Thanks to the Internet of Things, business models are reconfiguring how we do business from the inside out. And IoT is not only stimulating new business models, it is also enhancing and disrupting already established ones.
Plenty of companies will continue to drive significant revenues from traditional business models, but instead of solely relying on the tried-and-true one-off sales model, IoT has opened up a whole new world and there are a number of ways this is having a transformative and advantageous impact on how we do business, particularly when it comes to B2B.
We are quickly reaching the point where nearly anything can be sold as a service. Take an equipment manufacturer: with the old business model this kind of company would use its own money or raise financing to build products which were then sold to customers. The value was solely in that one transaction. When that same company moves to selling services instead of products, everyone wins. Customers avoid big upfront costs and gain the ability to make fast changes in response to shifts in the market while also accessing enhanced service and support. Businesses, on the other hand, gain more consistent and recurring revenue streams.
The asset sharing model involves selling extra capacity back into the market, allowing you to ‘sell’ your IoT-enabled product to many customers. The bonus for the customer is that they pay a reduced price and the bonus for you is that you can grow your market much quicker and in doing so can establish a steady revenue stream.
We’re already seeing asset sharing in our cities and towns with car sharing, city bike schemes, and urban micro-mobility solutions such as e-scooters. People have begun to question whether they need to make a big, expensive purchase, such as a car, when so much of that car’s time is spent doing nothing, just parked in a space.
The Razor & Blade Model
When King Gillette created this model in the early 1900s, he inadvertently created one that is almost perfectly suited to IoT. Sell the base product – in Gillette’s case the razor handle – at an extremely low price or even give it away for free, and then sell the replaceable product (the blades) at high margins. The challenge arises when there is a gap between running out of the replaceable product and ordering new ones.