Era of Internet of Things needs new oblique business models

Internet of Things (IoT) means that businesses make use of electronic information exchange and interaction increasingly. IoT makes business modelling more challenging but also more valuable. However, majority of current business models do not take account the interconnected nature of firms that evolve in the same innovation ecosystem. New business models suitable for future needs were detected by the researchers of the University of Oulu.

According to professor Petri Ahokangas, the role of the external environment in value creation has been neglected. He emphasizes a new approach, which he calls the “oblique business model”. It is a model that within co-evolving IoT business ecosystems builds on the value sharing.

“As the Internet of Things continues to spread further, the implications for business model innovation are tremendous”, Ahokangas say.

Ahokangas states that business models are never static and develop continuously through refinement, adaptation, revision and reformulation. In addition to value sharing the idea of oblique business model lies in utilizing external resources of the third parties outside the firm. Such business models are employed by fast growing and service-oriented companies.

“The sharing economy relies on the idea of two-sided business opportunity where companies make the underutilized resources of the third parties accessible to their customers. Therefore, the question is not only about value co-creation and co-capture, but also about value sharing.”

Scalability guarantees a good business model

Building on the ideas of the sharing economy and its oblique business models, Oulu Business School researchers led by Ahokangas have started to explore two emerging areas of business models – future and scalability – in several different contexts.

“As business models can be regarded as ever-changing, focusing on future by looking through the business model concept opens up new possibilities to create new business. Similarly, although scalability of a business model is one of the key elements for success, it has seldom been researched. “

“When working with business models in a future-oriented mode, the key is to re-conceptualize and re-contextualize our existing business models over a cycle of visioning, strategizing, practicing and assessing as a management group effort. “

Scalability is one of the key antecedents of success in business models. According to Ahokangas this have been widely researched during the N4S-program. "Scalability has two elements: scale up the capacity of the business model and scale out the scope of the business model to new domains such as markets or new opportunities. Especially in the cloud computing context the Oulu team has examined business model scalability in market push and market pull situations."

Ahokangas sees the business model scalability as a valuable opportunity for the company management.

"Business model and business opportunity are dependent on each other. As by definition the business model is a device to exploit a business opportunity."

The next big thing in Finland: healthcare

With billions of connected devices, cloud-based IoT promises to enhance decision-making and data analysis to a level that was never achieved before. Advanced transportation mediums are increasingly getting more and more instrumented with sensors, actuators, bar codes and other technologies. IoT and cloud can also help in assisted driving, mobile ticketing, monitoring environmental parameters, and introducing augmented maps. Above all, healthcare is one major application sector.

Finland has a huge group of ageing population who needs proper care. Elderly care and assisted living seems to be the most prospective business opportunities for companies to explore. Since Finland will have cuts in social sector, the healthcare expense will rise and an obvious way of saving is through using efficient technology. To succeed in business, companies need to be ready with proper services through a connected society in a digital way.

”The healthcare industry in Finland is growing fast and new technology is surely going to play a role there. The interest lies in finding out how much IoT and cloud technologies will foster the speed of growth in this sector.”

One innovative product that claims to track emotional health of a person and suggest activities as remedies is Moodmetric It offers a wearable ring which is not only a health wearable but also can become an un-detachable part of one’s daily style. It senses vital readings from user’s skin and uses the data in interpreting emotional status. Moodmetric is using storage and computational capacity of individual mobile devices, but the company is already developing the Internet based infrastructure to adapt to a real wide customer base.

Also companies such as MyData is a good example of oblique business model, which will most likely collect data from multiple platforms and sources in order to accumulate individual details. MyData is defined as personal healthcare data over which individual has legal and practical control. Individual users can control the access of other parties to that data. Patients can allow only specific hospitals, clinics, therapists or doctors to retrieve relevant data from their repository. IoT interventions can easily enhance the way of personal data collection and dissemination in this scope.

”A lot of start-ups are now designing health related solutions and waiting for medical acceptance for their services. Online digital services like MyData will gain more visibility and acceptance in the society in the short-term future. Finding sustainable funding solutions will be one of the major operations besides innovation.”

Since product‘s lifetime has already shortened, companies will start designing innovative service based of pricing for different services. A lot of new pricing models will appear for testing in this short-term period. Point of care providing will start shifting from hospital/clinics to other places.

Ahokangas predicts that the evolution of hospitals in Finland will be faster in the future, and especially in private hospital organizations.

”Hospitals in Finland have their own digital services, but having all of them under one comprehensive umbrella will be a challenge.”

“The hospitals can be seen as a complex ecosystem comprising services from private and public organizations. Business model as a ‘boundary-spanning unit of analysis’ helps to make sense of it”

According to Ahokangas Finnish companies need to work on better user experience and usability of services.

”Having a small population, Finland will need the industry to be export oriented and operate globally.”

Fifteen vital business model components

This list shows that value network, value proposition and customers have been most important notions in the discussion to define business model. It also depicts that financial aspects such as revenue, cost and profit are core to the concept and cannot be overruled while thinking about longer sustainability. The components of a business model together make the overall model structure a compelling set up to conceptualize how the business in done, how revenue is being generated, how profit is being maximized, how sustainability is being ensured and how the company/ industry is being transformed. A business model to perform better, all the components should be organized in a complementing way to support the others.

Test ecosystem created in Digile’s IoT-program

For the research a case network was chosen with the support from the extended network actors of the Digile’s Internet of Things-program. Researchers collected relevant qualitative data through structured interviews within the start-up scene in Finland, the Finnish health tech arena, healthcare research arena and network service providers. All of the interviewees are in leading roles in their organizations and have deep understanding of the industry from their standpoint as stakeholders. Individuals who were interviewed includes the CEO of MoodMetric, the MD of Salwe which is a health and wellness research organization coordinating pre-commercial research within industry and academia, the innovation and business architect at Ericsson Finland‘s new business development R&D team and the MD of Finnish Health Tech Association (FiHTA). The interview framework was structured with a qualitative stance to understand the futures business models in the IoT enabled healthcare sector from the experienced campaigners in the industry in Finland.

Marika Iivari, Petri Ahokangas, Marjaana Komi, Maarit Tihinen, Kristiina Valtanen (University of Oulu): Toward an Ecosystemic Business Model in the context of Industrial Internet
Presented at the 23rd Nordic Academy of Management Conference, Copenhagen, 12th-14th August, 2015
https://conference.cbs.dk/index.php/NFF2015/
NFF2015/paper/view/2741

Marko Juntunen, Petri Ahokangas, Hang Nguyen (University of Oulu):  Antecedents of business model scalability
Presented at the 23rd Nordic Academy of Management Conference, Copenhagen, 12th-14th August, 2015
https://conference.cbs.dk/index.php/NFF2015/
NFF2015/paper/view/2615

Julius Gomes, Petri Ahokangas, Sara Moqaddamerad (University of Oulu): Futures Business Models for an IoT enabled Health Care sector from a causal layered perspective
https://www.researchgate.net/publication/283487342
_Futures_Business_Models
_for_an_IoT_enabled_Health_Care_
sector_from_a_causal_layered_perspective

Background photo by:

Kimmo Lehtonen

Oulu Business School
http://www.oulu.fi/oulubusinessschool/

Moodmetric
www.moodmetric.com

MyData
https://mydatafi.wordpress.com

Salwe
http://www.salwe.fi/home-en.html

IoT-Program
http://www.internetofthings.fi