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The Role of the Internet of Things (IoT) in Transforming the Business Model of Small and Medium Enterprises (SMEs)

Chapter 1: Introduction

1.1. Existing Research Gaps

With the world becoming more interconnected and the increasing disruptiveness of information technology, the concept of the internet of things (IoT) has become an important research topic (Ehret & Wirtz, 2017, 1). Given the growing acceptability of IoT, organisations are now prompted to adopt IoT solutions to improve and enhance the experience of their customers and clients (Metallo, Agrifoglio, Schiavone & Mueller, 2018, 298). In accordance with Kiel, Arnold & Voigt (2017, 4), IoT crates a network of interconnected physical devices, which exchange data with each other through the internet, allowing enterprises to obtain and use strategic information (Gierej, 2017, 206). The existing marketing literature has shed some light on the effects of IoT on consumer behaviour and its contribution to the creation of new business opportunities (Boyes, Hallaq, Cunningham & Watson, 2018, 1). In contrast, there is no much empirical evidence on how IoT helps companies deal with external and internal challenges by altering their business models (Lu, Papagiannidis & Alamanos, 2018, 285). Considering the uncertainties of IoT as well as the relative novelty of this concept, the significance and importance of business models that allow organisations to shield their customers and clients against external fluctuations and changes should be further investigated. This project contributes to bridging this gap in the literature by providing the reader with a deeper understanding of the opportunities and threats offered by IoT and its role in business model change in the context of small and medium enterprises (SMEs).

1.2. Rationale

The topic of IoT is of particular interest to the researcher due to a range of reasons. One of these causes is that the significance of relationship marketing has dramatically increased with the emergence of IoT (Glova, Sabol & Vajda, 2014, 1122). Today, marketers are striving towards the establishment of long-term relationships with consumers, instead of simply stimulating their intention to buy (Krotov, 2017, 831). The role of IoT in this process is considerable as the internet and mobile devices have being increasingly used for communication purposes by both consumers and businesses (Ehret & Wirtz, 2017, 1). The growing presence of IoT translates into more sophisticated and effective marketing strategies, which tend to use such instruments as neural networks and artificial intelligence (AI) (Kiel et al., 2017, 4). Nonetheless, the literature that examines how companies make use of the technological potential of IoT for organisational design is still fragmented and insufficient (Alexopoulos, Koukas, Boli & Mourtzis, 2018, 880). Another reason for choosing this particular topic is that the pace at which IoT develops makes the majority of standard business models adopted by SMEs unsatisfactory (Metallo et al., 2018, 298). Hence, there is a strong urge to understand how the potential business opportunities and threats created by IoT can lead to reorganisation activities aimed at the SMEs’ business models.

1.3. Thesis Background

IoT research has been predominantly stimulated by the need for convergence in a range of interdisciplinary technologies (Wang & Hsieh, 2018, 28). To get a better understanding of the relationship between IoT and the business model, it is relevant to have a closer look at what constitutes the internet of things. The IoT landscape comprises three major dimensions or environments, namely technological environment, physical environment, and socio-economic environment (Gierej, 2017, 206). The technological environment consists of such elements as hardware, software, data, networking technologies, and integrated platforms, which enable communication and interactions of the objects in the physical environment (Babiceanu & Seker, 2019, 47). In turn, the physical environment is comprised of human and non-human objects that are linked together by means of the previously mentioned elements of the technological environment (Lu et al., 2018, 285). Finally, the socio-economic environment consists of various stakeholders (e.g. consumers, entrepreneurs, legislative bodies, and industry associations) that set requirements, address technical and legal issues, and determine the success or failure of a business entity (Krotov, 2017, 831). By using these dimensions and their elements in combination, SMEs can create new value propositions or business models with the help of IoT. However, the success and effectiveness of these enhanced business models depends on how well organisations address IoT-driven threats that exist in the external environment (Boyes et al., 2018, 1). These threats can include challenges of information and data reliability, potential market disruption by new competition, intellectual property risks, and safety and security issues (Ehret & Wirtz, 2017, 1).

1.4. Aim and Objectives

Based on the identified research and literature gaps, the main purpose of this doctorate project is to explore the role of IoT in transforming the business model in the context of SMEs. The research objectives are:

  1. To examine the key elements of the IoT landscape and connections between them.
  2. To identify the role of IoT in the value creation process in the context of SMEs.
  3. To explore the impact of IoT on SMEs’ business models.
  4. To investigate SMEs’ response to business opportunities and threats generated by IoT.
  5. To provide SMEs’ management with recommendations on what particular improvements could be introduced to their business model to make it more responsive to the recent IoT trends.

1.5. Suggested Methods

This doctorate project employs a mixed method approach, which is justified by the fact that no sufficient research on the relationship between IoT and business models in the contexts of SMEs exists (Kiel et al., 2017, 4). The sample was drawn from 250 managers and owners of UK-based SMEs. Semi-structured interviews with these individuals formed the principal source of empirical data (Merriam, 2015, 134). While collecting data occurs in a structured manner, this technique still allows for following the principle of openness (Howell, 2012, 93). In turn, the researcher employed self-administered questionnaires to explore what elements of the IoT landscape the sampled SMEs use the most. In addition, this technique helped the researcher investigate the respondents’ perceptions of the key opportunities and threats created by IoT (Lo & Campos, 2018, 10). The researcher performed sampling by using the non-probability convenience sampling technique, thereby allowing for collecting data in a fast and efficient manner (Pruzan, 2016, 79). By contrast, the use of this technique could negatively influence the generalisability of the obtained empirical findings (Bryman & Bell, 2010, 142).

References

Alexopoulos, K., Koukas, S., Boli, N. & Mourtzis, D. (2018). “Architecture and development of an Industrial Internet of Things framework for realizing services in Industrial Product Service Systems”. Procedia CIRP, 72(1), 880-885.

Babiceanu, R. & Seker, R. (2019). “Cyber resilience protection for industrial internet of things: A software-defined networking approach”. Computers in Industry, 104(1), 47-58.

Boyes, H., Hallaq, B., Cunningham, J. & Watson, T. (2018). “The industrial internet of things (IIoT): An analysis framework”. Computers in Industry, 101(1), 1-12.

Bryman, A. & Bell, E. (2010). Business research methods. 3rd ed., Oxford: Oxford University Press.

Ehret, M. & Wirtz, J. (2017). “Unlocking value from machines: Business models and the industrial internet of things”. Journal of Marketing Management, 33(1-2), 1-20.

Gierej, S. (2017). “The framework of business model in the context of Industrial Internet of Things”. Procedia Engineering, 182(1), 206-212.

Glova, J., Sabol, T. & Vajda, V. (2014). “Business models for the internet of things environment”. Procedia Economics and Finance, 15(1), 1122-1129.

Howell, K. (2012). An introduction to the philosophy of methodology. London: SAGE.

Kiel, D., Arnold, C. & Voigt, K. (2017). “The influence of the Industrial Internet of Things on business models of established manufacturing companies–A business level perspective”. Technovation, 68(1), 4-19.

Krotov, V. (2017). “The Internet of Things and new business opportunities”. Business Horizons, 60(6), 831-841.

Lo, F. & Campos, N. (2018). “Blending Internet-of-Things (IoT) solutions into relationship marketing strategies”. Technological Forecasting and Social Change, 137(1), 10-18.

Lu, Y., Papagiannidis, S. & Alamanos, E. (2018). “Internet of Things: A systematic review of the business literature from the user and organisational perspectives”. Technological Forecasting and Social Change, 136(1), 285-297.

Merriam, S. (2015). Qualitative research: A guide to design and implementation. Chichester: John Wiley & Sons.

Metallo, C., Agrifoglio, R., Schiavone, F. & Mueller, J. (2018). “Understanding business model in the Internet of Things industry”. Technological Forecasting and Social Change, 16(1), 298-306.

Pruzan, P. (2016). Research Methodology: The Aims, Practices and Ethics of Science. New York: Springer.

Wang, Y. & Hsieh, C. (2018). “Explore technology innovation and intelligence for IoT (Internet of Things) based eyewear technology”. Technological Forecasting and Social Change, 127(1), 281-290.

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