Everything you need to know about IoT Business models

Everything you need to know about IoT Business models

What is the business model? How do we create that?

We make use of business models to describe the way an organization creates, delivers, accomplishes and captures value. The product managers are responsible to focus and deliver products that envision value. IoT is more than adding more sensors to a product and displaying the data via a dashboard. That is not how you create a “value”.

It has more to do with connecting to the day-to-day activities of a business for improving efficiency and reliability. IoT can change the way you work, play, sleep, eat, swim and Man, everything! With IoT, you can develop several customer-friendly products. Depending on your research and user analysis, you can create a business model.

What are the most popular IoT Business models available?

IoT Business models have a sole aim- to help their customers increase the productivity level. Companies can adopt the best-suited business models. As Ericsson points out, there is no widespread standardization in IoT as compared to smartphones. It is still in its infancy. Businesses have to take advantage of business models in the right way. These are the top 10 business models:

  1. Subscription-based model
Subscription-based model

Since IoT consists of a 24x7 connection, you can create cyclic business models by connecting with your customers directly. This model does not involve a one-time sale, where the customer pays you a monthly fee for the value and service they receive. This has similarities to SaaS models where you involve a more user-centric approach to make money from your product. This would allow you to maintain a more active customer relationship. You get to interact with your customers regularly, learn about their requirements and offer them with more exclusive features to take care of their specific needs.

2. Preventive maintenance

Using IoT technologies, you can protect the most valuable in-field assets. We safeguarded the equipment used at an extraction site through imperfect and infrequent in-field inspections. Since they were more complex, even small technical malfunctions can reduce their efficiency. This could lead to a loss of millions of dollars. To avoid this, we can involve a cost-friendly IoT device to monitor the equipment remotely, preventing the malfunctioning of equipment and tracking the maintenance schedules. During underperforming, you would get automatic alerts.

3. Output-based model

Here, you would not be paying for the product entirely. Instead, you get to pay for the benefit or outcome you get from the product. Let’s say you involve IoT for your digital marketing requirements. Here, you get to pay for the outcome, the social media campaigns you have carried out and the number of leads you have got. You pay only for the services you receive, not for the IoT product they own.

4. Asset-sharing model

Self-driving cars, IoT drones, shared power plants… these are some of the first things that would strike in our mind while talking about the Asset-sharing model. You get to collaborate with multiple customers when you utilize the product to its maximum ability. Customers would get to pay a lower price for what they get. You get to reach a wide audience in a shorter period. This would directly impact your brand credibility.

5. Razor-based model

Here, you design to sell other products, without selling the product. When the chicken is about to get over, the refrigerator could order them to prepare dinner based on your weekly preference. Amazon dash buttons are the best example of a Razor-based model in recent times. They use contextual shopping where you can reorder a product as soon as it gets over. These buttons come pre-configured before you order a particular product. The dash sales had increased drastically by 400% from 2015. About 60% of the new brands have signed on to take part in the program. Even though this device is no more, it is a classic case of the Razor-based model.



With IoT, you get to monitor the environment of your customers. Do you want to know how much they are attached to your product? IoT can help you achieve that. Your customers are going to pay for the time they spent on your product, not for the time they spent interacting with your specific product. When you are employing IoT to monitor your house, you are not paying for the IoT products like a sensor. You are going to pay for your house that is being monitored.

7. Making money out of your IoT data

IoT can collect your data from the social platforms you are logged on, and send it to different data aggregators. Facebook, Twitter, Instagram, LinkedIn, and other social media platforms are the primary data aggregators, who collect your data and send it to advertisers or third-party agencies. To enable this, many safety measurements and data protection measures have to be taken.

8. Compliance monitoring

Are you aware of the fact that American manufacturers spend over $192 billion on compliance? Oil and Gas industry is employing IoT at a faster rate. They use IoT to get constant data in real-time. They can avoid hefty penalties on missing the compliance. With IoT by their side, companies can respond more quickly and easily.

9. Service offering

Service offering

IoT product lets you enhance an existing service or offer a new one to all your customers. You can track your assets, diagnose the vehicle remotely, conduct energy optimization services and offer consulting services to help companies optimize the customer’s process. We involve real people in this model. One of the most renowned services includes remote diagnostics where Bosch involves eco-driving, traffic prevention, and driving behaviour analysis services. They use “privacy by design” for their IoT projects where the data transmission takes place after it is encrypted. Similarly, businesses have to take preventive steps to ensure that the service is on time.

Important things to ask while developing IoT business model:

When you are developing a business model, there are certain things that you need to remember.

What is desirable?

Nobody wants to sap their attention and energy away with a bohemian product. The product has to help your customers in any way possible. What if the product is not up to the market trend? What if the product is more expensive? These are some of the factors you should keep in mind when you are setting your business model.

What is feasible and viable?

If the budget exceeds or if the strategy is too complex, then the IoT product development is going to get more complex. To avoid this, you should take care that the business model is more simple and ascertains your requirements.

These are the 3 things to remember while validating:

Instinct or gut feeling does not work: Creating an IoT Business model is a huge work. You get to discuss with your subject matter experts, technical researchers and everyone else, before you choose your business model. Discussing with the right team and putting the right effort are what you have to do.

Assumptions and hypotheses might change over time: As per Bosch, this is one of the biggest mistakes businesses make. There was once a time when home automation in IoT was a big deal. Now, people are focusing on Industrial IoT (IIOT), where we automate bigger business units. The trend keeps shifting constantly. Hence it is vital to research more practically.

Depending on who, how and what you ask, statements and outcomes will be different: Some people might impose their predictions upon you. Some might not. This is where IoT Business models come into play. You need to validate the right business model before you strategize it.

Pattem Digital is here!

Muddled with what IoT Business model would match up your needs? We are here to help you.

At Pattem, right from setting the strategy to product maintenance, we handle every department like a pro!

We are a team of award-winning professionals with a sharp-edged approach towards businesses.

We are nominated as the most promising outsourced product development company by CEO Insights.

Our team is fast expanding to the Bay Area, European countries and Singapore!

Do contact us if you need any of our services.




PattemDigital is a new-age Outsource Product Development studio. We make cutting-edge Data Science, AI & Machine Learning solutions for global companies.

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Pattem Digital

Pattem Digital

PattemDigital is a new-age Outsource Product Development studio. We make cutting-edge Data Science, AI & Machine Learning solutions for global companies.

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