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IoT Technology Is Now Proven—But Where Is the Money?

Ericsson recently released follow-up data from its research with leading telecom service providers in a report on how operators can create successful Internet of Things business models in the complex landscape.
By Jens Erler
Dec 27, 2018

Expectations are high for the Internet of Things (IoT). It promises to solve many of today's complex problems, from organizing city traffic to revolutionizing manufacturing. By leveraging big data analytics, the IoT creates possibilities for completely new insights into markets, businesses and societies, and new business opportunities related to connectivity, artificial intelligence (AI) and IoT devices are fast emerging.

On the other hand, machine-to-machine (M2M) communication has been around for much longer. Some see M2M as part of the IoT, while others challenge this view or even consider this subject a rather academic question. There is, however, one important aspect to be highlighted: In traditional M2M solutions, we typically have dedicated devices generating a specific type of data, often transmitted through an industry-specific protocol to a dedicated M2M application. The solution is based on a pre-defined value chain, and if the generated business value is exceeding the costs introduced by the value chain, then we have a positive business case.

But what if the business value does not exceed the costs? In that case, we need to get creative and search for additional sources of revenue. Who else could benefit from the data collected or from access to certain device capabilities? What additional value could be created when the data is enriched, for example, through correlation with other data from different types of sensors or data providers? Which additional services could be created based on a broader range of devices and data streams leveraging the same infrastructure?

The purpose of these questions is to find multiple ways to monetize data and device capabilities. And as a result of people asking them, we see an ecosystem of players evolving around IoT infrastructure, working together to "co-create" value for address-specific customer needs, such as managing urban traffic or enabling smart homes, among others.

Essentially this is a transition from vertical silos to a platform-driven approach, which not only is a different technology concept, but also requires a different approach to business model development. And it is at the transition point from M2M to IoT where the classical value chain of a vertically integrated M2M solution is evolving into a value network with different value and revenue flows between different players in an ecosystem.

The Dawn of the Ecosystems
An ecosystem is a community of living organisms in conjunction with the nonliving components of their environment (such as air, water and mineral soil), interacting as a system (see related Wikipedia page). Applying this well-known concept from nature to the IoT, we see multiple players in an IoT ecosystem interacting with each other to jointly co-create value for enterprise customers and consumers.

IoT ecosystems are typically developed around a common core, which corresponds to shared and common assets, ranging from shared business ideas and culture to technologies, platforms, processes and standards.

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