Figure 1. Schematic Illustration of Business Model Canvas (BMC) (Osterwalder & Pigneur, 2010)
IoT is the ever growing concept of connecting physical objects through internet. Internet of Things has the capability to connect everything, everyone and everywhere. It is important to accept the reality that the resources are limited and an optimum utilization of these resource have to be done for sustainability. The wastage is usually highest in the fields of water and electricity consumption. The biggest challenge for businesses is that the processes today are competitive and have to meet the customer demands without slowing down. IoT solutions such as smart irrigation system, automatic street light system and voice controlled home automation are one of the key solutions to the raising challenges. In this study prototypes of the above mentioned solutions have been built and tested to understand the potential of IoT. India predicts about 5 billion IoT connections by 2022, and an economy of $1 trillion by 2025. And the reality is that, it's already 2019 and IoT's growth is slower than predicted because of some of the barriers to implementation. Some of the barrier to the growth of IoT is unawareness of consumers and cost concerns. So it is necessary for businesses to adapt business models which are efficient and suitable for IoT businesses to reach the target segment with a proper channel and a competitive value proposition. In this study a business model framework has been suggested for the prototypes built. As cost is another barrier to the IoT adoption, the cost effectiveness of IoT solutions such as smart lighting system and smart irrigation system has been compared with respect to the traditional solutions.
Today's businesses should be able to balance both the demand of the customers and customization demands without the reduction in the speed of the production. The data has huge potential in the field of analytics, but the traditional methods of data collection are time consuming and need consistent monitoring. FAO predicts that 800 million people are under nourished in emerging countries and it also predicts that the world has to produce about 70% more food, which means the agriculture industry has to give importance on improving efficiency and productivity by allocating the resources optimally (EY). Street light systems usually use HPS (High Pressure Sodium lamps) which consumes more electricity. About 70% of all energy is created by using fossil fuels, which is a source of air pollution. At global level about 300 million street lights are utilizing this kind of energy which results in huge expenses.
Price concern is one of the barriers of adoption of IoT technology by consumers. About 25% of the consumers have concerns with respect to price of IoT solutions accordingly. And specially in the case of innovation, IoT can cause a disruption because of which conventional business model canvas cannot support IoT characteristics to be properly replicated.
It is important to accept the reality that the resources are limited and an optimum utilization of these resource have to be done without any wastage. The wastage is usually highest in the fields of water and electricity consumption. IoT solutions can be a solution to this raising issues.
An IoT ecosystem consists of everything that provides sustainable solution to problem. We need to aim at identifying the stage of supply chain in IoT which is most profitable. By keeping the core competency in mind, the maximum value must be obtained from the supply chain. It is necessary for us to look at industry from the perspective of owner who wants to set up an IoT business i.e., a business which may provide a hardware, software, service, device or end to end solution. The following requirements are required to make an IoT service or solution: Hardware Unit, Connectivity, Software Infrastructure, Software/ app development and Integration services. If observed at the requirements, some companies have competency to solve only one part whereas other companies have multiple competencies. In a case when a company has one competence, then partnership is the answer to combine produces for end to end solutions. For example, from the prototype of Automated street light system, the system is built and data generated is sent to the cloud. But no platform for users is being developed and this part in the value chain has to be outsourced in order to provide end to end solutions. So an App developer is a key partner. It is necessary for the company to identify which requirements it wants to keep In house and which ones it want to out source in order to maximize value.
For a business to have sustainable growth and profitability, it should have efficient BM in order to execute a successful strategy. A BM consists of activities and elements needed for the business. A BM has ability to answer all the question related to the businesses such as target segment, value proposed, costs and revenue. It is important for the startups to a) Understand the activities present in BM, b) Identifying key activities for the business to be prosperous.
BM consists of all activities related to making as well as selling. It is necessary for all the elements in the value chain to fit properly in order to generate profits. Similarly, it allows visualizing the different elements from a fit to make a whole.
It is an easiest tool to make BM. This BMC has been created by Alexander Osterwalder in 2005 and has addressed the limitations of BM. A schematic BMC is shown in Figure 1. The BMC is based on 9 building blocks. An IoT Entrepreneur who plan to launch new products can be successful only if they can precisely sort out the building blocks (Joyce & Paquin, 2016).
Figure 1. Schematic Illustration of Business Model Canvas (BMC) (Osterwalder & Pigneur, 2010)
The 9 building blocks are:
IoT is a topic to be considered in energy management and operational efficiency. IoT creates platforms which brings data to the end users, so that they can make informed decisions which save cost and increase efficiencies (Talon, 2016). Sahu and Behera (2015) has created a low cost effective and energy reducing irrigation system beneficial for Indian farmers which costs from Rs.15000 - Rs. 20000 as the study believes that the automation machinery used by the companies are not cost effective, and if they have to be targeted to the farmers then they have to be provided at a price affordable to them. Thomas (2017) created an irrigation for Indian farmer which uses inexpensive components to make the system. The system reduces the energy consumption, labour and water required. Chowdary et al. (2019) has made a irrigation system which can decrease th power of the field. A method to reduce cost and save energy has been made with the help of Node MCU and micro controller and WiFi module.
Smart irrigation focuses on efficient water usage and is a profit making business. It is helpful for businesses to reinvest in the updated technologies in the field of irrigation (Radadiya, 2016). A business case explains that street lights are important for communities but they consume about 40% of city's budget. This paper proposes energy efficient automatic street light system (ASLS) using a low cost microcontroller. On concluding, around 77%-81% decrease in power usage can be accomplished through this proposed ASLS. Husin et al. (2012) proposed a automatic street using a low cost micro-controller. After implementing this street light system the power consumption reduced by 77%- 81%. The street light systems are replaced with LED based lamps and the operational costs can be reduced by 50%. Usually street lights operate for 12 hours with high intensity and have a short span of 5 years. The operators have to always replace about 20% of street light every year, hence adding to costs. Md et al. (2017) has proposed a cost effective and time saving voice controlled home automation system which can help physically challenged and elders.
IoT will be the cause of extreme business transformation in the coming three years according to a current KPMG survey of 750 tech leaders (KPMG, 2018). IoT has capability to create new value to the customers, hence disrupting the existing business models. New models of business have to be created for new solutions of IoT. In the case of innovation, IoT can cause disruption and conventional business model canvas cannot support IoT characteristics to be properly replicated (Mansour et al., 2018). According to a survey, 46% of respondents imply that there will be transformation in the existing business model, 30% have faith that IoT can open fresh income chances from the current product and services and 29% believe IoT will motivate new business processes (Wnuk & Murari, 2016). No proper tools are present to capture the complexity of IoT business models. Tools presented by Osterwalder and Pigneur (2010) are used, but are not effective for IoT business models. A problem to be addressed from a perspective of IoT stakeholder is to generate value. Value can be new experience, businesses, or return on investments (ROI) varying with respect to the stakeholder. The participation of many participants in the IoT digital value chain can create complicated business models necessary for many IoT applications (Nagy et al., 2018; Vermesan et al., 2016).
By comparing the costs incurred before and after implementations of IoT solutions in the Lightning System with sensors has been explained. The automated light system based on the sensor has been used in the corridor and compared with the conventional method of using lights without sensor. The costs and benefits incurred in the traditional and IoT methods have been listed. And the costs are subtracted from the benefits, in order to find out the resulting value. If the resulting value is positive, then the economic benefits of using the lighting system with sensor is beneficial else the conventional method can be continued. The common data available for both the systems are as follows.
In the sensor based lighting system the light has been ON only for 2 hours, depending upon the motion around the lighting system. Sensor based lighting systems have ability to Switch ON and Switch OFF automatically according to the motion. The sensor based lighting system is used to reduce the usage of energy. The data available for the lighting system is shown in Table 1.
Table 1. Common Data Available for Both the Lighting System
This lighting system is ON when an object enters, and switches OFF when the object leaves. The costs incurred in traditional lighting system and smart lighting system is shown in Table 2.
Table 2. Costs Incurred in Traditional Lighting System and Smart Lighting System
Consumption/day (in watts) = Number of lights* watts/tube *Operation hour /day
1000 watts/hour =1 unit
Consumption per year in units =365 *Consumption/day in units.
Total cost of consumption/Year = Electricity Tariff*
Consumption per year in units.
Energy saved in units = Consumption per year in units using sensor based lighting system - consumption per year using traditional based lighting system.
Costs Saved/year = Total cost of consumption/Year using sensor based lighting system - Total cost of consumption/ Year using traditional based lighting system.
The Table 3 shows that the costs incurred in traditional lighting system are 6 times more than costs incurred in smart lighting system.
Table 3. Costs and Energy Saved using IoT Solutions
By using smart lighting system, we are able to save 730 units of energy per year and significant reduction in costs of lighting amounting to Rs. 5292 per year. Thus, sensor based lighting system can save energy and costs and hence from the economic point of view using a sensor based lighting system is a reliable lighting solution.
Smart irrigation system can reduce cost and increase profits by Rs.4000 (Rs.24945 - Rs.20945) for farmer. The additional capital expenditure of Rs. 10000 in the smart irrigation system can be recovered over the period of time because of effective cost-reduction measures and benefits gained by smart irrigation system. Table 4 shows the information for traditional and smart irrigation system.
Table 4. Information for Traditional and Smart Irrigation System
Table 5 and 6 shows the calculation involved in traditional and smart irrigation system for paddy crop. The cost benefit analysis os shown in Table 7. After the payback period the return is identified and can be reinvested. Only operational costs have been taken because of the variability in cost of depreciation. Hence, depreciation costs have been ignored.
Table 5. Calculations Involved in Traditional and Smart Irrigation System for the Crop Paddy
Table 6. Profit Calculation of Conventional Irrigation System and Smart Irrigation System
Table 7. Cost Benefit Analysis
Efficiency is lowered by (40 - 50%) by high water wastage. More labor is required. The irrigation is done based on fixed schedule and from time to time the schedule has to be manually adjusted.
Efficiency is high (90 - 99%), meaning saves about 40% of water requirement and no wastage, requires less labor, precision watering. The smart irrigation system works by taking the weather condition and the requirement of water in the soil.
The features and costs of smart irrigation system is suitable for farmers, municipalities, etc. in long term as it saves the water resource and also increases the system's life. The smart lighting system is suitable for usage as it saves about 8 times the cost incurred in conventional lighting system. The life span of system increases as used lesser.
A BMC framework has been used to analyze different IoT Business models. A generic business model canvas for IoT has been derived from the various business models of IoT and is shown in Figure 2.
Figure 2. IoT Business Model Canvas
IoT is capable of creating a shift in the process in which we interact with the environment. Not only consumers are the beneficiaries but other businesses in the industries are also benefitted through the shift, as they form a part of the value chain of IoT.
The following questionnaire formed based on a business model canvas to validate the framework of the IoT business model. Interviews were taken from the IoT companies based on the questionnaire given below to identify the framework used and to check if their framework matches (Ju et al., 2016). To validate the framework, the business model frameworks have been implemented on the case studies of the prototypes built.
The results observed from the 3 interviews done is that those companies also use similar kind of framework given by Ju et al. (2016).
From Ju et al. (2016), the key elements in the IoT business model canvas were found as follows: key partners, key resources, key activities, and value propositions. So a business model framework for prototypes were built based on these key elements.
Most of the literature has emphasized on Infrastructure, which consist of key partner, key resource and key activities and value proposition block by Ju et al. (2016). So the frameworks for the prototypes have been made on these blocks. Table 8 shows the business model prototypes.
Table 8. Business Model for the IoT Prototypes Built
A Motion Detector Automated Street Light System is a street light system which switches ON/OFF based on human or vehicle movement. This system only 'Switch ON' when the light intensity in the atmosphere is low. The model of motion detector automated street light system is made based on two types of sensors, one is PIR and another one is LDR. The PIR sensor detects the human movement or vehicle movement by using the temperature. In order to detect whether it is dark or not, LDR sensor has been used which senses light intensity. These street light systems have ability to switch ON and switch OFF automatically according to the motion. The smart light system is used to reduce the usage of energy and is cost effective. The street light system is ON when an object enters, and 'Switch OFF' when the object leaves. The street light system is automated and does not require to be operated manually. An application for user has to be made by outsourcing a software developer through which the customers can 'Switch ON or OFF' the system and have access to the data generated by the sensors.
The communication in the network is developed using Arduino and other peripheral components. The data generated by the sensors which is light intensity and temperature is stored in a cloud called Think Speak. This data is analyzed by outsourcing a data analyst who further can use the data to forecast the future.
The purpose of the study is to create a Voice controlled home automation system which uses speech to text in order to convert speech information into text. This system can switch ON or OFF the bulb, fans, AC, fridges and other electronic appliances connected to it through voice instructions. This system improves its recognition ability with increase in number of samples, using machine learning algorithm. This system is user friendly and saves energy. The system can be connected to wide variety of devices depending on the choice of the customer.
In order to resolve the water problem in the country, the smart irrigation system has been prepared with the help of wireless sensor network. The soil moisture sensor senses soil moisture content and sends the data to Arduino. If the moisture content rises a certain limit of threshold, then the pump automatically switches ON and irrigates the land, else remains switched OFF. If the moisture content present in the soil falls below the given the range, then the command is given to the pump to irrigate the land. The data generated by the sensors are shown on smart-phone and the pump can also be controlled through smartphone if an application developer can be outsourced. The moisture content data generated is connected to a cloud called Think Speak. This huge amount of data is analyzed and forecasted using the in house analyst. These analysts use the data to forecast the future moisture content which will be helpful in drought mitigation. The irrigation can be customized based on the type of the crop and phase of vegetation.
Finally, the case studies of prototypes built to inspect the suitability of proposed business model framework in Prototyping Business Models for IoT Service has been implemented (Ju et al., 2016). This study provides a useful guideline for companies that initiate IoT products or services in the field of irrigation, lighting and home automation system. The features and costs of smart irrigation system is suitable for farmers, municipalities etc. in long term as it saves the water resource and also increases the system's life. The smart lighting system is suitable for usage as it saves about 8 times the cost incurred in conventional lighting system. The life span of system increases as its usage decreases.
The present research further supports that IoT technology has enormous potential in the fields of irrigation, lighting and home automation. IoT is a cost effective and resource saving solution to day to day problems. And operations can be managed smoothly with the help of this technology. Managers can focus on their core competencies than managing issues.