

How to apply discounts for preferred customers/partners, or through loyalty programs Integrating with third-party financial platforms for quick transactions.

 

Meeting these customer demands in 2018 and beyond calls for business plans that cater to personalized services on these principles:

  • Billing according to real-time usage
  • Optimized energy or data use for the customer
  • Identifying billing and usage anomalies
  • Quickly offering pricing based on the customer’s status

IoT revenue models need integrated systems to tackle these customer-facing challenges from a single hub.

Measuring Facility and Customer Data for Multiple Manufacturers and Software Providers

 

Measuring and analyzing customer data will become a staple revenue model for the Internet of Things. However, it presents a logistical challenge of scale.  If a single auto manufacturer wants to track non-personally identifiable usage and behavioral data, it would need to set up a system that pulls and funnels information to every manufacturer of every component of every car.

 

The scope of the challenge is here: Toyota sold 16.7 million cars in 2016. If they were all connected cars (a very real possibility in the near future), then Toyota would need to keep track of that many new vehicles on the road every year.

 

For every car, it would also need to keep track of these connected components:

  • Tire pressure
  • Oil replacement rates
  • Battery life cycles
  • Coolant systems
  • Heater units
  • Frame integrity
  • Radio/player
  • Brakes
  • Transmission
  • Odometer
  • Windshield wiper integrity
  • Fuel mileage
  • Internal GPS routes

In this scenario, Toyota would need to adopt a system that measures and delivers performance and usage data for each of those components, for the appropriate manufacturer, and for each of the 16.7 million vehicles it produced.  Adopting a centralized data hub will be the only way to process that much information, but that hub will also need to empower enterprises to incorporate new data measurement tools on short notice.

 

Setting up a system to measure those related-yet-different streams of data requires a lot of back-end work that end users will never see, even in a business environment. But end users aren’t always the customer.  The solution will also require a billing structure that can keep up with business models that rely on big data analysis. The challenge lies in creating plans for enterprise partners to pay for data across billions of connected devices, and according to the business arrangement between the two companies.

Re-Aligning Financial and Operational Outcomes for Enterprise

 

Enterprise companies already face the challenge of aligning (and realigning) financial goals and outcomes between various departments.

That challenge will only grow with the IoT market to accommodate the tens of billions of connected devices in on the market.

 

Finance departments need to know how much a national campaign costs day-by-day or week-over-week while marketing departments need to judge the return on that investment according to other metrics.  At the same time, the production line needs to know if that campaign generated enough demand to justify another production run of the company’s flagship product. The customer service department might be delivering reports typed up by hand, but none of these groups have a bird’s-eye-view of the whole operation.

 

That’s a problem for companies that want to scale revenue models touching billions of connected devices. IoT companies can’t scale with their departments locked in communication and operational silos—not if they want to generate and react to business opportunities quickly enough to dominate the market.

 

This challenge calls for a solution that can process data in different ways for major stakeholders to see, even if each one has a separate set of responsibilities and action plans. The organizations who emerge as leaders in the Internet of Things will leverage platforms built from the ground-up to harmonize departments

Generating New Products and Services From Real-Time User Data

 

You can count on the word “innovation” to be front and center at every press conference under the sun, and with good reason—the Internet of Things has been called the “Fourth Industrial Revolution” by the Mobile World Congress. However, the business world can’t continue to treat innovation and creativity like a blank canvas upon which thought leaders like Steve Jobs paint.

 

Innovation begins with need, and there will be no better indicator of customer needs than the data generated from the billions of connected devices across the globe. Statistical representations from limited focus groups are no longer the gold standard for market research. Such studies could be outdated by the time a company can incorporate them into a business strategy, and they’re rarely tailored for the organizations using them.

 

Thankfully, the nature of the Internet of Things makes this solution straightforward, in theory. IoT companies can move beyond extrapolating the results from a handful of people toward real-time analysis of big data. The sheer number of devices in play can generate an entire spectrum of user data that can inform how, when, and where companies should introduce new products and services.

 

Work will need to go into setting up that system, but the key to long-term success will be in adopting or developing a system that allows businesses to add, remove, and update the parameters for that data with relative ease.

 

The Internet of Things will mature rapidly as enterprises prepare to overcome these challenges in every major industry.

Learn how to overcome revenue challenges in your industry with an enterprise solution built for the Internet of Things.

About the author
Tim Neil

Tim Neil

As Director of Marketing at LogiSense, Tim Neil is responsible for corporate messaging as well as Product Management shaping the vision and direction of the LogiSense Billing Software.