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Tons of innovative ideas but how many are successful? IoT is calling for better business minds behind the inventor. (via Sergey Nivens/Shutterstock)


The Internet of Things (IoT) market is expected to grow even more rapidly as existing firms have demonstrated their intention to make everything Internet-enabled. CES 2015, firms were demonstrating all types of products from cars to home goods that could access the Internet to search and sync. The number of internet enabled devices soon to enter the market is appalling and unnecessary, but companies are doing what they can to stay competitive. Even plant moisture trackers and light bulbs are getting refitted to connect to the Internet.


In order to stay competitive, IoT startups need to engage in different business models and ensure they have a product worth making. The vast majority of IoT businesses make single-time purchase items utilizing one basic business model: produce for less and sell for more. While ready-wear and ready-use items like clothing and food can utilize a simple business model to make a profit, technology should not be discarded like clothing.


If built properly, technology can be updated, upgraded, and extendable. Technology is also expensive, and should be considered an investment that the customer is making. Think of how much money we can save and how much waste can be reduced if companies updated and upgraded software instead of forcing consumers to buy their latest product every year?


What is more? Technology is expensive to create and produce, and investors are going to look for different criteria before making an investment into a tech startup. Investors are aware that the business climate is changing and IoT is becoming highly competitive, so they want to be sure that new startups are utilizing a business model that ensures recurring income before choosing to invest. Breed Reply, an IoT incubator, has recently released some advice for startups on how to revise their business models before applying for investment.


The first alternative business model IoT startups can adopt is product cost plus one-off premium service. This is a strategy in which companies can wrangle a one-time fee out of customers for a service that uses their existing product. An example of this is Fitbit’s premium service. Customers can choose to use it out of the box, or they can add the premium service for a fixed-fee.


The next is a product cost plus cost of recurring premium service model. This model uses a similar model to the one above, however it requires a recurring charge for a premium service. An example is Dropcam that requires consumers to pay for a cloud service that allows them to store, download, and upload their videos.


A free product with ongoing revenue stream is a model that many service providers use (think ‘free’ phone with a 2 year contract and activation fee) to eliminate upfront costs and barriers to purchase while they capitalize on the long-term client relationship and monthly revenue.


The final business model is no product, no service cost. This is a model in which there is no cost to the consumer because the developer can provide a b2b service that allows/enables businesses to better deliver services or track consumer activity. In essence this is a business to business to consumer model.

For those of you inventors and entrepreneurs out there, keep these different models in mind before creating your final idea to ensure that you can secure investment and have a successful product down the line.



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