國立臺灣科技大學

物聯網創新中心

Internship Report

New Approach to Smart Home Subscription Systems

in the Outcome Economy Era

Name ：Wilfried Ariel Mulyawan

Supervisor ：Dr. Shuo-Yan Chou
 Abstract
Subscription-based business models are revolutionizing the realm of smart home products,
presenting a transformative shift in traditional approaches. In the rapidly evolving landscape
of connected homes, companies in smart home technology face the challenge of leveraging
the full potential of innovations while ensuring economic viability. Beyond technological
breakthroughs, a crucial aspect involves the reconfiguration of business models.

This shift signifies a departure from conventional ownership-driven and product-centric

business models towards outcome-based strategies, encapsulated within the outcome
economy. In this context, the primary focus lies in delivering tangible value to customers,
fostering a distinct value proposition and a sustainable competitive edge.

By conducting a thorough case study analysis within the smart home technology sector, this
paper aims to clarify the dynamics of subscription business models. It provides a
comprehensive definition and outlines the key characteristics that define these models within
the realm of smart home products. The insights garnered from this analysis offer a roadmap
for effectively implementing subscription-based approaches, fostering a positive-sum game
where both providers and consumers extract heightened value from the evolving business
landscape of smart home technology.

Keywords: Business Model, Value Chain, Maintenance, Subscription, Usage, Cost, Smart
Home.

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 Table of Contents

1.
Introduction...............................................................................................................................5
2. Literature Review...................................................................................................................6
2.1 Smart Home Product Dimensions....................................................................................6
2.1.1 Continuous Activation Dimensions...............................................................................8
2.1.2 Selective Activation Dimensions...................................................................................8
2.2 Servitization......................................................................................................................8
2.3 Business Model Transformation.....................................................................................10
2.3.1 Digital Business Model...............................................................................................10
2.3.2 Subscription Business Model......................................................................................10
2.3.3 Outcome Economy Business Model............................................................................11
2.4 Related Study..................................................................................................................11
3. Smart Home Conceptual Model Study................................................................................12
3.1 Conceptual Business Model Canvas..............................................................................12
3.2 New Conceptual Business Modeling Approach.............................................................13
3.3 Smart Home Business Conceptual Remodel..................................................................14
3.4 Machine Breakdown Model...........................................................................................16
3.5 Predictive Maintenance Model.......................................................................................18
3.6 Product and Data Ownership Details.............................................................................18
4. Business Model Analysis.....................................................................................................20
4.1 Product Dimension Service Details................................................................................20
4.2 Financial Assessment Analysis.......................................................................................22
4.3 Research and Development Analysis.............................................................................23
4.4 Customer Journey Model Analysis.................................................................................24
5. Proposed Business Model Conclusion.................................................................................26
5.1 Outcome Economy Analysis..........................................................................................26
5.2 Business Model Conclusion...........................................................................................27
Reference..................................................................................................................................28

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 List of Figures and Tables

Figure 1. Conceptual Model of the Smart Home.....................................................................................6

Table 2. Smart Home Dimension Concept..............................................................................................7
Figure 3. Servitization Definition............................................................................................................9
Figure 4. Business Model Canvas..........................................................................................................12
Figure 5. Proposed Business Model for Smart Home...........................................................................13
Figure 6. Business Conceptual Remodel...............................................................................................14
Figure 7. Smart Home Business Details................................................................................................14
Figure 8. Machine Breakdown Model...................................................................................................17
Figure 9. AI Predictive Maintenance.....................................................................................................18
Figure 10. Smart Home Product Ownership..........................................................................................18
Figure 11. Subscription Payment Model...............................................................................................21
Figure 12. Financial Analysis Model.....................................................................................................22
Figure 13. Research and Development Model.......................................................................................23
Figure 14. Customer Journey Model.....................................................................................................24

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 Chapter I
Introduction

The contemporary landscape for smart home products, encompassing technologies such as air
conditioners, washing machines, and all interconnected devices, introduces a myriad of
challenges for industrial entities. This paper addresses the escalating difficulties faced by
companies operating in the smart home sector, including the ramifications of globalization,
heightened competitive pressures, and compressed innovation cycles. Against this backdrop,
Industry 4.0 is identified as a pivotal force, offering promising avenues for innovation to
bolster the sustained growth and competitiveness of smart home technology firms.

Despite substantial investments in this domain, the tangible macro-economic impact often
remains inconspicuous. In response, this proposed business model underscores the imperative
for companies to not only refine internal processes but also to pioneer novel digital business
fields and models. Aligning with the burgeoning service-oriented paradigm within the smart
home industry, subscription-based business models emerge as pivotal avenues with high-
value potential.

Analogous to their manifestation in the manufacturing sector, these subscription models,

rooted in traditional subscription principles, redefine the relationship between company,
product, and customer. Shifting away from the conventional transactional model of one-off
product sales, this transformation centers on a continuous delivery of value, wherein the
customer's needs and outcomes assume a central role. This recalibration of the business
model transcends the erstwhile product- and service-centric economy, consistently
prioritizing the customer's desired outcome to augment overall customer value.

Acknowledging the emergence of 'advanced subscription business models' within the smart
home domain, the paper identifies these models as transformative mechanisms extending
beyond a mere recurring payment mechanism. Distinguished by their capacity to address
individual customer needs through unique value propositions, these advanced models have
the potential to disrupt the smart home technology sector.

While pioneers currently propel the design of subscription business models in the smart home
industry, a notable dearth in scholarly discourse and terminological clarity is observed
regarding advanced subscription business models within this sector. Consequently, this paper
seeks to address this lacuna by delineating the characteristics of advanced subscription
business models in smart home products, leveraging a case study methodology. The central
research question guiding this investigation is: 'Which characteristics constitute advanced
subscription business models in the realm of smart home products?' The objective is to
furnish comprehensive guidance for both the implementation and further scholarly
exploration of advanced subscription business models within the context of smart home
technology.

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 Chapter II
Literature Review

2.1 Smart Home Product Dimensions

Figure 1. Conceptual Model of the Smart Home

This scholarly work, authored by (Wu, et al., 2023) endeavors to systematically evaluate the
intelligence capabilities inherent in smart home environments. The focal point of the study
revolves around a meticulously crafted conceptual modeling approach, seeking to provide a
comprehensive and nuanced understanding of the multifaceted components that constitute
contemporary smart homes. Rooted in the authors' affiliations with Beijing University of
Technology and the Engineering Research Center of Intelligent Perception and Autonomous
Control, Ministry of Education, Beijing, China, the paper contributes to the scholarly
discourse on smart homes, emphasizing the need for a unified conceptual model.
The proposed conceptual model draws inspiration from diverse perspectives within the
academic community, synthesizing existing frameworks and methodologies to create an all-
encompassing representation. Leveraging the semantic Web context, the authors introduce a
novel house modeling ontology that seamlessly associates modeled elements through
advanced inheritance mechanisms and meticulously defined auto-completion rules. This
ontological foundation not only ensures interoperability among current solutions but also
anticipates integration with future technologies, thus fortifying the smart home environment
with ambient intelligence capabilities.

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The study acknowledges the varied definitions of smart homes across different studies,
encompassing technical components, services, user needs, and energy-saving considerations.
Through an intricate exploration of these diverse perspectives, the authors identify
commonalities that form the basis of their conceptual model. The model comprehensively
encapsulates the devices and services integral to smart homes, further serving as a
springboard for the investigation of user requirements for smart features.
In alignment with the overarching goal of the research, the authors propose an automated
method for evaluating the intelligence of smart homes. This method systematically gauges the
extent to which smart homes satisfy user requirements, offering a quantitative and qualitative
measure of their intelligence capabilities. By embarking on this academic endeavor, (Wu, et
al., 2023) aspire to contribute to the advancement of intelligent and user-centric smart home
systems, fostering a deeper understanding of their intricate dimensions and operational
dynamics.

Smart home sensor types and corresponding dimensional concepts.

Sensor Type Dimension
Smart switch Switch
Humidity sensor Humidity
Smart bracelet Motion
Smart speaker Sound
Smart door lock Fingerprints
Fire alarms Fire
Smoke alarms Smoke
Temperature sensor Temperature
CO2 sensor Air quality
Smart light control device Light
Table 2. Smart Home Dimension Concept

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2.1.1 Continuous Activation Dimensions
Spectrum of dimensions intrinsic to smart home products is methodically examined,
encompassing Fire, Switch, Security, and Smoke systems. These dimensions necessitate
persistent activation to meet the imperatives of safety and security. The indispensable
components of fire and smoke detectors, crucial for ensuring safety, require uninterrupted
activation to enable swift detection and response to potential hazards.
The continual vigilance ingrained in the monitoring of these dimensions is of paramount
importance, constituting a foundational element in securing both inhabitants and property
against fire-related risks. Conversely, the Switch dimension, operating as a fundamental
control mechanism, is discreetly activated in response to user input or automated schedules,
demonstrating a discerning responsiveness aligned with user needs. Similarly, Humidity
sensors may be selectively activated to optimize energy efficiency, responding judiciously to
the presence of inhabitants within the home.
2.1.2 Selective Activation Dimensions
Simultaneously, a set of dimensions including Humidity, Motion, Sound, Temperature, Air
Quality, and Light present a nuanced operational paradigm, permitting selective engagement
contingent upon the presence of occupants within the smart home environment.
Motion detectors, designed for identifying movement, necessitate activation primarily in the
presence of occupants, aligning with both security and energy conservation objectives. Sound
sensors, employed for security and automation, require selective activation contingent upon
specific scenarios or user-defined preferences, responding to situational demands.
Temperature sensors are selectively engaged based on user preferences and environmental
conditions, avoiding continuous activation but responding to the need for climate control. Air
quality sensors may be selectively activated based on occupancy and pollutant levels, with
continuous monitoring considered necessary in environments with specific air quality
concerns.
Light control devices, responsive to ambient conditions and user preferences, may be
selectively activated based on the time of day, user commands, or occupancy status.
Continuous operation is not universally required, facilitating energy-efficient lighting
management.
Fingerprint recognition systems, integral for access control and security, are selectively
activated during authentication processes, with continuous operation triggered as necessary
for secure access verification. This perpetual vigilance assumes paramount importance in
preserving the integrity and security of the smart home environment. The discerning
activation patterns of these dimensions contribute to the overall efficiency, functionality, and
security of the smart home ecosystem.

2.2 Servitization
The phenomenon wherein manufacturing companies augment their traditional business
operations by integrating services to fortify their competitive stance is denoted as
'Servitization' (Schuh et al., 2020). This trend is propelled by the escalating intricacy of
products and the surge in demand for customization. Presently, the overarching objective is to
elevate product performance through the amalgamation of services and digital components.
The evolution of the business model from merely offering a product to providing a
comprehensive digital solution is delineated as a transformation line.

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1. Offering products: Companies primarily focused on delivering tangible products
concentrate on product and process innovations to foster growth and enhance
profitability. Services, if offered, are predominantly auxiliary to support product sales.
2. Offering individual services alongside the product: Services are obligatorily provided
alongside product-related benefits. These services empower customers to utilize the
product autonomously, detached from the manufacturer and tailored to their specific
needs, fostering competitive advantages. On occasion, services may be regarded as
independent of the product if a lucrative market niche is identified.
3. Offering services as an integral part of the offer: Services are methodically integrated
into the existing production system to create a service system and augment customer
value. While these services constitute an integral part of the offer, they often pertain to
the offered product portfolio. Embedded software in the product enables new service
functionalities through data feedback. Additionally, data collection and analysis
facilitate the integration of personalized services. The business model remains
fundamentally intact but is expanded by the services made possible through digital
technologies.
4. Offering an overall solution: Services, representing solutions for individual customer
challenges, assume centrality and become the core business and distinguishing feature
of the company. The physical product serves primarily to enhance customer loyalty
and is not the focal point in the customer landscape.
5. Offering an overall solution as a service: The business model transforms into a
solution provider by offering the actual solution to a customer problem as a service.
The assumption of responsibility for the solution process induces a shift in risk and is
consequently accompanied by a change in the objective system and profit mechanism.
Altered dependencies between the customer and the company foster a closer business
relationship, leading to an increased interest in continuously optimizing the customer's
business.
6. Offering a digital solution: The digital component of the offering grows progressively
until the digital solution is proffered independently of the company's core product and
service business. This evolution allows for the establishment of new business fields
beyond the company's core operations. The ability to analyze customer behavior
becomes a critical success factor for such digital business models.

Figure 2. Servitization Definition

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2.3 Business Model Transformation
2.3.1 Digital Business Model
The competitive advantage attributed to digital business models emanates from the
synergistic interplay of two pivotal capabilities: scalability achieved through detachment
from physical assets and the capacity to predict customer behavior by strategically occupying
control points.
A fundamental element contributing to competitive advantage in digital business models lies
in the manufacturer-neutral service offerings. This orientation accentuates the utilization
value of the solution for the customer, emphasizing outcomes over the utilization of the
company's proprietary physical assets. Such an orientation enhances adaptability, enabling
swift responses to emerging customer demands by leveraging existing market assets on a
short-cycle basis. Simultaneously, achieving horizontal and vertical digital consistency
among individual customers, products, and companies serves to mitigate the complexities
associated with deploying new releases, thereby contributing to the scalability of the digital
business model.
Furthermore, the close interlinking and data collection inherent in these models offer the
potential to make precise forecasts concerning changes in the market and customer
ecosystem. This necessitates the data-based mapping of individual customer interactions,
commonly referred to as the data model or digital shadow. Employed by the company, the
digital shadow identifies short-term customer insights and informs potential avenues for
further development of the digital solution.
2.3.2 Subscription Business Model
The inception of the subscription concept can be traced back to the book and newspaper trade
during the 17th and 18th centuries, significantly shaping its contemporary understanding. In
the conventional sense, various definitions in the literature converge on the recurring fee
characteristic for a defined product, content, or service. Over time, a diverse array of
subscription models has emerged, particularly in the B2C sector, spanning consumer goods,
digital content, and automobile subscriptions. Within the B2B sector, the subscription concept
is frequently utilized under various synonyms, such as 'SaaS' (Software-as-a-Service) in the
software industry.
Evolving into a fully-fledged business model, subscriptions are progressively finding
application in the manufacturing industry. The traditional understanding of subscription
undergoes adaptation, notably expanded by the mechanical and plant engineering industry,
presenting a distinctive value proposition. This transformation hinges on shifting from the
traditional emphasis on the product value, rooted in the product creation process, towards
unwavering customer-centric value creation. The overarching goal is no longer centered on
the one-time ownership acquisition of the product by the customer; instead, it focuses on
continuously providing the customer with the valuable outcomes generated by a product or
service. The technological underpinning of this shift is forged by the escalating connectivity
and data accessibility of customers, products, services, and companies, driven by trends such
as Industry 4.0.
The pricing attribute is scrutinized in the context of the assumption that consumers exhibit
diverse preferences for smart home outcome economy products and services. In a scenario
where individuals possess varying willingness to pay for equivalent offerings, or when
products share a comparable price point, their consumption patterns differ significantly. Past
research highlights the direct impact of pricing fairness on customer satisfaction [Zhang et
al., 2021]. In the smart home outcome economy business model, financial incentives play a

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substantial role in influencing customer retention, emphasizing the significance of fair
pricing. This study considers price features derived from monthly fee offerings in the smart
home outcome economy, focusing on specific product types such as smart devices,
subscriptions, and additional services. For instance, smart home device subscriptions may be
priced at various levels, such as $30, $45, $60, and over $60, reflecting the complexity of the
services offered. Furthermore, the study categorizes pricing based on certain restrictions,
considering the nature of smart home devices and services. These considerations aim to
discern customer preferences, ensuring an optimal composition of attributes within the smart
home outcome economy. The research questions formulated delve into personalization
features, product features, e-service quality features, communication and interaction features,
pricing plans, the preferred composition of attributes for an optimized smart home outcome
economy, and the identification of customer segments within this context.
2.3.3 Outcome Economy Business Model
The Outcome Economy business model represents a paradigmatic shift in the conventional
transactional landscape, encapsulating the principle of "pay for what you get." This
transformative approach signifies a departure from traditional ownership-based transactions,
wherein consumers transition from outright product acquisition to an outcome-centric
framework. Within this model, consumers remunerate based on the tangible results or
services derived from the product's performance, underscoring a fundamental change in
economic exchange dynamics.

This evolution places a heightened emphasis on the actual value and utility experienced by
the consumer, fostering a dynamic linkage between payment and the measurable outcomes
achieved. Such a model not only prioritizes efficiency and resource optimization but also
incentivizes innovation and continual improvement. By aligning economic incentives with
desired results, the Outcome Economy seeks to cultivate a landscape where consumers
receive quantifiable and meaningful value. This academic perspective emphasizes the
tangible benefits and experiences associated with the product or service, thereby redefining
the fundamental dynamics of commercial transactions.

2.4 Related Study

The study by (Schuh et al., 2020) from RWTH Aachen University explores the transformative
impact of subscription business models in machinery and plant engineering. Focused on
Industry 4.0, the authors advocate for a shift from traditional ownership-based models to
outcome-centric approaches, termed the "outcome economy." This paradigm shift,
characterized by continuous value delivery, addresses the economic challenges faced by
manufacturing companies in the industry 4.0 landscape.
The paper emphasizes the nascent stage of advanced subscription business models in the
manufacturing sector and the lack of terminological clarity, highlighting the need for a clearer
understanding. Drawing insights from machinery and plant engineering, this related study
aims to extend the discourse to smart home technology. By examining parallels and
divergences, it seeks to elucidate the characteristics of advanced subscription business models
in smart homes. The research question guiding this exploration is: "How do characteristics of
advanced subscription business models in machinery and plant engineering translate into
smart home technology?" Through a comparative analysis and case study methodology, this
study contributes to the ongoing dialogue on the outcome economy in diverse industrial
domains.

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 Chapter III
Smart Home Conceptual Model Study

3.1 Conceptual Business Model Canvas

Figure 3. Business Model Canvas

In this scholarly examination critically explores the evolving smart home business model
within the paradigm of the Outcome Economy, encompassing both market and system
dimensions. The analysis, intricately detailed in the Business Model Canvas, dissects key
elements such as partners, activities, resources, value propositions, customer relationships,
channels, customer segments, cost structures, and revenue streams. Delving into a
specifically constructed scenario, the evaluation centers on the intricacies inherent to the
smart home business model, emphasizing shared ownership. The Information Technology
(IT) architecture is a focal point, necessitating the meticulous integration of Internet of
Things (IoT) devices and the establishment of nodes within the blockchain system. Tailoring
processes for various user categories, including providers, space owners, and requesters,
demands nuanced mechanisms ensuring precise information dissemination and data
protection. The payment flow's pivotal role is emphasized, particularly within the envisioned
model where providers receive compensation post the completion of requested services. The
study meticulously examines the distributed ledger's integral role within the smart contract,
ultimately serving as a triggering mechanism that activates IoT devices and facilitates
transactions within the system. Functioning as a conduit, the smart contract links the
blockchain system with IoT devices. These nuanced considerations encapsulate the core
thematic elements central to the scholarly discourse presented in this academic thesis.

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3.2 New Conceptual Business Modeling Approach

The pursuit of an Outcome Economy business model for smart homes involves a
meticulously orchestrated sequence of steps, each contributing to the establishment and
sustenance of a customer-centric service framework.

1. Research and Development (R&D): The foundational phase necessitates an intensive

focus on R&D, wherein the company engages in the comprehensive development of
smart home systems. This involves the integration of cutting-edge technologies to
form the basis for intelligent and responsive home environments.
2. Marketing and Advertising: Following the R&D phase, the company initiates strategic
marketing and advertising campaigns. These endeavors are designed to effectively
communicate the value proposition of the smart home services to potential customers,
elucidating the benefits and features they stand to gain.
3. Service Offering Details: With customer interest piqued, the company proceeds to
present detailed service offerings. This stage is crucial in providing potential clients
with a clear and transparent understanding of the scope, nature, and intricacies of the
services being offered.
4. Contractual Agreements & Deposit Fee: Upon customer agreement, formal
contractual arrangements are established. Customers are required to remit a deposit
fee, serving as a precautionary measure against potential damages. The contract
outlines the terms and conditions governing the relationship between the customer
and the service provider.
5. Subscription Fee Payment: Customers are obligated to pay a recurring subscription
fee, covering the utilization of various services and associated products. This fee
structure is inclusive of any additional payments for specific models or features
utilized by the customer.
6. Predictive Maintenance Integration: The implementation of predictive maintenance
strategies becomes pivotal in enhancing operational efficiency. By leveraging
predictive analytics, the company can proactively identify and address potential issues
before they escalate, ensuring uninterrupted service delivery.
7. Renewal or Terminate Contract: As the agreed-upon contract period approaches its
conclusion, the company engages with customers to assess their inclination. This
critical juncture involves inquiring whether customers intend to conclude the existing
contractual arrangement or opt for its renewal, emphasizing the company's
commitment to ongoing customer relations.

Figure 4. Proposed Business Model for Smart Home

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3.3 Smart Home Business Conceptual Remodel

Figure 5. Business Conceptual Remodel

In the customer relationship aspect of our smart home outcome economy business model, the
system caters to three distinct user categories. The integration company introduces a service,
while providers contribute products or unused devices and equipment. Unlike the traditional
model where providers merely sell products and might not engage with buyers thereafter, our
novel approach ensures a continued relationship between the provider and the item they
supplied. This ongoing association enables effective advertising to the customer, emphasizing
a form of outcome economy where providers not only furnish devices but also maintain their
quality. The system diligently monitors the condition of each device, notifying providers to
obviate the need for regular repairs.
For customers, this represents a groundbreaking outcome economy in our business model.
They eschew product purchases and instead pay a rental fee based on the usage during a
transaction, combining a pay-per-use model with micropayments to attract a larger user base.
The smart home company, acting as an intermediary, receives rental fees from both
integrators and customers. This product release not only activates idle resources but also
aligns with circular economy principles, lessening the environmental burden.
In terms of profitability, the system employs several methods: Membership fees are charged
monthly, semi-annually, or annually, requiring users to register before utilizing platform
services. Service fees are set for assisting in device installation from providers and
monitoring device conditions. This multifaceted revenue approach contributes to the
sustainability and success of the smart home outcome economy.

Figure 6. Smart Home Business Details

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New forward-thinking outcome-based smart home subscription business model is proposed,
aiming to revolutionize the traditional product life cycle. The schematic representation in
Figure 7 delineates the transformative alterations and impacts introduced by this innovative
business paradigm, particularly accentuating the utilization phase of the product life cycle.
Noteworthy in this model is the deliberate shift from a paradigm of ownership to one that
prioritizes access. Users are afforded the opportunity to leverage smart products without the
encumbrance of physical ownership, as the ownership mantle is assumed by the manufacturer
in this reimagined model.
The outcome-based business model specifically zeroes in on the utilization phase, ensuring
the delivery of product outcomes to users through a strategic integration of various cutting-
edge technologies. This transformative approach not only guarantees outcomes in a more
sustainable manner but also encompasses an array of beneficial changes throughout the
product life cycle.
Foremost among these changes is the adoption of the "access-over-ownership" model. In this
paradigm, users gain the ability to harness smart products without the need for possession or
physical storage, and the ownership of the equipment is effectively transferred to the
manufacturer during the use phase. This structural shift endows the manufacturer with
incentives to optimize smart home maintenance, prolong product life, and make judicious
decisions regarding materials and design considerations at the early stages of the product life
cycle.
To underpin the measurable outcomes promised by this model, a suite of enabling
technologies is employed. The Internet of Things (IoT) plays a pivotal role in facilitating pay-
per-outcome pricing, ensuring users pay based on the tangible results they receive.
Concurrently, blockchain technology adds a layer of transparency to financial transactions,
fostering trust in the model. Artificial intelligence (AI) assumes a multifaceted role, from
predictive maintenance to user behavior analysis, continually enhancing outcomes and
aligning services with the dynamic needs of customers.
The pay-per-outcome feature is a hallmark of this outcome-based model, allowing users to
pay for the actual outcomes they receive, promoting affordability, and making high-
performance products or services accessible. The flexibility for manufacturers to set different
prices based on users' short-term or long-term needs enhances profitability and encourages
extensive product usage. This dynamic pricing strategy also caters to the varied financial
capabilities and preferences of users in the smart home market.
Predictive maintenance emerges as a critical component of the model, ensuring the quality
and reliability of delivered outcomes. By leveraging real-time tracking of equipment
performance through pertinent data, manufacturers can identify potential failures in air
conditioners and perform maintenance before disruptions occur. This proactive maintenance
not only reduces costs related to repairs and downtime but also contributes to the extension of
product service life, minimizing material and energy consumption.
Efficient design considerations are paramount in this outcome-based sharing business. As the
manufacturer assumes the role of the product owner throughout the life cycle, there is a
heightened focus on designing efficient systems and equipment. This encompasses the
selection of durable and eco-friendly materials, exemplified by features such as inverter-
driven or variable-speed compressors that enhance control and adaptability. Additionally,
strategies related to material use, such as ease of disassembly or recyclability, further
contribute to a sustainable approach, aligning with contemporary environmental
considerations.

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The integration of digital technologies, particularly the rise of the Internet of Things (IoT),
has played a pivotal role in facilitating outcome-based business. The ability to track product
usage more accurately than ever before makes pay-per-outcome pricing a viable and
attractive option. The intersection of blockchain and IoT provides a secure infrastructure,
preventing fraud in transaction information and enhancing the transparency and
trustworthiness of the financial aspect of the model. Artificial intelligence (AI) applications
span predictive maintenance, asset management, energy management, and user behavior
analysis, continuously improving outcomes and aligning services with the evolving needs of
customers.

3.4 Machine Breakdown Model

The maintenance journey initiates with either user-generated alerts or automated alerts from
the smart home product itself. This triggers an automated initial check, employing
sophisticated tools within the smart home system to conduct a preliminary diagnostic
assessment. This rapid assessment allows for swift identification of common issues, forming
the foundation for subsequent diagnostic stages.
For issues deemed minor, the model incorporates a remote assistance phase. This facet aims
to empower users with self-repair capabilities by guiding them through troubleshooting steps
via the smart home application. This user-centric approach not only enhances user autonomy
but also aims to expedite issue resolution without the need for on-site intervention.
Persistent or complex issues trigger advanced diagnostics, leveraging predictive maintenance
algorithms. These algorithms draw insights from historical performance data, real-time
diagnostics, and user behavior patterns. By predicting potential causes and recommending
specific maintenance actions, the model adopts a proactive stance, addressing issues before
they escalate. This anticipatory approach contributes to heightened efficiency and cost-
effectiveness.
When remote efforts prove insufficient, on-site maintenance becomes imperative. A dedicated
maintenance team, equipped with a comprehensive understanding of the issue through
advanced diagnostics, intervenes. The fee structure for on-site maintenance undergoes
meticulous analysis, considering factors such as issue complexity, required resources, and the
intricacies of the repair process. In situations demanding immediate attention, the model
incorporates emergency repair protocols. These procedures ensure swift resolution of critical
issues, minimizing downtime and optimizing the overall reliability of the smart home system.
The model adopts a forward-looking stance through future schedule analysis. By providing
users with insights into ongoing maintenance requirements, the smart home system enhances
transparency and facilitates proactive decision-making regarding long-term product care.
This sophisticated machine breakdown model, situated within the Outcome Economy
framework, underscores a commitment to excellence in smart home maintenance. Through its
seamless integration of advanced diagnostics, user-centric remote assistance, and strategic
on-site interventions, the model aims to redefine industry standards, setting a precedent for
elevated user satisfaction in smart home technologies.

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Figure 7. Machine Breakdown Model

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3.5 Predictive Maintenance Model

Figure 8. AI Predictive Maintenance

Furthermore, the outcome-based model places significant emphasis on maintenance services,

playing a pivotal role in ensuring the consistent and uninterrupted operation of the product to
deliver desired outcomes. Predictive maintenance emerges as a crucial component, accurately
estimating the likelihood of machine failure well in advance. This foresight empowers
decision-makers to enact timely measures such as maintenance or replacement programs,
ultimately leading to substantial cost savings and heightened productivity by maximizing
machine uptime. A notable departure from traditional preventive maintenance, predictive
maintenance transcends reliance on average equipment life or anticipated life statistics for
routine maintenance, mitigating redundancy in the process and reducing operating costs. The
integration of third-party maintenance aggregators, as depicted in Figure 9, introduces
economies of scale and broader adoption, further diminishing maintenance expenses. This
strategic approach not only lowers costs but also offers the advantage of personalized service,
enabling the selection of maintenance strategies tailored to specific needs.

3.6 Product and Data Ownership Details

Figure 9. Smart Home Product Ownership

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In the paradigm of the outcome-based business model, the strategic decision by
manufacturers to retain ownership of the product heralds a transformative approach to smart
home provisioning. This choice facilitates a spectrum of dynamic alternatives, ranging from
traditional one-time purchases to more innovative models like rental, leasing, subscription-
based services, and resource sharing. As delineated in Figure 10, the enduring ownership
tenure assumed by manufacturers becomes not only a financial incentive but a commitment
to uphold the product's quality throughout its entire life cycle. This extended responsibility
aligns with the tenets of Industry 4.0, where the convergence of digital technologies and
manufacturing processes demands a reevaluation of traditional business models.
The integration of IoT technology serves as the cornerstone for these evolutionary shifts. This
technological facet enables the collection of high-volume real-time or near-real-time data,
fundamentally reshaping the economic landscape of smart homes. Through this data-centric
approach, manufacturers gain invaluable insights into product usage patterns, performance
metrics, and user behaviors. This data-driven intelligence becomes the basis for crafting
nuanced and flexible pricing structures. Particularly in the context of non-ownership business
models, where the user may opt for outcome-driven arrangements, the ability to seamlessly
adopt pay-per-outcome structures emerges as a pivotal element. In essence, the utilization of
IoT technology not only facilitates economic innovation but also redefines the relationship
between manufacturers and consumers in the smart home ecosystem.
Shifting the focus to data ownership, a critical consideration within the smart home
landscape, the tripartite relationship between the smart home integration company, the smart
home manufacturer, and the customer assumes paramount importance. In the modern era
marked by heightened awareness of data privacy, transparency, and ethical usage, the
ownership and control of data become pivotal aspects of user-centric design. This intricate
relationship entails a commitment to data transparency, wherein customers are provided with
unambiguous insights into how their data is utilized within the smart home ecosystem. This
transparency, coupled with the ability for customers to monitor data usage at all times,
establishes a foundation of trust and accountability.
Furthermore, the delineation of data ownership responsibilities between the smart home
integration company and the smart home manufacturer is crucial. Clear and open
communication channels are maintained to elucidate the purposes and scope of data
utilization, ensuring that customers are well-informed participants in the data exchange
process. This commitment to transparency not only aligns with contemporary expectations
for ethical data practices but also establishes a collaborative framework where all
stakeholders are cognizant and engaged in the responsible and ethical utilization of data
within the smart home environment.

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 Chapter IV
Business Model Analysis

4.1 Product Dimension Service Details

In the analysis of the business model for smart homes, the articulation of service details is a
pivotal element, particularly in distinguishing between indispensable and optional product
dimensions. This differentiation aligns with the inherent nature of smart home products,
categorizing certain dimensions as essential, such as the switch, while categorizing others as
optional, allowing users to customize their smart home environment based on individual
preferences.
 Essential Product:
The foundational dimension within the smart home ecosystem is the switch, serving as a
central control mechanism for various functionalities. The switch dimension is categorized as
indispensable, necessitating continuous activation to govern the entire system effectively.
This includes managing other dimensions and ensuring seamless integration of smart home
components. The imperative nature of the switch warrants a consistent and uninterrupted
operation, forming the linchpin of the smart home infrastructure.
 Optional Product:
Conversely, other dimensions, including but not limited to humidity, motion, sound,
fingerprint, fire, smoke, temperature, air quality, and light, are considered optional. Users
have the flexibility to selectively engage these dimensions based on contextual needs and
personal preferences. Unlike the switch, these dimensions do not require continuous
activation but can be selectively turned on or off depending on the presence of occupants
within the smart home environment.
 Differential Pricing Based on Activation Requirements:
The discernment between essential and optional dimensions introduces a nuanced approach
to pricing within the smart home business model. Given that certain dimensions, like the
switch, demand continuous activation, a baseline subscription fee is established to cover the
essential services that are consistently operational. For optional dimensions, users are offered
a tiered pricing structure that reflects the selectivity and sporadic nature of their activation.
This ensures a fair and tailored pricing model, aligning with the varying needs and
preferences of smart home users.
1. Pay Every Use
The exploration of advanced payment models for smart home products has led to the
identification of a specific product category well-suited for a pay-per-use framework. Among
the discerned products, home environment devices, represented by thermostats, air
conditioners, and heaters, emerge as fitting candidates for this payment paradigm. This
categorization arises from a careful consideration of the intermittent nature characterizing
their usage patterns, where users are charged only for the periods of active engagement,
primarily when occupants are present within the dwelling.

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The conceptual foundation of this payment model strategically aligns the payment structure
with the tangible utility and consumption of the products. By tailoring the payment scheme to
the sporadic nature of user interaction with home environment devices, the proposed pay-per-
use model offers distinctive flexibility and cost-effectiveness. This strategic alignment caters
to the diverse needs of smart home consumers, recognizing that continuous access to these
devices may not be a requisite for all users.
In essence, the delineated pay-per-use model for home environment products within the smart
home ecosystem reflects a meticulous consideration of usage variability. The academic
discourse underscores the significance of adapting payment structures to the dynamic nature
of smart home devices, fostering a nuanced and equitable approach to cost allocation based
on actual user engagement and consumption patterns.
2. Pay Every Month
The envisioned business model for smart homes introduces a distinct category of products
that are suited for a pay-every-month subscription model, encompassing pivotal components
essential for the continuous and seamless operation of the smart home ecosystem. This
category includes security systems, switches, and safety features, all of which demand
constant activation and vigilance, justifying the adoption of a subscription payment model for
ongoing access and functionality.
Security systems, positioned as a foundational element within the smart home infrastructure,
necessitate 24/7 monitoring to ensure immediate responses to potential threats. The pay-
every-month subscription model aligns seamlessly with the perpetual nature of security
requirements, offering users uninterrupted access to a comprehensive suite of safety
measures.
The switch dimension, serving as a fundamental control mechanism for various smart home
functionalities, requires continuous activation to respond promptly to user inputs or
automated schedules. Opting for a monthly subscription ensures users sustained access to this
essential control system, contributing to the smooth operation of the entire smart home
ecosystem.
Safety systems, such as fire and smoke detectors, fall within this subscription model category
due to their critical role in protecting inhabitants and property. These systems demand
constant activation for timely hazard detection and response, justifying the need for a
continuous payment model.

Figure 10. Subscription Payment Model

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4.2 Financial Assessment Analysis

Figure 11. Financial Analysis Model

The financial analysis of the smart home outcome economy business model employs various
assessment tools, including net present value (NPV) analysis, scenario analysis, and
sensitivity analysis. The conceptual framework for financial feasibility assessment is
illustrated in Figure 12. More comprehensive financial evaluation is conducted for two
alternative projects: the traditional product selling business model (Model A) and the
outcome-based sharing business model (Model B). The data pertaining to cost and revenue
factors for both models are collected, with a specific focus on quantifying outcome-based
features. Model B undergoes a meticulous price determination process to establish the "pay-
per-outcome" price, incorporating scenario analysis to find a viable price, NPV analysis to
assess profitability, and sensitivity analysis to estimate risks associated with the proposed
business model.
Within Model B, the pay-per-outcome pricing is determined through a detailed process, as
depicted in Figure 12. The initial pricing period and corresponding prices in the pay-per-
outcome payment scheme are established. Each pay-per-outcome price undergoes constant
revision and verification until it satisfies three conditions: (a) does not exceed the
competitor's price (upper price limit), (b) adheres to the price relationship rule between
different pricing periods, and (c) aligns with the worst-case scenario in the scenario analysis,
ensuring a higher NPV under potential outcomes. This rigorous financial assessment
framework provides a holistic understanding of the viability and profitability of the smart
home outcome economy business model.

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4.3 Research and Development Analysis
In enhancing the research and development (R&D) initiatives within the Outcome Economy
business model for smart homes, three critical components necessitating improvement are the
Value Chain Analysis, Maintenance Algorithm, and Financial Analysis. Each of these
components contributes significantly to the overarching efficiency, functionality, and
sustainability of the smart home system.

Figure 12. Research and Development Model

 Value Chain Analysis Enhancement:

The Value Chain Analysis plays a central role in the research and development endeavors of
smart home products and services. To enhance this critical facet, a more detailed and nuanced
examination of the value chain is deemed essential. This entails a comprehensive assessment
of each phase within the lifecycle, spanning from the acquisition of raw materials and the
manufacturing process to distribution, marketing, and post-sales services. By pinpointing
areas amenable to optimization, such as the incorporation of eco-friendly materials or the
streamlining of distribution channels, the overall value proposition of the smart home system
can be significantly enhanced. Moreover, it is crucial to integrate a focus on sustainable and
ethical practices throughout the value chain, aligning with contemporary environmental and
social considerations. This holistic approach ensures that the smart home system not only
delivers cutting-edge technological solutions but also adheres to principles of sustainability
and social responsibility across every phase of its lifecycle.
 Maintenance Algorithm Refinement:
The refinement of the Maintenance Algorithm stands as a pivotal undertaking in the
optimization of smart home systems, representing a critical component in the realm of
predictive maintenance. The primary objectives of this refinement endeavor encompass
augmenting predictive accuracy and enhancing algorithmic efficiency. Advanced machine
learning techniques and data analytics are proposed for integration, drawing insights from
historical performance data, real-time diagnostics, and user behavior patterns. These
enhancements collectively contribute to the evolution of the algorithm, enabling it to
anticipate potential issues before they manifest. Furthermore, the incorporation of user
feedback and preferences is advocated to imbue the algorithm with a more personalized and
proactive approach to maintenance. Continuous learning mechanisms are recommended for
integration, ensuring the algorithm's adaptability to evolving technologies and user habits.
This comprehensive optimization strategy aims to elevate the reliability and effectiveness of
the Maintenance Algorithm within smart home systems, ultimately fostering a more
proactive, user-centric, and adaptive approach to system maintenance.

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  Company Financial Analysis Optimization:
Financial analysis is crucial for determining the optimal payment structure that ensures
profitability for the company while maintaining customer satisfaction in the context of the
smart home business model. This analysis involves a comprehensive examination of various
financial aspects, including pricing, profit margins, deposit fees, maintenance costs, and
repair expenses. The financial viability of the business model depends on striking a delicate
balance between setting a competitive price point that attracts customers and generating
sufficient profit to sustain the company's operations.
The pricing strategy should consider factors such as the initial cost of installation,
subscription fees, and deposit fees, with the aim of providing customers with a transparent
and reasonable payment structure. The deposit fee serves as a financial safeguard for the
company, covering potential repair costs caused by user-related issues. Additionally,
subscription plans should be strategically designed, considering the continuous operation of
essential services like security and safety systems, while offering flexibility for customizable
features that cater to individual preferences.
The financial analysis also extends to maintenance costs, ensuring that the company allocates
resources efficiently to address any issues promptly. Predictive maintenance, facilitated by
advanced algorithms, plays a crucial role in minimizing unexpected repair costs and
enhancing the overall financial predictability of the business model. Moreover, exploring
cost-effective technologies, forming strategic partnerships, and evaluating the long-term
customer lifetime value contribute to an optimized financial outlook.
Optimized financial analysis is essential for crafting a smart home business model that not
only attracts customers with a competitive pricing structure but also ensures the company's
financial sustainability through strategic planning, efficient resource allocation, and a focus
on long-term customer relationships.

4.4 Customer Journey Model Analysis

Figure 13. Customer Journey Model

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Customer journey model delineates the sequential actions involved in the acquisition of smart
home products, drawing a comparative analysis between the traditional approach of
purchasing individual devices and our innovative subscription-based Outcome Economy
model. In the awareness phase, customers, for the original purchase, become cognizant of
individual smart home products through various channels, including advertisements, reviews,
or recommendations. In contrast, prospective subscribers gain insights into the subscription-
based smart home system through targeted promotional materials, online platforms, or
strategic marketing campaigns. During the research phase, customers conducting an original
purchase engage in comprehensive research to evaluate specific products, features, and brand
reputations, enabling them to make informed purchasing decisions. In the subscription model,
potential subscribers explore a range of subscription plans, considering factors such as
included services, product offerings, and associated costs. The decision-making process
involves customers, in the case of the original purchase, choosing specific smart home
devices for one-time purchases, while, for the subscription model, customers opt for
subscription plans aligning with their preferences, encompassing a comprehensive array of
services, continuous product access, and ongoing support.
The subsequent purchase phase differs significantly between the two models. For the original
purchase, customers acquire individual devices by making upfront payments for the selected
products. On the other hand, subscribers to the Outcome Economy model commit to a
recurring fee, granting them access to the entire smart home system and its associated
services. The installation phase follows, where customers who have made an original
purchase either self-install purchased devices or may hire professionals for installation if
needed. In contrast, subscribers to the Outcome Economy model benefit from professional
installation services as an integral component of the comprehensive subscription package.
The usage phase sees customers employing the purchased devices according to the
manufacturer's guidelines in the original purchase model. In the subscription model,
subscribers enjoy the smart home system with continuous support, regular updates, and
personalized assistance.
Maintenance practices diverge between the two models. Customers making an original
purchase assume responsibility for maintenance and repair costs after the expiration of the
warranty period. Conversely, subscribers to the Outcome Economy model rely on the
subscription service for proactive maintenance, timely repairs, and regular updates, thereby
reducing individual responsibility. Finally, the upgrade phase showcases distinctions in
customer decisions. Customers making an original purchase decide on device upgrades by
purchasing new models when desired. In contrast, subscribers to the Outcome Economy
model seamlessly access automatic upgrades and replacements integrated into the
subscription, ensuring they remain up to date with the latest technological advancements.
Key differences underscore the advantages of the subscription-based Outcome Economy
model. It offers continuous services, including maintenance, updates, and personalized
support. Users within the subscription model experience shared ownership, thereby reducing
individual responsibility for device-related issues. Automatic upgrades and replacements are
intrinsic to the subscription model, enhancing the overall user experience. This illustrative
diagram encapsulates the distinctive actions and benefits of our subscription-based Outcome
Economy model compared to the traditional purchase of standalone smart home products.

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 Chapter V
Proposed Business Model Conclusion
5.1 Outcome Economy Analysis
The application of the Outcome Economy framework to the smart home business model
marks a transformative shift, redefining conventional approaches to emphasize outcomes,
user-centricity, and sustainability. This comprehensive analysis delves into the integral
components shaping the contemporary smart home landscape within the ambit of the
Outcome Economy.
Within this paradigm, manufacturers retain ownership, ushering in versatile models such as
renting, leasing, and subscription-based offerings. A fundamental facet lies in differentiating
between essential and optional dimensions. Essential dimensions, exemplified by switches,
dictate continuous operation, while optional dimensions grant users the flexibility to tailor
their smart home environment according to individual preferences.
A nuanced pricing strategy emerges to align costs with usage patterns. Essential services, like
switches, warrant baseline subscriptions, ensuring continuous access. Optional features,
offering customization, adopt tiered structures to accommodate diverse user needs.
Introducing the "Pay Every Use" model responds to sporadic engagement, while the "Pay
Every Month" subscription ensures uninterrupted access to vital components such as security
systems and switches.
Predictive maintenance assumes a pivotal role, driven by advanced algorithms that anticipate
potential issues, thereby mitigating unexpected repair costs. The integration of third-party
maintenance aggregators introduces economies of scale, enhancing cost-effectiveness and
fostering user-centric maintenance practices.
The Value Chain Analysis takes center stage in enhancing sustainability across the entire
product lifecycle. From raw material acquisition and manufacturing to distribution and post-
sales services, a detailed examination identifies areas amenable to optimization, fostering an
overall value proposition that aligns with contemporary environmental and social
considerations.
The refinement of Maintenance Algorithms involves the integration of advanced machine
learning techniques and user-centric adaptability. Continuous learning mechanisms, drawn
from historical performance data, real-time diagnostics, and user behavior patterns, enhance
predictive accuracy and overall algorithmic efficiency.
The Financial Analysis component proves crucial, involving a comprehensive examination of
pricing, profit margins, deposit fees, maintenance costs, and repair expenses. Striking a
balance between a competitive price point and profitability is paramount, considering factors
like installation costs, subscription fees, and deposit fees. Strategic subscription plans,
especially for essential services like security systems, contribute to sustained financial
viability.
The Outcome Economy analysis offers a strategic roadmap for businesses navigating the
dynamic smart home ecosystem. Emphasizing ownership flexibility, nuanced pricing,
optimized maintenance, and robust R&D practices, this analysis heralds a user-focused era.
By embracing tangible outcomes, customization, and sustainable practices, the smart home
industry can not only meet but exceed user expectations, pushing the boundaries of
technological possibilities in the ever-evolving landscape.

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5.2 Business Model Conclusion
The exploration of the Outcome Economy within the smart home business model unveils a
paradigm shift with profound implications for manufacturers, service providers, and
consumers alike. This comprehensive analysis elucidates key takeaways that collectively
formulate a transformative business model for smart homes.
The paradigmatic shift towards outcome-based models introduces a novel approach to
ownership, enabling manufacturers to retain control while offering consumers versatile
options such as renting, leasing, and subscriptions. This dynamic ownership framework
aligns with the varied preferences of smart home users, allowing them to customize their
environments based on individual needs.
A nuanced pricing strategy responds to the diverse usage patterns inherent in smart home
ecosystems. Essential services, including switches and security systems, adopt baseline
subscriptions for continuous access, while optional features employ tiered structures for
flexibility. The introduction of innovative payment models such as "Pay Every Use" and "Pay
Every Month" further enhances affordability and accessibility.
Predictive maintenance, empowered by advanced algorithms, emerges as a linchpin for
ensuring seamless operation and cost-effectiveness. By anticipating issues before they
manifest, these algorithms mitigate unexpected repair costs. Integration with third-party
maintenance aggregators enhances economies of scale and user-centric maintenance
practices, fostering a proactive and personalized approach.
The Value Chain Analysis and continuous refinement of Maintenance Algorithms underscore
the commitment to sustainability and innovation. A detailed examination of the value chain
identifies optimization opportunities, fostering a holistic value proposition aligned with
contemporary environmental and social considerations. The infusion of advanced machine
learning techniques and user-centric adaptability into Maintenance Algorithms further ensures
adaptability to evolving technologies and user habits.
The financial analysis is a linchpin for crafting a smart home business model that balances
profitability with customer satisfaction. Pricing structures, deposit fees, and subscription
plans are strategically designed to provide transparent and reasonable payment structures.
The financial viability is further bolstered by efficient resource allocation, predictive
maintenance, and a focus on long-term customer relationships.
The Outcome Economy business model for smart homes not only embraces technological
innovation but places user-centricity, customization, and sustainability at its core. As smart
homes continue to evolve, this business model provides a strategic roadmap, ensuring
manufacturers and service providers meet the dynamic needs of consumers. The key
takeaways emphasize adaptability, efficiency, and a commitment to delivering tangible
outcomes, paving the way for a smarter, more user-friendly, and sustainable future in the
realm of smart home technology.

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