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There are a few Internet of Things use cases that are likely to account for the bulk of growth in IoT through 2020. And the good news is that these important use cases cover a wide range of industries, meaning there is room for all kinds of companies to grow in IoT—from industrial companies that will become IoT providers over software companies by extending their offerings to IoT solutions, to the device makers that provide the IoT ecosystem.

While many different players have entered the IoT space over the last several years, a recent BCG survey shows that 40% of IoT customers prefer to use traditional and well-established software companies for their IoT solutions. That’s because today’s customers are looking for end-to-end solutions, and the IoT applications and services they depend on only deliver value when the underpinnings work seamlessly with the top layers.

To develop the most effective products for this customer environment, IoT vendors need to develop a strategy for where they will play and how they will win. There are three areas of operation to consider—and a number of key questions executives should ask:

  • Addressing Use Cases. What are the company’s strengths, and how can these be leveraged to address use cases? Do we want to address use cases within a specific industry or build a single adaptable solution that can be used by a number of industries?
  • Targeting Customers. What types of customers do we want to attract? Should we directly serve clients that operate assets or clients that manufacture IoT-ready assets for other businesses?
  • Developing End-to-End Solutions. What will the company offer customers? Can we develop an end-to-end solution that covers all layers of the stack, or will we specialize in a particular layer?

Once IoT vendors decide where to play, they must determine how to win in that space. Of course, that’s easier said than done, but a focus on several important areas can greatly improve the odds of success:

  • Leveraging Partnerships. How can the company leverage existing assets and capabilities to optimize its position within the technology stack? Are we positioned to build up talent and capabilities in adjacent sectors? Or is it preferable to form strategic partnerships with other players?
  • Understanding How Sensor Data Will Be Used. It’s critical to ensure that the flood of available sensor data is linked to clear business objectives. 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. If the company has focused mainly on B2C, for example, how should the strategy change to reach B2B customers? 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. How can we capture more value through these new business models and create a compelling business case for our customers?

So then there’s the million-dollar question for IoT providers: how do we take all of this information and determine the best path forward? The right answer depends greatly on the 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. Platform-based solutions represent an important horizontal play here, and they 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 by developing 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 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 moving up and down the technology stack is always a challenge, so it will be critical to pick the areas in which you want to compete and develop partnerships with other companies when necessary. This is how you can build up a powerful suite of end-to-end offerings and stake a claim in one of the biggest market opportunities of our generation.

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