In Part 1 the discussion was about Defining the IoT.
In this blog post, Randy Littleson, Senior Vice President of Marketing at Flexera Software speaks with Rami Ahola – Global Electronics Center of Competence at IBM and Vikram Koka – Vice President Intelligent Devices and IoT at Flexera Software and asks them to share what Monetizing the IoT means.
Randy: What do we mean by monetizing the IoT?
Rami: The fact that something is connected has little or no value in its own right, it’s really the data that you get from the connected device and the insights that you drive and then the actions that you take based on those insights that create the value. That’s how you create value then how do you monetize that value? That can happen in many ways. If you look at some of the asset intensive industries, its monetization is indirect, it’s cutting service costs, it costs you less to service your device because you only service it when it’s in need of service rather than doing time base as you did before. Or you enable new service models or in the consumer space you increase the value that customers are driving from your products and hence can charge a higher price for your devices. Nest is a prime example of that, they charge what, 5 to 10 times more than non-connected thermostats for their device and consumers are still willing to pay for it.
Vikram: I really like how Rami described it as the indirect model. I couldn’t agree more on the aspect that once you’re connected, that’s great, so what? The aspect where a lot of value is getting proven is on the so what? This is based on what things are now possible because it is connected and it can take action based on the fact that it is connected. You could provide new insights. The effect of the indirect model is to provide information, therefore you can reduce the cost of services, because you only need to service particular equipment when it needs to be serviced rather than just on a preset interval. This benefits, by saving cost which incurs not only as an opportunity cost but also the cost of sending somebody over, and the down time for maintenance. When you talk about monetization it is fundamentally different than just feature function of the same part, how and what features does it have with respect to a competing part? Now it’s all about what is the lifecycle, what value do I get from it during its operation, how can this value grow over time, and what is all the ecosystem value? I drive these results as a benefit of being connected and sending information back. This drives a lot more value from the ecosystem from the long term value of this particular endpoint which is now connected. That’s much greater than the value of the part itself.
Randy: You both mentioned the word ecosystem. When we think about monetization and then we think about the ecosystem, who’s got opportunities to monetize? Does everybody have an opportunity to monetize? Do we think there is more opportunities with certain players in the ecosystem than others?
Vikram: Everybody does. IoT provides the benefit that everybody really drives value creation, the growth potential. Let’s take a simple example from the consumer space. I have a sensor for a particular parking spot in a parking garage. Just a sensor by itself doesn’t necessarily have value, but if you link this sensor with an application which is in a car, then the driver can reserve this is parking spot. The driver can go there, it is available and then being able to drive the value from both an application and a sensor which could be provided by completely different people. That enables a brand new set of value propositions. In an industrial environment standpoint it’s the same thing, for a medical device or a medical equipment manufacturer it enables the data to be drawn from the sensor or medical instrument which provides information about a patient. This type of data wasn’t readily available in the past. Now the doctor, the radiologist or the nurse, and even family (who could be distant) are able to access this information on an ongoing basis. This provides value to a much larger number of people, as well as a much larger range of applications, which then drive additional value.
Rami: My view is pretty consistent with Vikram’s. There’s value throughout the ecosystem all the way from people making the sensors to device manufacturers, to companies providing the connectivity from the devices to wherever they’re connected to, to the service companies. I would however differentiate between value and being able to monetize it. In Vikram’s healthcare example there is value to the family who can remotely monitor, but that value isn’t always necessarily monetizable because that specific function is expected as part of the overall service and isn’t something that can be uniquely monetized. But by in large I think there’s opportunity to monetize throughout the ecosystem.
Share your perspectives—How do you define Monetizing IoT?
Up Next: Part 3: How does licensing change the revenue streams of available to the traditional device manufacturer as they start to support IoT?