How to monetize IoT – patterns and models
While many of today’s IoT applications are deployed to bring about operational efficiencies and cost savings, companies are setting their sights on IoT’s other major benefit: growing new revenues. Flexible pricing for products and services, improved management of recurring revenue and enterprise contracts, and changing business models without constraints give a great competitive edge. However, few operator and enterprise billing solutions support this fast-paced agility.
Picking up where we left off with regards to business models and monetization in IoT before, IoT monetization is still one of the most challenging tasks when operators are looking into IoT offerings. The most important thing when monetizing IoT is to have a flexible and – more importantly – suitable business model that can cater to the complex ecosystem environment and as a service (aaS) offering structure that is IoT. For more background on this, please read the previous blog post.
Together with TM Forum, Ericsson has created a monetization toolkit/framework. The latest arsenal provided is the utilization of monetization patterns. A monetization pattern is a template with all necessary attributes to build a monetization model. Within the template, you can define a monetization model: how it is offered, its value, how it is billed/charged for and settlement methods (if appropriate). This tool helps to develop a model easily by assigning values to each of these attributes as shown below.
- Service description / Value proposition
- Customer experience manager
- Customer contractor
- Billing method
- Charging method
- Charging criteria
- Customer biller
- Partner contract
- Settlement method
- Settlement criteria
- Partner settlement
How to build a monetization model
Here’s an example of a monetization model developed with the above-mentioned template:
Revenue model: service provider sells products and services to end customers. End customers pay service provider in installments for access to a product or service: for example, USD20 per month for access to data services
Recurring revenue: service provider collects revenue from end customers through invoices for a post-paid plan or charges in real time for a pre-paid plan
Business model: it’s the recurring revenue model for consuming a product or service on a continuous basis. The agreement between the service provider and end customer is based on trust and retaining customers. Loyalty is rewarded in the form of promotions.
Monetization model: describes the overall plan to convert an asset into money or source of income
Revenue model: the revenue model defines the method by which you can generate revenues. It identifies and defines the product (value) on offer, the revenue source (where is the money coming from), who pays for the value and what price they would pay. It corresponds to the revenue streams building block in the Osterwalder canvas
Business model: Osterwalder defines a business model as the rationale for how an organization creates, delivers, and captures value or alternatively, “a blueprint of how a company creates and captures value”
Revenue stream: this is an amount of money that a business makes from a particular source as a result of value propositions successfully offered to customers.
If you would like to hear more about these topics, I’m speaking in Amsterdam at the Internet of Everything InFocus 2017 conference today. I kick off the Monetization Case Studies track: INDUSTRY INSIGHT: Tools and Use Cases for IoE Monetization. Learn more at: https://ioeinfocus.tmforum.org/agenda/?tab=t4_s10349