How does IoT work? – The steps of the value chain

How does IoT work? – The steps of the value chain
07.02.2018 Kathrin Kempf

The IoT value chain consists of various technological and business-related steps. Analysing them comprehensively and in detail leads to the very core how IoT is working. It all starts with the customer and a relevant product. But the fact that the product now is connected entails a new set of requirements non-existent in an analogue world. During the past months, iq! presented various of the most important parts of a functioning IoT system. In this article, we want to put the pieces together and combine them all in the overall IoT value chain. 


IoT Value Chain

The IoT Value Chain
Source: iq! Managementberatung

The IoT value chain – every step is important

It all starts with the customer. Every connected product should be designed to fullfill an unserved customer need or to elmininate a customer pain point. It is very tempting to add new product attributes just because connectivity makes it possible. Now, the lawn mower is able to transfer the amount of grass already cut. But why? Unless you are a farmer with many hungry cows to feed, this information is worthless. But if the mower would measure humidity and start the corresponding irrigation pipes, it could be of great help to private clients.
For further reading: iq! Blog artical: “Customer centricity is king

Physical products get connected. Starting point of the actual IoT system is the product that gets connected. A very important question is if only new products are equipped with sensors or if a retrofit option for older products is offered. The latter could boost reach dramatically.
Before starting to invest in IoT, companies should check its’ digital status quo, especially in sales, marketing and customer service.
For further reading: iq! Blog article: “Digital Innovation – many companies lack the basics

Sensors and Actuators are added to the physical product. Sensors collect relevant data like humidity, temperature, load, speed, etc. and transmit them to a steering center. Actuators do the exact opposite. They receive orders from the steering unit and translate them into actions the connected product is asked to fulfill.
For further reading: iq! Blog article: “Sensors are the basis for IoT successNewsletter Registrierung

Internet Connection: There are multiple ways to connect the products to the Internet and transfer the data from and to the product. IoT requires long reach (because in many cases, the distance between product and steering unit is long, sometimes even moving). In contrary, requirements to bandwidth are simple, only small data packages have to be submitted. And the network should be cheap, since it is in constant use.
Read more about Network Options: iq! Blog article: “IoT start-ups you should know: Sigfox.”

Storage: IoT Devices transmit tons of data. In many cases they are stored in the cloud. But the capacities of the cloud come to its limits as the number of connected products rises. There are other solutions, e.g. fog computing, that allow on the one hand a prescreening of data in order to reduce the amount of data to be stored. On the other hand, the technology is based on decentralized available storage space and therefore activates unused storage capacity.
Read more in the iq! Blog article: “IoT technologies you should know: Fog Computing

Application / Steering: Connected products have a backchannel like our television has one. In order to profit from that fact, we need a remote. This can be an App on the mobile phone or a Dashboard for the computer. It should be based on processed data and give a good overview of the status quo and necessary actions. One thing is very important to keep in mind: With IoT, the customer becomes an user who constantly interacts with the manufacturer of the product.
Read about the implications in the iq! Blog article: “IoT – the customer becomes a user

Data analytics: IoT makes no sense if the huge amount of data is not analyzed thouroughly and with the right questions to answer in mind. Analytics should put the customer in the centre of attention again and try to improve the service offered.
Read more about the tight relationship between Big Data and IoT in the iq! Blog article: “IoT needs Big Data and vice versa

Services / added value: The whole point of offering IoT Devices are Services. For some companies, like in the automotive sector, it is all about pushing people in the own Service channel by knowing exactly when they need an appointment in the garage. Other companies are now able to add a (digital) Service offer to their products.
Read more about the challenges of Service Distribution and Customer care in the iq! Blog article: “Challenges of IoT Sales
Read more about the ideal structure of the IoT Service Portfolio in the iq! Blog article: “IoT Service Portfolio: less is more


This article may seem a little bit too technology focused. But it is very important to understand the different components of the IoT value chain and how they act together. Besides technology, the customer becomes even more important that in the analogue world, since the relationship with him itensifies and amplifies into a mutual exchange. iq! is eager to show clients that the Internet of Things does not end with the development of a fancy connected device with a multitude of new features. Is is a whole new way of doing business with the customer and also with other companies, if the products are interconnected with devices an IoT ecosystem.

Please check also iq!’s current White Paper about this subject: “Strategien für die digitale Transformation der Wertschöpfungskette
(in German)

0 Kommentare

Antwort hinterlassen

Deine E-Mail-Adresse wird nicht veröffentlicht. Erforderliche Felder sind mit * markiert.


Wir setzen Cookies ein, um die Nutzung unserer Webseite zu analysieren und um Webseitebesuchern auf anderen Webseiten Werbung abhängig von deren Nutzungsverhalten anzuzeigen. Bitte klicken Sie auf „OK“, wenn Sie mit den vorher beschriebenen Verfahren einverstanden sind. Datenschutzerklärung

Die Cookie-Einstellungen auf dieser Website sind auf "Cookies zulassen" eingestellt, um das beste Surferlebnis zu ermöglichen. Wenn du diese Website ohne Änderung der Cookie-Einstellungen verwendest oder auf "Akzeptieren" klickst, erklärst du sich damit einverstanden.