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Chapter 4 — The Perfect Meta Product

4.3 Building Networks of Value

Today, your services, products, people and spaces can 'team up' by using all sorts of information streams to offer you personal and relevant uses. This is possible thanks to the web and ubiquitous technologies. But just because something is possible doesn't mean it's valuable. 'Encouraging meaningful experiences' is at the centre when designing a Meta Product (the people or the users are at the centre of the design process). The way these experiences are orchestrated, or in other words, the way to make them happen, is by building networks of value. This means creating ways to motivate the members of a network to exchange their resources. During this process, new members, new resources and new methods of exchange might arise. The information stream would be 'the fuel' of it all.

BUILDING NETWORKS OF VALUE

So how can we build networks of value? How can we build a motivated network? Let's take an example. Pachube is a platform that stores, shares & identifies real-time sensor, energy and environment data from objects, devices & buildings around the world2Pachube, 2011. Online available at: http://www.pachube.com [Accessed June 15, 2011].. That sounds fantastic, but of course to make sense of all that and come up with a sustainable business is quite complex. For instance, after the earthquake and tsunami in Japan on March 2011, a developer created an Android app that shows the radiation from the Fukushima nuclear power plant and visualizes the wind of Japan. It also shows the distance between the power plant and your location on the map. Pachube makes it possible to show numerous measurements by Geiger counters owned by citizens. How is Pachube building a motivated network here, or a network of value? We guess that first of all, the service is meaningful to the people in that context; secondly, Pachube is trying to build a more robust, compatible and scalable platform where people, organizations, service providers, objects, products and many other things can become part of a network. The more robust, compatible and scalable the platform is, the more Pachube can bring down the costs of handling masses of real-time data. This in turn will attract more developers of hardware and software and more people to pay the subscription and connect with Pachube.

In an always-on era we haven't even started to grasp the potential of the internet nor its side effects. The current value on a societal level is set on collaborative tools, increased transparency, open source, real-time sharing, knowledge exchange, social networks and living breathing digital communities. With that we see the rise of dialogue-driven innovation — already impacting business models now but even more so in the future. — ANNE LISE KJAER
PACHUBE taken from www.pachube.com

Building a network of value means providing a service that is meaningful to the people in a network and then offering them a platform to adapt and grow that service as they need it. Right now, you're perhaps thinking about what 'the' business model for Meta Products might be. First of all there is no one answer to that question, because it depends on the motivation of the people in a particular network. But let's try to reflect on different business models that have been proposed in recent years:

People pay for the actual atoms

For most products, consumers actually pay for the atoms themselves. They pay for the materials, the production and assembly processes, the distribution, and the extra margins on production prices. If there is a digital or online part, this is assumed to be free.

People pay for use

In some cases, businesses are selling products on the basis of usage. Particularly if the investment is high, like buying a car, consumers can also rent a car when they need one. People find it convenient to pay only for the time they actually use these product-service combinations.

People pay for recurrent products

Some markets, like the magazine and newspaper market, have a short life cycle, so it becomes handier to just subscribe to receive a certain amount of items within a given time span.

Giving away products for free

Businesses are giving away their products for free more than we might think. In most of these cases, advertising covers the costs of producing and distributing these products. Think of the many free magazines where advertisers indirectly pay for all the costs. This is called the 3-party market (producer, advertiser and consumer).

In the digital domain, other business models can be identified:

Selling licenses

Most software is sold on a license basis. Consumers pay for a certain version with certain features which they can download at purchase.

Selling subscriptions

Like physical products, web services are often sold via subscriptions. Think of your hosting service. You probably pay an annual fee to get your website hosted.

Giving away web services for free

There is an extremely large group offering their web service completely for free, and this group is increasing every day. There are several models that can serve to keep these businesses alive. One is through advertising: let advertisers pay for access to an audience who, in return, pay nothing for the service itself. Another way is merchandising: offer merchandising around the relevant free web service. Services are also given away entirely for free as an investment for growth. Small companies launch and grow a web service until it's big enough to sell it to a web mammoth such as Google or Yahoo. In the meantime, consumers have been using the service for free. YouTube did it. Lastly, another way of giving away web services for free is the popular freemium model: offer a free basic version of the web service, and sell in-app features later on. Many Android apps work this way, though Apple is not fond of this scheme. They seem to think that this freemium model can easily turn into a 'scam', while encouraging the proliferation of low quality apps that are just interested in increasing the number of downloads to attract advertisers. What do you think?

Crowdfunding

This is a very interesting model we see on the increase these days. With this model, consumers can choose to give a donation for the service they use or to support any other type of cause. Web apps and SMS functions are coupled to allow people to pay without any hassle.

IBM SMARTER PLANET EXHIBITION courtesy of IBM




In an interview with Usman Haque, founder of Pachube, he said that Pachube's business model is “slowly adapting as we talk to big and small businesses." Furthermore, in that interview he identified privacy as the most valuable business model: “if you want a free service, then data will be open: but if you want privacy, that's what you will pay for."3MacManus, R., 2009. Online available at: http://www.readwriteweb.com/archives/pachube_business_models.php [Accessed June 15, 2011].

In a recent article in McKinsey Quarterly about the Internet of Things, the current challenge of building networks of value is described: “Business models based on today's largely static information architectures face challenges as new ways of creating value arise. Now is the time for executives across all industries to structure their thoughts about the potential impact and opportunities likely to develop from the Internet of Things." Actually we believe designers that are skilful in designing networks will have a crucial role to play in helping industries figure out what to do with these technological phenomena.

In our future connected world, business models will arise from the cooperation and teamwork between industries, for example by building compatible platforms for visualizing, mapping, feeding input and output, manufacturing of devices, software development, and so on. We can see signs of this already as services and devices arise on top of existing data such as the mapping from Google or the social information of Facebook, Twitter or LinkedIn.

Value is a complex concept that has a multitude of faces, but perhaps in the overall scene of the internet of things there is value in the possibility that it gives us to measure, manage and being told if what we are doing is less efficient than something else. Especially when the effects are on a larger scale, such as the consumption of energy. When this value is recognized it actually changes behaviours. — ALEXANDRA DESCHAMPS-SONSINO

The big internet companies like IBM, Apple, Microsoft and Nokia-Siemens are figuring out how to create web-sensor-networks one way or the other. Wuxi WNS in China has enabled interesting collaborations between companies and the government aiming to build compatible platforms for the web and ubiquitous technologies, in order to make possible what they call a 'smart planet'. They've constructed two 'information service parks' and a 'university park' where information and technology service providers such as Nokia-Siemens, China Telecom, China Unicom — among many others — and universities can assemble and implement their networks for 'smart logistics', 'smart industry', 'smarty environmental protection', 'smart healthcare', 'smart urban transport', and so on.

…for the potentially valuable developments you need basically standardisation. It's ridiculous that you can't use the same mobile phones in China as in the Netherlands. With computers it's even worse, you barely have an Apple that can talk to a Windows machine and the other way around. Imagine in the Internet of Things, if I have a X coffee machine hanging in my home network and I want to change it to a Y coffee machine, but this one doesn't talk to my home network…it won't work. That's why we need standards and compatibility. This holds for multitudes of different consumer appliances. — MADDY JANSE

So where do you stand as a designer in all this? We believe the involvement of designers is a crucial element at the fuzzy-front-end of value creation. Designers are the active link, translators, mediators and communicators between the processes of creating platforms, building networks and encouraging meaningful experiences. You may not have invested in an industrial park in China or be in the process of developing the ultimate technological solution, but you do understand how networks behave, how people create knowledge, how people become motivated and assign meaning to what they do and design or co-design interactions accordingly, so that technology truly serves us rather than us becoming servant of technology.

Companies who think innovation is about invention and technology push are likely to struggle with the Internet of Things. In contrast, if they see innovation as situated within socio-material networks they have something meaningful to offer, or what you call Meta Products. — LUCY KIMBELL