IDC Industry Study: Applications and Business Model Innovation Enable Digital Transformation for Product Companies

IDC OPINION

Software is everywhere! From vending machines to cars to devices of all kinds, software is bringing 

the "Internet of Things" to life and forever changing consumer and business experiences. Along with the proliferation of software applications, there is an explosion of innovative business models that support the cultivation, and monetization, of customer relationships. New business models typically have subscription at the core and monetize customer experiences and relationships by including elements of user, usage/consumption, and outcomes-based monetization.  In detail:

 

  • Despite the prevalence of these strategies, for companies that have historically centered their businesses on selling products, it is a long journey from a rigid "everything is a box" mentality to one that is more closely aligned with selling outcomes or experiences. For one, there are often sticky cultural and operations issues at businesses that were set up to efficiently sell and ship boxes. In addition, there are issues around managing the transition from up-front fees to subscription revenue streams.
  • While it's relatively easy to put in new technology, the people and process changes that are required to pivot your business around digital and business model innovation are harder. Putting in a modern billing solution may be something that everyone can get on board with, but people don't always understand what kinds of changes to their day-to-day jobs that can really mean.
     
  • For many companies in the midst of this kind of transformation, one of the biggest challenges to the success of this approach is that the new business represents only a small portion of the company's revenue. Unless the company's management fully supports the new business as an essential growth engine that is key to the business' future health, it will be hard to get the support needed to make the necessary changes for a successful transition.

IN THIS STUDY

Companies in every industry are in the process of digital transformation (DX) initiatives that center on 3rd Platform technologies (mobile, cloud software and technologies, and social) and the expansion of new business models. This study discusses some of the unique challenges faced by hardware or device companies as they transition to new business models that use software to help cultivate and monetize customer relationships. This document includes profiles of companies that are using software business models and monetization approaches to help launch or grow innovative businesses within the Internet of Things ecosystem.