In the 1960s, Rolls Royce pioneered the concept of power by the hour – a pay per use system for its engines. Instead of purchasing the product upfront, the customer was offered a performance-based contract. This helped align the incentives of the manufacturer and operator — reliability, reduced expenditure and accurate cost prediction. This article explains how automation is changing business models.

After Rolls Royce introduced power by the hour, other manufacturers rapidly followed suit and the concept of product as a service was born. The business models of many engine manufacturers were forever altered.

An organization’s business model sets out how it will create and deliver value.Over the years, such models have increased in sophistication depending on advances in technology. Emerging, innovative technology can change existing business models or create new ones altogether.

One example is the Internet of Things (IoT), which has provided companies with a wealth of operational data. By incorporating IoT, businesses can continually monitor operations to identify opportunities and develop new strategies. Businesses can now be data-driven, with products and services designed to be flexible and personalized to meet customer expectations.