Equipment manufacturers are currently utilizing new digital technologies such as the Internet of Things (IoT), Artificial Intelligence, or Big Data, for new digital offerings. However, these offerings seldom enhance revenue, because companies struggle with business model (BM) dynamics. By analyzing 27 companies through an explorative case-study approach, the authors consider how companies can successfully achieve revenue enhancement through digital offerings. The result is a threefold framework for revenue enhancement through digital offerings. First, this framework distinguishes between three phases of BM dynamics: 1) augmenting products through a "hardware plus" logic, 2) developing a portfolio of multiple logics for creating customer value, 3) integrating this portfolio through platform logic. Second, the framework emphasizes that three barriers, which we refer to as confidence, mixing, and collaboration barrier, limit the progress from Phases 1 to 3. Third, the framework reveals that each phase contains certain modifications of BM components. In the first phase, companies adapt their BM components slightly, so as to advance toward a "hardware plus" logic. In the second phase, companies embrace more radical BM innovations in order to convert services into an outcome-based BM and develop a new software subscription BM. In the third phase, companies modify BM components in order to integrate the BMs internally and to open them up for external collaboration partners.
PurposeThe emergence of Internet of Things (IoT) platforms in product companies opens up new data-driven business opportunities. This paper looks at the emergence of these IoT platforms from a business-model perspective.Design/methodology/approachThe study applies a mixed method with two research studies: Study I–a cluster analysis based on a quantitative survey, and Study II–case studies based on qualitative interviews.FindingsThe findings reveal that there is no gradual shift in a company's business model, but in fact three distinct and sequential patterns of business model innovations: (1) platform skimming, (2) platform revenue generation and (3) platform orchestration.Research limitations/implicationsThe results are subject to the typical limitations of both quantitative and qualitative studies.Practical implicationsThe results provide guidance to managers on how to modify the components of the business model (value proposition, value creation and/or delivery and profit equation) in order to enable platforms to advance.Social implicationsAs IoT platforms continue to advance, product companies achieve better performance in terms of productivity and profitability, and more easily secure competitive advantages and jobs.Originality/valueThe paper makes three original contributions: (1) it is the first quantitative study on IoT platforms in product companies, (2) identifies three patterns of business model innovations and (3) offers a first process perspective for understanding the sequence of these patterns as IoT platforms advance.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.