Where is the value in the M2M value chain?

M2M has historically been viewed as a specialist market in the context of the wider mobile industry. It struggled to achieve scale because many applications focused on narrow, enterprise sector opportunities.

These applications also involved proprietary designs and significant expenditure on customized engineering efforts. As a result, the value proposition was only perceived in few application areas where there were exceptionally strong financial or operational imperatives. However, this situation is constantly evolving and companies need to understand how value is shifting as they plan their business strategies.

The following value-chain illustration typifies the industry challenge, as it was perceived around 2008. Specifically, there was a need to simplify the integration of connectivity technologies (horizontal portion of value-chain) with end-user applications (vertical portion of value-chain). Ideally, this integration process would be achieved using lower cost technology and more streamlined integration and service launch processes to widen the appeal of M2M in many more application scenarios.

A great deal of work was done by technology providers, module suppliers and mobile operators to bring down the cost of hardware and also to scale back certification hurdles. As connectivity was demystified, the M2M market began to scale up and the commercial focused shifted to higher value opportunities.

The following value-chain typifies the industry view from 2010 on and shows more of an emphasis on a higher quality connectivity service and embryonic opportunities both to enable and also to offer end-user applications directly.

 

The strategic implications for companies in the M2M market are clear.

• The pace at which the M2M market is evolving has quickened so technology providers and service suppliers need to ensure that their business strategies are attuned to how the value chain is evolving.

• In terms of connectivity, value is now perceived to relate to the quality of connectivity. This presents opportunities for suppliers that provide services to enable connectivity per se and also to assure a higher quality of connectivity once connected devices have been deployed. These correspond to the Service Enablement Services shown above.

• There are also new business opportunities associated with value added services that build on M2M technologies. These relate to the end-user service e.g. a remote health monitoring service as well as the way it is brought to market e.g. co-branding, distribution channel support, financing etc.

Companies in the M2M industry are well placed to capitalize on new business opportunities as mobile and complementary connectivity technologies are integrated in new devices and services. To achieve this, companies will need to adapt their strategies and business models as value evolves along the value chain.