How to make any IoT business model work – or not?!
When creating new IoT business models, corporates are often unsure how to get started. They spend too much time discussing their business models, instead of directly testing them. This presents a significant hurdle to creating innovative solutions rapidly. In addition, corporates often lack experience in working with agile and iterative methods. These aspects usually lead to mistakes during the innovation process that could be avoided.
The four most common mistakes corporate teams tend to make when creating new IoT business models:
- Working until the solution is perfect
- Waiting for the right moment to launch
- Over-deliberating project execution
- Making many wrong assumptions
The last point in the list above is one that most corporates struggle with, even though it is the easiest mistake to fix. Let me take you on a little journey into my past to show you what happens if you make the wrong assumptions.
Assumptions my younger self made when selling on the flea market
I have participated in flea markets many times to sell stuff I no longer wanted. I started when I was still a child, and in the beginning, I was hopeless. In retrospect, I set up my booth at the market based on several wrong assumptions. Just to name a few:
- People like thrift shopping.
- People will pay me my highest asking price for the stuff I want to sell.
- People will like my old stuff, and I will be able to sell of all of it.
What lesson did I learn? My entrepreneurial younger self intuitively started validating the assumptions and doing some research. I identified what locations and things my potential customers liked, and what prices I could ask for. After having figured this out, everything changed. Suddenly, it was easy to sell my things, and I made a good profit!
Nonetheless, uncertainties remained, like bad weather, which can put people off coming to the flea market. Validating assumptions helps you reduce overall risks to a minimum.
Which questions to ask when validating IoT business models
The above example may be simple, but the same approach to validating assumptions can be applied to IoT solutions and IoT business models. True, developing IoT solutions is a bit more complicated than selling your old belongings on a flea market. But the characteristics which apply to validating assumptions are equally manageable and possible. There are three generic aspects you should keep in mind when you want to develop successful IoT solutions and services: What is desirable? What is feasible? What is viable?
The aspects covering what is desirable, viable and feasible serve as a first assessment. They help to identify the assumptions, and then to find the most suitable IoT business model validation methods. As you might imagine, the method used to validate a tech related assumption is different from that used on a user related assumption.
A step-by-step guide: How to validate IoT business model assumptions
For an IoT business model to be successful, all assumptions must be validated – no matter if they are tech, user or business related. If you can prove all your assumptions are right, you are well on the way to succeed.
How to do this? No worries, I have a step-by-step guide with examples for you:
Step 1: List your assumptions
I identified and listed three assumptions as to why I failed miserably at selling my stuff on the flea market.
Step 2: Prioritize the assumptions based on their impact
I prioritized them based on how critical each one is.
Step 3: Identify validation methods
I conducted user and market research to prove whether my assumptions were true, or not.
Step 4: Assign responsibilities & deadlines
On my flea market journey I was a “one-boy” show. But working in teams makes it necessary to assign validation tasks to team members with deadlines.
Step 5: Utilize the results to iterate or spin your idea
Having validated the assumptions, I used the results to choose the next suitable flea market.
Step 6: Keep going
Since the things I sell change frequently, I continually validate my assumptions to select the right flea market.
The last step is the most important one, because it never ends. You have to keep going because your product must continually evolve to stay competitive. In addition, when multiple assumptions are involved, it is quite likely that some will become wrong. That’s not a problem at all! Just make sure you use the results of your validation to persevere with your IoT business model. If that doesn’t work out, don’t hesitate to spin it early.
If you would like to learn which methods we applied in real IoT projects, sign up for our webcast on how to validate IoT business models!