IoT is where the next wave of innovation is and naturally the next business opportunity also goes with it. But the ecosystem and vendors are still evolving and to compete successfully, IoT vendors need to develop a strategy for where they will play and how they will win.
- Addressing Use Cases. What are the company’s strengths and how can these be leveraged to address use cases? Do we want to address one or more use cases within a specific industry (for example, targeted solutions for medical-device manufacturing) or build a single adaptable solution that can be used by a number of industries (automated inventory management)?
- Targeting Customers. What types of customers do we want to attract? Is the company better positioned to directly serve clients that operate assets (such as transportation companies that need predictive-maintenance capabilities) or should we pursue clients that manufacture IoT-ready assets for these businesses (such as large industrial manufacturers that supply products to oil and gas companies)?
- Developing End-to-End Solutions. What will the company offer our customers? Can the company develop an end-to-end solution that covers all layers of the stack under our brand, or will we specialize in a particular layer of the stack (as a means to enable other IoT solution providers)?
Once an IoT vendor decides where to play, management must determine how to win in that space. As companies explore this angle, they must address the following:
- Leveraging Partnerships. How can the company leverage existing assets and capabilities to optimize its position within the technology stack? Is a software company, for example, well positioned to build up talent and capabilities in hardware? Or is it preferable to form strategic partnerships with other players, such as hardware companies, service providers, and systems integrators?
- Understanding How Sensor Data Will Be Used. In IoT, sensors can provide a flood of data, and it’s critical to ensure that the data is linked to clear business objectives (such as increasing revenues and reducing costs). What business metrics will we measure once IoT sensors are in place?
- Building Capabilities. What new capabilities does the company need? Should we build up internal capabilities, pursue M&A, or establish partnerships?
- Crafting a Go-to-Market Strategy. What is our go-to-market strategy? If the company has focused mainly on B2C, for example, how should the strategy change to reach B2B customers? If the company has historically sold software to IT departments, how will we reach out to business stakeholders? IoT conversations have to be centered on use cases and business value.
- Evolving the Business Model. Given the granularity of available sensor data, new business models are emerging. Instead of selling equipment for an upfront fee, for example, companies get compensated for the actual use and uptime of that equipment. How can we capture more value through these new business models and create a compelling business case for our customers?
The right path forward will vary depending on each company’s starting point:
- Enterprise software companies need to leverage their brands’ strong reputation and build an end-to-end solution through M&A or partners. As far as most customers are concerned, platforms don’t drive major value in IoT solutions: 80% of the IoT customers we surveyed were not at all aware that they were using a platform. Nonetheless, platforms represent an important horizontal play and hold enormous potential to scale over the long term.
- Established internet players need to leverage their strong B2C position and make a more aggressive move into the B2B space.
- Specialized startups should carve out their sweet spot for highly targeted IoT offerings—ideally in a segment that will not be better served by larger competitors.
- Industrial and technology companies must extend their product offerings to defend their large B2B customer base and find new ways to engage with customers across the product life cycle.
- Telcos can leverage their telecommunications assets and capabilities—including data access—to push beyond connectivity and provide higher-value offerings.
IoT offers tremendous opportunity, and hundreds of companies have already made big bets in this space. But it’s not simple to provide the end-to-end IoT solutions that customers want and need. It is not easy for a hardware manufacturer of connected devices, for example, to acquire (or become) a software provider that delivers value in the applications and analytics layer. Moving up and down the technology stack will be a challenge.
But there is good news: companies need not simply grit their teeth and build these capabilities through hiring or M&A. They can pick the areas in which they want to compete and develop partnerships with other companies in order to build a powerful suite of end-to-end offerings
Note: This is an excerpt from the original report mentioned above, all copyrights belong to the original author