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4 Methods for Monetizing Smart Device Data

In a world of information-centricity, data is king.

For Original Equipment Manufacturers (OEMs), Business Model 1.0 meant “Products.” Whether it was a heart valve, a temperature sensor, or an aircraft control module, OEMs built businesses on their ability to develop and deliver new and differentiated products. While many OEMs added service business to their existing product businesses, the digital revolution brought about by the Internet of Things accelerated the transition to Business Model 2.0: “Products as a Service.”

That same digital transformation is creating a new category of opportunities for those OEMs ready to exploit them: Business Model 3.0. The future of the OEM is not just a question of products or services, but also of “Information as a Product” – a business model made possible by the dramatic growth in the volume of data available. The first step to harnessing that value is understanding how existing OEM product lines can leverage the Four Types of Information Value.


A Treasure Trove of Available Data

The next-generation business opportunity for OEMs is hidden in the vast treasure trove of data these devices collect and manage. Future business models for blood pressure cuffs will correlate equipment data with care outcomes, reimbursement rates, and quality of life metrics. OEMs can generate new revenue by assisting their customers in mining the data for business improvements – in this case, generating new patient revenue or reducing the cost to deliver care.

However, information does not need to “save lives” to add value. Using industrial refrigerator data to optimize electricity consumption may not be visible to most people, but those cost savings add up nonetheless.

What’s more, OEMs do not need to stop selling products in order to take advantage of these opportunities. In fact, controlling the product experience will play in their favor. In a brave new world of information-centricity, data is king. The OEM who owns the data has the first right of refusal to exploit an entirely new business model.


What Is an “Information-Centric” Business Model?

Information-centric business models provide information as the core unit of value instead of a product or a service. That information may be derived from data produced in the process of selling or servicing a product you manufacture, but it is not dependent on that. In fact, if your product offers an application program interface (API), outside parties are likely already engaging in their own information-centric business model (coincidently, at your expense).

That is not necessarily a bad thing. Outsiders might have expertise your organization lacks, or they may be compensating you for the privilege of using your product’s data stream, or you have decided that their involvement helps you sell more products, or you have convinced yourself that you can purchase this company at some later time. OEMs must consider the possibility that it may not be in their best interest to completely cede this new business model to an outsider. The question then becomes, what kind of information value could my OEM offer from its data?


The 4 Types of Information

By itself, raw data has no value. Data must be organized, coaxed, and cajoled into a form that delivers meaning. In other words, simply owning a large database of product information does not, in and of itself, create a business model. But before we can understand the creation of value from data, we need to understand the information itself and its increasingly sophisticated uses.

Level 1: Describing

Information at this level focuses on basic questions: Who, what, when, and where. An aircraft sensor delivering descriptive information would tell the pilot the plane’s altitude or airspeed.  A blood pressure cuff delivers basic biometric information (usually blood pressure and heart rate). Refrigeration sensors deliver temperature values over time. All of these pieces of descriptive data are good to know, but they are limited in their application.

Level 2: Understanding

At this next level, multiple disparate pieces of information come together to tell a richer story. Decreasing airspeed and low altitude could be very good (safe landing) or very bad (a stall). Certain patterns in blood pressure could indicate a more serious medical condition. A spike in temperature may mean a door has been left open (an easy fix) or that a cooler is malfunctioning (a costlier issue). This information is not only good to know, it is more valuable.

Level 3: Predicting

If a pattern occurs with enough frequency, we can make a strong case that we know what will happen in the future. In the right conditions, with the right combination of data, the aircraft sensors can illuminate a stall warning light, alerting the pilot to take immediate action. Certain blood pressure patterns can trigger a physician emergency. Certain temperature patterns can alert maintenance personnel before a failure occurs.

Level 4: Acting

At the highest value point is taking autonomous action. In the aircraft, before the pilot could react, the plane could adjust pitch angle or airspeed to avoid the stall. In many newer cars, this same idea is at work, automatically stopping the car in anticipation of a head-on crash. Those actions can be more challenging in a medical context, but they are not impossible. Industrial data often are ripe sources for autonomous action, reducing labor costs and improving equipment performance and longevity.


Putting the 4 Types of Value into Practice

In the new OEM economy, information is king. By carefully exploring, testing and exploiting information opportunities created by their product’s data, OEMs can maximize their natural advantage.

As an OEM, your first step toward implementing Business Model 3.0 is a careful audit of the information value your product already creates as well as the technical challenges you will face in elevating that value proposition. Hiring an outside expert can dramatically improve the quality of the analysis and the rigor of the time and cost estimates, giving you a clear picture of the opportunity in front of you.

Some OEMs are well on their way, collecting data on product performance. They simply need to find ways to monetize and productize that information for their end customers. Other OEMs are earlier in that process, and need to add connectivity to their products in order to begin capturing and storing data. In either case, there are always options.

Contact Logic PD today to explore and quantify the Information Value opportunity for your existing product lines.


If you liked this article about leveraging digitally gathered info to generate more revenue, check out our white paper on the best ways to leverage and communicate the value of your connected device’s service offerings:


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