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Connected business models: inventing smart earnings models
Template Innovation Day presentationCONFIDENTIAL
CONNECTED BUSINESS MODELS:INVENTING SMART EARNINGS MODELS
Alexander FrimoutInnovation [email protected]
CONNECT: INTERNET OF THINGS
Connected business models: inventing smart earnings models
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CONTENT
Challenge to change business models
Connected business - What is the Internet of Things
IoT business inspiration
Getting organized
Conclusion
Connected business models: inventing smart earnings models
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ALEXANDER FRIMOUT
Alexander is an innovation consultant specializing in user insights, data processing and Internet of Things applications.
He has worked on a wide variety of projects ranging from consumer goods to industrial manufacturing and space applications.
His combined economic and scientific background give him a unique perspective into many business problems.
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CHALLENGE TO CHANGE BUSINESS MODELS
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APPROACH TO BUSINESS MODELS
• Optimization
• Efficiency
• Incremental
• Cost plus pricing
Finance Creative• Disrupt
• Breakthrough
• Turn the model upside-down
• Service models
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• Who has at least someone busy with optimizing the finances?
• Who has turned their business or revenue model upside down?
• Who has thrown all industry standards overboard?
SO … ?
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GETTING IN THE GAME
• How can I participate in the IoT without throwing all my assets overboard?
• How can I implement the IoT incrementally?
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VERHAERT APPROACH
Product
IoTextension
Finance Creative
IoT extension modelallows to tap into additional revenue streams without disrupting the company
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WHAT IS THE INTERNET OF THINGS?
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Image: http://www.wordstream.com/blog/ws/2015/01/09/the-internet-of-things
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WHAT IS THE INTERNET OF THINGS?
Web 3.0Internet of Things
Web 1.0Web as a business
infrastructure
Web 2.0Web as social media,
user contribution
• Digitalization• E-commerce• Freemium
• Crowdsourcing• Crowdfunding• User designed
?
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WHAT IS THE INTERNET OF THINGS?
Product
IoT extension
Web 3.0Internet of Things
PHYSICAL
DIGITAL
Sensors+
Connect • Process • Communicate
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WHAT IS IT GOOD FOR?
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So what? Why should I care?
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1. Because people are telling you to
WHY SHOULD YOU GET INTO THE INTERNET OF THINGS?
“69% of consumers plan to purchase a connected smart device at some time during the next five years.”
Acquity group consumer survey
“83% Of IoT experts agree that the Internet of Things will have widespread and beneficial effects on our everyday lives by 2025.”
Forbes IoT expert canvas
“The IoT offers a potential economic impact of $4 trillion to $11 trillion a year in 2025.”
McKinsey Global Institute Report
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2. Because the Internet of Things allows you to create extra value in your products
WHY SHOULD YOU GET INTO THE INTERNET OF THINGS?
Nest Thermostat
7x More expensive8% Market share25% Profit share
Apple iPhone
3x More expensive12% Market share70% Profit share
Products and their business models don’t have to be completely reinvented.
If you create extra value by making your product a little smarter, you can get a large profit share!
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YOUR PRODUCT AS THE BASIS FOR VALUE CREATION
Product
IoT extension
PHYSICAL
DIGITAL
Connectivity
Analytics
Digital service
TECHNOLOGY
Sensor/Actor
CUST
OM
ER V
ALU
E
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IOT BUSINESS INSPIRATION
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UX BASED MODEL WITH FLAT RATE SALES
• Often simplest solution for traditional product companies
• Requires good knowledge of all potential future costs
• Defining the right services & value based pricing is important
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CREATE A DIGITAL ADD-ON
• Product must be able to function without the service
• Service is sold separately during or after product purchase
• Different service options possible for different consumer segments
• Bait & hook/Razor blade models options
18
Optional
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SMART EARNINGS WITH A PAY-PER-USE
• Pure pay-per-use model becomes easier to maintain and possible for products where it was traditionally not
• Need an efficient delivery mechanism and some up-front capital investment
• Dependency on high transaction volumes makes the model less appropriate for start-ups
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VALUE ADD SERVICE ON CRITICALITIES
• Products can self-diagnose when its status changes or maintenance is required
• Products can take action independently, eliminating the need for a third party
• Allows companies to become a solution provider
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MONETISE SENSOR DATA IN SERVICES
• Connected product provided (potentially free of charge) to user
• Data that is deemed valuable and relevant
• Data can be valuable for multiple parties and/or the company itself
• Relies on wide adoption
• Additional revenue streams possible
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GETTING ORGANIZED
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WHAT CHANGES?
How can we build this Internet of Things Extension around our product?
Product
IoT extension
PHYSICAL
DIGITAL
ROIRevenue streams
Data
ConnectivityUX
PartnershipsCRM
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GET YOUR IOT BUSINESS CONCEPT TOGETHER
Start with the product1Value added services2Strategic partners – establish your ecosystem3
4 Expand from your one trick pony
5 Monetize your IoT extension
6 Implementation
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© Verhaert - Outsmart model, variant on Osterwalder
Product
1. START WITH PRODUCT
The product is the central offering that creates value, not the business model.The question is not how can I generate revenue in a different way, but how can I make more money with my product.
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Start from your product and think
‘How can I add more value for my customers?’
2. UNLOCKING VALUE THROUGH SERVICES
And important:
Involve users in the process!
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SECURE SUPPLY
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IOT IS ABOUT BEATING COMMODITIES
PersonalizationDistributed productionPremiumizingExtend moments of useBig data
Cost reductionReliabilityUser experienceFreedom to operate
Product validationConcept designBusiness consultingDigital designConnectivity
TRENDS CHALLENGES TACKLED KEY EXPERTISES
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HOW - CONNECTIVITY MATRIX
The connectivity matrix is a toolbox that unlocks the IOT extension to build additional value with a digital component for physical products.
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3. STRATEGIC PARTNERS - ESTABLISH YOUR ECOSYSTEM
What does your ecosystem of the future look like?
Who are the main players?
What devices will we need to connect to?
What partnerships will we need?
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AN ECOSYSTEM IS BONDED BY A MUTUAL VISION OR BELIEF
LifeBEAM Smart Sports headband
Under ArmourArmour39 shirt
Glagla wind connected shoe
Fitbit Activity tracker
Quantified Self
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4. EXPAND FROM YOUR “ONE TRICK PONY”
IoT extension
PHYSICAL
DIGITAL
Uncertainty of market / organization complexity
Tech
nica
l com
plex
ity &
pot
entia
l ret
urns
• Take a breakthrough product
• To an products system
• To a system of systems
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5. MONETIZE YOUR IOT EXTENSION: 3 WAYS
Earning models for capturing extra
value
2 31Use data as a
currency
DATA
HEALTH SECTOR
REALTORSACADEMIC INSTITUTES
R&D ORGANIZATIONS
GOVERNMENTAL ORGANIZATIONS
LOCAL COMMUNITIES
MARKETING AGENCIES
INSURANCE COMPANIES
INFRASTRUCTURE PROVIDERS
Use knowledge to manage better
MEASURE
CUSTOMER SEGMENTATION
STOCK
INVENTORY MANAGEMENT
SUPPLIER DATA
PRODUCTION DATA
NEW FEATURES DEVELOPMENT
SHELF MANAGEMENT
SALES DATA
PRODUCT TRACKING
MANAGE
JIT MANUFACTURING
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DevelopmentSTEP 5
Selecting, prototyping &
testing
STEP 4
Designing alternative bus. mod.
STEP 3
Idea generationSTEP 2
6. IMPLEMENTING A CREATIVE BUSINESS MODEL PROCES
Take a product development approach towards business models!
• Be aware of your assumptions and guesses in a newly developed model, and make sure you test them with users.
• Iteration is very important. You likely won’t get it right the first time, but the business model can be adapted until it works.
• Be patient and invest effort in business modeling – develop alternative scenarios (products & services, roles, finance, organization).
• Validate your model after each iteration, with internal and external stakeholders.
• Design your business model implementation scenarios.
• Make sure you have the necessary competences for not only implementing the plan but executing it as well.
Assessment and analysis
STEP 1
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A CREATIVE PROCESS REQUIRES MAKING TRADE OFF’s
Product
PHYSICAL
DIGITAL
ROIRevenue streams
Data
ConnectivityUX
PartnershipsCRM
Financial appeal
User desirability
Time and ease of
execution
Endorsed by negative selection →Weak ones out
Risk
IoT extensionmodels
Selection of models: use a framework based on trade-offs
IoT extension
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CONCLUSIONS
It’s not just a financial exercise nor just a creative one!• Think service, but start with the existing product
• Developing the IoT Extension requires creativity
• Validate you Extension and involve users
• Expanding competences is a requirement
• The bottom line is still creating financial and business profit!
It’s about a multidisciplinary integrated approach
Connected business models: inventing smart earnings models
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www.verhaert.com
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www.lambda-x.com
Verhaert NetherlandsKapteynstraat 12201 BB NoordwijkT +31 71 760 05 50E [email protected]
connect.verhaert.com
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www.load-interactive.com
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