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Internet of Things Partner Insights

Why You Need to Co-Create to Build Your IoT Business Model

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Within 5 years, 3.5 billion things will be connected by cellular technology alone, with many billions more connected in other ways. But a fragmented Internet of Things (IoT) marketplace has created a landscape that is too complex and without clear ways to monetize the business. Add to this an often-poor user experience and you have a serious drag on building IoT businesses.

How can we unlock the IoT potential? Through collaboration and partnership.

It won’t be possible for any single company to solve the puzzle. We’re talking markets as diverse as connected cars, robots, shipping containers, agricultural fields, traffic systems — you name it.

If we really want to create a killer user experience, we must collaborate, co-create and develop new business models within a variety of ecosystems.

IoT as the ecosystem of ecosystems

At Ericsson, we believe we will only achieve economies of scale in IoT by finding multiple ways to monetize both data and device capabilities within an entire ecosystem of partners. This requires a transition from vertical business silos to a platform-driven approach.

Within an IoT ecosystem, all players must operate on profitable, individual business models, but all the business models within the ecosystem must also be complementary to each other (which does not exclude competition in certain areas).

IoT Ecosystem Business Logics (illustrative) — in IoT ecosystems, each player in the system is linked to others through value streams. (Illustration: Courtesy of Ericsson)

This means that IoT business modeling must take place both on the individual stakeholder level, as well as on an ecosystem level. It’s important to note that IoT value streams don’t have to consist entirely of revenue. Innovation and insight, for example, cannot always be directly monetized, but customers and partners still prize them.

The key to IoT business models

How does this work in practice? It means that companies need to work together with customers, partners, startups and regulators to find innovative business models, such as hardware as a service, pay per use, or performance-based contracting to give just a few examples.

This can be a challenge. All stakeholders need to have an open mind-set and to be prepared to share their views and expectations based on their own business models. This represents a fundamental change in business culture for many companies, particularly in traditional “physical” industries.

There is also no guarantee of success. IoT business modeling typically requires several iterations, and some business models may work for some, but not all, stakeholders. We need to be prepared to fail and retry fast.

But it’s not just startups that embrace the possibilities of co-creation. Large companies are equally capable of innovation — and equally dependent upon partnerships to innovate.

We are deeply committed to this kind of work through Ericsson ONE, our business incubator program. This is our collaborative community dedicated to building new business, using the telecom network as one of our most important building blocks. At Ericsson ONE, we give small teams the innovative environment they need to flourish through coaching programs, joint workshops, and access to global testing, as well as opportunities to work with Ericsson, its partners, and the world’s leading service providers. We test ideas and then either quickly kill them or invest in the ones that have a disruptive and viable solution attached to them.

Co-creation with GE

And we’re not alone. Earlier this year, teams from GE and Ericsson came together in Batavia, Ohio, to address various industrial business challenges based on GE’s actual business.

It started with a recognition from both companies that there is a massive opportunity in connecting industrial companies and providing a better user experience for them. As we talked about the future of smart manufacturing, we realized that neither of us could take advantage of the opportunity on our own.

Over the two-day workshop, 60 participants from Ericsson, GE, and handpicked startups worked on three pitches for nine C-level judges from both companies. Two of the projects — based on critical asset tracking and real-time digital quality control respectively — were funded and are now in development in collaboration with specific GE business units.

In the end, it’s all about getting the right expertise in the room and then investing significant time together. Our workshop was only a success because executives, people who work the factory floor and founders of innovative startups all committed to working together. As our CTO Erik Ekudden says, that’s the trick to changing the industry, and we’re going to see it through.

Shannon Lucas is VP, head of emerging business global customer unit, at Ericsson.

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