In the overall IoT business model, great care should be taken to understand the value of the core assets, specifically, which assets can be exposed, shared, or sold and which should be protected. A clear strategy should be developed to maximize their value, and there needs to be a plan for generating additional revenue streams as the assets evolve and their usage grows. In this chapter, we will look at some of the key assets for IoT services.
Data
The Internet has given us incredible access to data that has now become an important asset previously not considered by many businesses. The search engines and social media groups have recognized this value and already monetize our personal data by storing search habits, location information, and so on. As there are already more IoT devices than people, the volumes of data will be incalculable and offer great opportunities for IoT services to monetize on the data being generated.
The value the device brings to the IoT business is one of the key factors in determining the success of the service. Its value to the business can be mapped to how the IoT service makes use of the data being transmitted to generate revenue. Innovation will be key to understand how to use the data and maximize its value to constantly create new use cases with their associated revenue streams.
During meetings with a connected transport cloud service, we discussed a proposal to connect their gateways to an IoT platform for the collection of data from various traffic devices for traffic management systems. Their business proposal was that they would collect the data via their gateways and sensors, and it would be stored and managed in the platform layer. This data would then be exposed to the application layer as part of their service offering. Surprisingly, they suggested the platform owner could have free access to the data stored on their platform for other IoT services. They also permitted the platform owner to offer the data to other companies to develop new IoT services. The platform provider could also generate additional revenue streams if it didn’t impact their core transport service. While this showed great initiative for creating a traffic management ecosystem, it also showed a complete lack of business knowledge of the asset they owned. The platform provider was hosting and manipulating the data, but they should not be allowed to reuse the data free of charge. It is key that the gateway owner should always have overall control of how the data could be exposed and used. For all IoT services, the owner of the data should always retain control to ensure they have the ability to develop new revenue streams.
For example, if a smart city service includes a connected traffic cloud that collects data from traffic lights, cars, parking spaces, and so on, this data becomes a key asset. The service owner can monetize on the data by implementing traffic congestion services. They may be successful offering this service, but have they maximized the value of their asset? No matter how innovative the service owner is, there can always be new ideas coming from many sources to create additional revenue streams. Offering the data for usage in an ecosystem (for a fee) could enable new ideas that the data owner may never have considered. In this scenario, the data owner needs to maximize the value of the asset by exposing the data and charging for its use.
A strategy for handling the data should be developed that includes a GTM model and a sales channel. I often recommend a marketplace because it fits into the concept of developing an ecosystem. As the data is already available, there is no extra cost except for capacity considerations; therefore, it is win-win for the company to expose and resell this asset.
The key question is how to value the data, and this will depend on the use case. Therefore, a revenue share model can be a good option. The service receiving access to the data pays a fee according to the usage and the revenue it is generating. See Ref. 10, “IoT: Harnessing Device Data.”1
Data Reuse
Let’s take the example of a utilities company that plans to roll out two million smart meters over a wide geographical area. For this example, we will estimate the cost of this activity at $20 million USD including the considerable cost of buying 200 trucks. Normally, a truck manufacturer will spend millions testing and analyzing the performance of their trucks, with data from brakes, steering, fuel consumption, and so on. If this data is made available to the truck manufacturer by the utilities company at a price, both companies can benefit. The business case for the utilities company changes as they are generating revenue from the data in the trucks; therefore, they can reduce costs for rollout of their smart meters. In this scenario, we have an energy provider selling data to a vehicle manufacturer, not something we would traditionally expect.
APIs
APIs (Application Programming Interface) are the most common method used for transmitting data and IoT service owners should develop an API strategy that is part of a service road map. It is essential both from the perspective of protecting a key asset and being able to monetize on it. The API specifications may be exposed publicly to help foster an ecosystem and demonstrate the capabilities of the service. However, it can be more beneficial to keep some APIs private if they implement knowledge or assets that are part of the IPR for the service. If the service provider plans to sell access to their API, they should select a value-based pricing model, in other words, calculating the value to the customer before setting a price as it will maximize revenue.
Algorithms
The intelligent logic contained in the service should always be protected as much as possible. This may consist of big data analysis, artificial intelligence, machine learning algorithms, or basic calculations that are perceived to be complex.
As mentioned earlier, an agricultural farm production service developed algorithms based on investigations into sourced historical data and the knowledge received from agricultural producers. The service owners believed their value to the market was the full agricultural service. However, they didn’t understand the key asset was the algorithm. We were able to demonstrate that the other components of the service were easily reproducible, in other words, the application, devices, and platform layer components. The algorithms and resulting actions taken according the historical, meteorological, and chemical conditions were the key differentiators for the service. The service owner was advised to take steps to protect the algorithms before service launch, and access to them was provided under strict legal conditions.
Patents
The application layer should be implemented as a presentation layer, but that shouldn’t imply that it is not an important asset. The application layer defines how the service is accessed. It is the showcase for the service and may contain features that are possible to patent. I was pleasantly surprised to find that many IoT services are patented. They may consist of components drawn from partners and suppliers that are packaged into an IoT service, but can still become patented. Many larger IT companies have departments dedicated solely to patenting, but this will not be possible for small IoT service companies. One option is to contract external specialist patenting companies to provide the required expertise. I discussed IoT patenting with a patenting consultant, and they suggested it will not be suitable for many IoT services because of the effort required to define the patent and the associated cost to protect it. The challenge with patenting is that it can be expensive to contract specialists to define and defend the patents in case of a suspected breach.
Devices
Device assets
Many consider the hardware contained in the device to be a key asset, but that will not be the case for many IoT services. The hardware is just a tool to communicate data and actions. While hardware capacity has been increasing at an accelerated rate for many decades, costs have gone in the other direction. In most cases, hardware loses its value quickly, so its real value to the business is via the data it is delivering.
I was meeting a device production company in China and was surprised that they were openly displaying and explaining the internal design of their devices. When I questioned this approach, they explained that it is not difficult to copy device design; therefore, they did not consider it an asset. What they did consider as their key asset was creating an open environment to discuss device design as they attempted to attract new customers. They planned to create an open ecosystem environment around the company, and the devices were part of that plan.
Manage IoT Assets
In this chapter I have introduced many of the assets defined in IoT services, but each service is unique and may have different assets other than those mentioned previously. The key message is that IoT services must understand their assets and expect their value to change over time. The careful management of assets will be key for the longevity of each IoT service.