March 21, 2016 | Written by: Albert Opher
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Every morning I start the day by reading the Wall Street Journal, Forbes, and other new outlets. It helps me wake up and learn about day-to-day happenings. Over the last few months, I’ve observed that there is always an article about the Internet of Things (IoT). More specifically, these articles have been focused on monetizing IoT data.
Just last week there was an article about how banks are analyzing cell phone data to reduce fraud. Other articles highlight farmers, new wearable devices, sports teams, drones, and block chain technologies generating, embellishing, and/or monetizing IoT data. We are seeing companies use IoT technologies to disrupt industries, to maintain a competitive advantage, and to adjust to dynamic market conditions.
Data captured by IoT technologies has the potential to derive new value. Leaders, hungry to realize this new value, are challenging themselves to instrument assets, to interconnect devices, applications and technologies, and to deploy deep insights accessible in near real time. Companies across all industries, such as telecommunications, manufacturing, healthcare, automotive and electronics, are discovering opportunities through IoT to reduce costs, generate revenue or create differentiation.
Because of these market dynamics, I felt the need to establish a framework to model this new economic reality and to uncover how entrants are realizing a rapid ROI on their IoT investments. I call it the Data Economy Framework. It identifies the various roles of the economy, describes the interchange between each role, examines the threats certain roles will face over time, and highlights enablers to the economy’s longevity.
While developing this framework, I found that most companies are monetizing eight types of IoT data: attribute, event, environmental, living, location, machine, motion, and orientation. Companies are using these IoT data types individually or collectively to generate revenue or reduce costs, or to transform the value proposition of their product or service.
Here are a few examples. Retail stores are constantly experimenting with cameras, cellular, Wi-Fi, and Bluetooth technologies to monitor the movements of specific customer segments. Many companies are willing to pay for data to understand specific segments and improve marketing initiatives (e.g. one-on-one promotions; customer insights).
John Deere launched many IoT products that run analytics on their famer’s connected equipment and data collected from field sensors. This enables services such as remote diagnostics, predictive maintenance, and fleet monitoring. It helps farmers reduce water waste and increase crop yields.
Siemens developed a sensor-based parking system to help drivers find parking spots quickly and effortlessly. It reduces city traffic, pollution, and parking violations. City officials and enforcement personnel have more visibility into violations and historical data.
IoT data monetization is the next frontier of broad economic growth across industries. To grow in today’s digital world, companies will need to use new IoT data to realize economic optimums and enhance market performance. The cost of entry into the data economy can vary, however, the ROI can far outweigh the investment. The time for enterprises to act is now.
Because of the rapid evolution of these technologies, and the dynamic ways in which companies are finding value in their IoT investments, companies need to begin to establish a strong digital foundation rooted in IoT that impacts people, processes, and technology. In concert with this, companies will begin to redefine their positioning within their respective ecosystems as well as within tangential markets.
Because these IoT-led transformations will ultimately impact both operating models as well as business models, a CxO must be directly involved in establishing the guiding principles and strategic imperatives necessary to achieve success.
These leaders work with other executive officers to mobilize their organization focused on a digital evolution rooted in IoT. Companies must determine new ways to utilize IoT data and build data-driven cultures.
To begin their journey, companies should consider the following:
- Develop institutional knowledge regarding IoT data monetization;
- Define the company’s desired role in the data economy;
- Define a corporate data economy policy and mission;
- Develop ways to control data when it is shared with partners;
- Engage a strong data science team;
- Find IoT data in all its forms across the company combined with publicly available data to understand the scope of monetization and the potential value;
- Identify beneficiaries of IoT data in the market and potential use cases;
- Determine opportunities for disruption both within their industry and beyond.
The disruptive power of the Internet of Things will remain a top agenda item for companies for the foreseeable future. There will be consolidation within the data economy, further expansion into ecosystems and a shift to customized fulfillment models in response to greater customer centricity.
It’s critical that companies understand their differentiation and market positioning, flexibly integrate consumer sentiment and values, reorient their culture viewing data as a strategic asset, and determine how best to utilize IoT technologies to preserve and expand their competitive position.
To learn more, please read my report on, “The Rise of the Data Economy: Driving Value though Internet of Things Data Monetization.”