Business Models and the Internet of Things (Extended Abstract) - Interoperability and Open-Source Solutions for the Internet of Things - page 7

Integration of users and customers. IT enables companies to increasingly integrate their
customers in their value-creation chain. In other words, IT allows companies to dele-
gate some tasks to their customers. Examples can be found in the User Designed,
E-Commerce, Open Source (content) andMass Customization business model patterns.

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Service orientation. Run time services and/or after-sales digital contact with cus-
tomers are on the rise. Using IT-based services, IT allows companies to maintain
and make use of customer relationships even after the sale. Exemplary business
model patterns for this include Rent instead of Buy, Subscription, Freemium, Razor
and Blade and Add on.

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Core competence analytics. Precise collection and analysis of transaction and use
data are increasingly valuable and represent a key skill for product design, pricing,
and sales structuring. Examples can be found in the Subscription, Flat Rate, Free-
mium, Pay per Use and Performance-based Contracting business model patterns.

￿

IT is used today to upgrade value in business model patterns. When the Hidden
Revenue pattern is applied by companies like Google or Facebook, however, which are
part of digital industries, IT is by de

nition constitutive. IT not only revives old
business model patterns and generates new business model patterns; it has also facil-
itated the emergence of an entirely new digital industry and rede ned old business

model patterns in that industry.
Many digital business model patterns, such as Freemium, have been applied
exclusively in the digital world until now. In manufacturing industries, the Internet has
mainly been used to simplify processes and thus reduce costs while increasing quality

and the variety offered. The Internet has been responsible for big breakthroughs in
digital industries, as Google, Facebook, PayPal, eBay, YouTube, and others prove.

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2 The Economic Power of the Internet of Things

This section outlines the formative power of the Internet of Things within the economy.
A broader and more well-grounded analysis of the economic perspective on the Internet
of Things can be found in [ 1 , 2 ].
The digital world differs in multiple

dimensions from the physical world and its industries, for instance in the areas of
marginal costs in production, transport, and storage, in transport and production speeds,
and in the ability to abstract and simulate.
Digitalization leads to high resolution management because the marginal costs of
measuring (in the control process) and the actuating elements (in the controller) are
almost zero, while interventions can be made with almost the speed of light.
The Internet of Things is now applying this logic step by step to the physical world.
It represents the vision that every object and location in the physical world can become
part of the Internet. Objects and locations are generally equipped with mini-computers
so they become smart objects that can take in information about their environment and
communicate with the Internet and other smart objects. These minicomputers are
usually barely visible or completely invisible, so the physical dimension of the object
remains people

- and that includes its various industries -

' s most important interface.