The Internet of Things (IoT) offers start-ups, businesses and entrepreneurs a lucrative platform upon which to build innovative products, processes and business models. With a current market valuation of over $900bn the IoT’s potential is obvious for both SMEs and large enterprises alike.

In trying to leverage this potential however, it’s clear that many still grapple with the best approach to get started, and those that have, are struggling to turn a profit or gain genuine business benefit from their investment.

This perspective is validated by Canonical’s global survey of IoT professionals, which identified “quantifying ROI and providing a clear use case” as the #1 most immediate challenge for the IoT.

The early Internet of Things has been a ‘gold rush’, with entrepreneurs jumping in to secure their share of an exciting and rapidly growing new market. Unfortunately, every gold rush has its losers with over two-thirds of IoT projects destined to fail.

There are many reasons for these failures — the most common is often a basic and seemingly obvious one. Too many fail to set out proper, clearly-stated goals and measurements. As such, they struggle to determine whether the project is succeeding or failing, and where they’re up to at any given point. The same is true of budgets.

After that there’s the big question; is your business model even valid? In a market where so many of the business models and applications are untested, it’s important that business leaders don’t jump in at the deep end, but rather ‘ramp up’ their project’s gradually.

Investments in IoT tech should be trialled on a small scale, before attempting to deploy across an entire organization.

As we move rapidly towards 2018, start-ups, businesses and entrepreneurs are looking for new ways to ensure IoT investments are driving financial growth and that business models will remain sustainable in the future. At the forefront of this is a change in the way that businesses monetise the IoT.

Here are four initial steps to get started on your journey towards effective, and profitable, IoT-led business:

1. Think strategy, not just products

Making the jump into a new IoT-led business model means so much more than just connecting processes to a dashboard or converting existing products into “smart” devices.

An effective approach to IoT must look beyond connected products and start to strategically consider all the ways that the IoT could improve profitability throughout an organisation.

This could include streamlining services through improved analytics, selling additional services as apps or add-ons, or simply selling advertising data from existing smart devices. The possibilities for both cost-savings and profit generation go far beyond simple device sales.

Advanced analytics will help you take control

With IoT specific operating systems allowing users to install new functions onto their products, a growing number of businesses are using IoT app stores to generate new revenues and increase their ROI.

Through this model, users receive the latest features without having to buy new devices. This provides greater security and functionality but also a long-term revenue source.

2. Don’t just build knowledge, hire it

The IoT covers a vast array of technical and business applications, as such it is very difficult for any one individual to call themselves an “IoT expert”. Instead of attempting to develop all knowledge internally, don’t be afraid to look beyond traditional hiring streams and turn to employees and experts from outside of their own fields.

3. Work with the industry to overcome risks

Collaboration will be a key part of broad IoT adoption. Until we learn to work together, set standards and build upon each other's achievements, the IoT will continue to suffer from the same security issues that have been its Achilles heel.

Much of this collaboration will be driven by business leaders but technology will also have a key role in ensuring that brands work together to develop a stronger infrastructure for the IoT.

Through the use software apps and IoT specific operating systems it’s possible to guarantee that products and services are built on a stable, unified platform – offering greater opportunities for collaboration and cross-device developments and security upgrades.

4. Join the dots

Many of the best IoT innovations will not come from a single source, but rather from the interactions between different IoT platforms, processes and devices. The profitability of IoT does not lie in devices themselves, but rather in the connections that those devices provide.

Often it is these connections – and the unique insights that lay between them – that will provide the greatest opportunities for profitability and business growth.

In order to succeed in the IoT space, brands must be able to spot these connections, using the data available from their various IoT touchpoints to identify weak spots, unexpected cost centres and unexplored gaps in the market.

In a world where every connected device generates data, the opportunities for monetising this data are limited only by access and imagination.

This article draws on findings from Canonical’s Defining IoT Business Models research whitepaper — the full version of which is available to download here.