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Industrial Internet Monetization Model (I2M2) — Part 2

9 min readSep 22, 2023

Primer

In the part-1 of I2M2, I discussed the I2M2 model designed by Wibu Systems Inc., and in this part-2, I am planning to discuss the enhanced I2M2 model proposed by the Industrial Internet Consortium, where the emphasize was given to an increased number of factors which, eventually, changes the model. The enhanced model is extremely novel and thorough as it considers more than the automated billing system, the builders, and the users. As a matter a fact, as I explained in my previous article on the same topic, the model considers six major parameters which influences the underlying concept of I2M2 and they are business models, money flow, norms of business, the members involved, the billing components and the aggregates, the platforms used along with components system & components builders and operational users.

Business Models

The three basic segments covered in any Business Model are Infrastructure, Market and Money.

The two major business models considered are 1) St. Gallen business model Extension 2) SAP extension. Most business models are built to put the various bits and pieces of the business together to make it into a single component using thorough analysis of the components involved.

St. Gallen Business Model

The St. Gallen Business Model Navigator works on the analysis of four dimensions of business- Who, What, How and Value.

The first dimension ‘Who’ identifies the customers to the business. The lack of market identification or definition is the vital factor which leads to a venture failure.
The second dimension ‘What’ addresses the issue of the complete range of products and services offered by the business. The customer value proposition or simply, ‘value proposition’ consists of everything which contributes towards adding value to the customer.
The third dimension ‘How’, describes how processes and methodologies are used in generating the value proposition. This value chain includes all the technologies, resources, capabilities, people, along with the firm’s ability to manage, orchestrate and automate the processes.
The fourth dimension of ‘Value’ involves the intricate nature of business value creation. Also known as ‘Revenue Model’, it includes the cost structure of the internal revenue generation mechanism which in turn, makes the business model financially viable. In other words, it outlines the method used in generating income to the organization using all the technologies, processes, methodologies, people etc.,

The four dimensions together is known as ‘The boundary spanning concept’, which identifies the factors both inside and the outside of the organization which contributes to the business performance and efficiency.

In my opinion,

“Innovation is a creative imitation which authorizes the power to combine increasingly new concepts with the existing working concepts”.

This is true for design thinking and business model innovations too. In other words, business innovations are similar to fashion concepts and trends. There exists a true chance for Stetson hats and vests to morph into the newer version and become a new fashion trend, in the near future. Thus 95% of the business model innovations are a recombination of many existing methods.

Based on 250 business models analyzed, the faculty and students of St. Gallen Business School, Switzerland, invented three base patterns.

The Line pattern where most businesses have succeeded using franchising techniques. Introduced in 1950s by singer sewing machine, it was later followed by many famous chain businesses such as Subway.

The razor and blade pattern, where the business model focusses on selling accessories to products in order to enhance their business profitability. The best example is the Keurig Coffee machines and the k-pods.

The third pattern is the most recent is the subscription model and has a rollercoaster pattern with the rise and falls in a random way, used by many current enterprises such as Microsoft, Salesforce etc.,

The above three patterns are used by many small and medium sized businesses to implement new business models by combining the existing proven and successful methodologies, using three simple steps. But before starting the implementation, it is essential to go through a pre-implementation phase, which is not about looking in the past and imitating them, but looking in the past and finding the mistakes in order to create better mechanisms which can deliver value and revenues in the future.

1) Initiation through environmental analysis: Defining the starting point and an estimation for the way to progress. It analyzes the factors for a new business model by thoroughly inspecting the components where the current business models lack the ability to succeed. This is known as the ‘looking back’ phase, to identify the weaknesses and inconsistencies in the older patterns. After receiving a stimulus through the analysis of the major influencing factors such as trends, technologies, and regulatory changes of the four dimensions (who, what, how, and value) of the BMI (Business Model Initiative), it might be possible to put together a real plan.

2) Ideation through pattern adoption: Analyze the past models using pattern analysis. Usually, AI algorithms are used in this technique to discover the similar and conflicting principles, which negate each other, and prevent the business from attaining success. Then select an idea which might take the business to success.

3) Integration: A new plan is arrived at by combining the internal and the external consistencies and then the implementation phase is begun.

Once the implementation is done, then test the business model using feedback from the users and the customers and then accordingly adjust the model, before finally releasing it as a business launch.

SAP Business Model

The SAP subscription business model strategy is simple- provide business solutions using innovative tools and services. They have been working on a holistic business transformation approach and finally evolved with the same by providing a semantical data model, an AI and analytics layer and a common security and authorization model for various business applications spread across their cloud platform.

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The three main tools and services offered are

Self-service and incident prevention using SAP’s knowledge base and AI technology
Real time interaction that includes chat or blog services which answers to a mission sensitive business threat or attack and helps in problem solving.
Personalized context sensitive support that provides a context specific business approach to serve business continuity and used to build a solid support network in order to make a clear context sensitive new strategy to build innovative services and solutions which focusses on eradicating the past mistakes which eventually lead to the problem at the first instant.

The two other probable business models which are reported exclusively based on IoT devices are

Sensors as a service: As the number of sensors keep increasing, the amount of data generated by them will exceed exabytes and the knowledge gained using this data will become valuable and thus it is quite possible to generate a huge amount of revenue by selling the sensor data to other parties.
DOP (Digitally Optimized Products) as a service: The IoT devices act upon the knowledge gained from the sensor data and this mode of decision making might gain huge value, in the future. For instance, a GPS controlled robotic vehicle, might maintain its charging schedule using the data about when it is being used and when it is idle and orders an accessory to be replaced during those idle hours and this information can be sold to other parties too and huge amount of revenue can be generated.

Monetization Structure

There are four types of monetization methods as designed by IIC:

The traditional structure [image shown above] involves a one-time payment method where the operational user pays the system builder (OEMs) once and the system builder pays the manufacturer once. This is called the upfront monetization method where banks are involved as the upfront costs are quite expensive and the payee might typically take a loan.
The continuous payment structure is based on the subscription model where the service or the product is paid as per use by the component builder and the operational user as well. This is known as the dynamic monetization method [See the image below] where the payment structure is based on the four types of costs- Physical costs, Intellectual costs, setup costs and profits.
This is the money made by selling operational data analytics to competitors. The concept of data sharing from one organization to another is helpful in understanding the operational pattern of a said machinery or component and it involves the operational analytics made using the data collected from these machineries in operation. This is called independent analytic monetization method, and this is the structure for smart devices and machineries, as it reduces operational and maintenance costs of the said machinery.
This monetization method is extremely similar to the analytics costs, except it does not involve operational analytics, but the overall data analytics of the machinery collected over its life span and these analytics can be used to improve the redesign and remodeling cost of the machinery or the device.

Participants

The three main participants are shown in the image of the Traditional Monetization Model.

Component builders are the manufacturers who create either a service or a product (hardware, software, machines etc., )
System Builders are people who use the service or product in their own systems. The examples for system builders are third party construction specialists in real estate, embedded product manufacturers, custom interface developers, original equipment manufacturers (OEMs)etc., The main job of the system builders is to understand the requirements of the user or the customer and create and deploy a system to suffice those requirements using the components. In other words, they integrate the components and create a system which delivers the solutions. Once the system is deployed, it becomes completely operational and ready to use, giving rise to the third participant.
The third participant is the vital part of I2M2 structure, the operational user. The operational user can be a system owner (Who owns the system) or a system user, (who uses the system, but not an owner) or can be an operational manager, who neither uses it nor owns it but controls and manages it to provide optimized usage.

Platforms

The IIoT system, which is built based on its three major participants, can be spread across many WAN, LAN, PAN, Edge, and Cloud platforms, where the physical components/devices are installed and operated from. So, the main challenge for IIoT platform is connectivity. Whenever we talk about connectivity quality, two prominent features crop up: latency and throughput. So based on the quality of connectivity, the platforms are divided into five levels 0 to 4. Thus, based on the levels of connectivity the monetization methods vary as shown in the below image.

Conditions

A specific condition which is vital for the operation of the whole I2M2 system is trust. The system is built on trust, in other words, the participants trust the system with their physical assets and monetary assets. Thus, in order to protect the trust, safety systems employed in the IIoT systems, and required to operate irrespective of its subscription levels. The safety system protects the assets (both participants and items) from harm.

Monetized Items

The items in the I2M2 model specifies three pieces of items from peripheral to the core [See Image above]:

1) Components

2) Aggregates

3) System

This section focuses on items delivered and payment secured. The most important thing to remember when monetized items are discussed is the fairness in payment methods to every component involved in this system, based on their time of work and importance of their work.

Conclusion

It is obvious that the internet monetization as proposed by Industrial Internet Consortium is far elaborate compared to the I2M2 Model designed by Wibu systems, as it takes into account every aspect of monetization from structure to business model to participants and to items. The design may seem new with respect to the industrial engineering sector, but the concept is available in various forms in the software sector, which can be equated to the industrial sector as well.