Discovering Unique Selling Propositions in the IoT Ecosystem – Part 1

Arpit Khosla, Founder of IoT Australia Consulting Services

IoT is widely recognized as one of the fastest‑growing technology sectors, yet its complexity and diversity make it challenging to identify the most promising investment opportunities and unique selling propositions (USPs). In this two‑part series, Arpit Khosla and Praneet Thakur, Advisor at IoT Australia Consulting Services, break down the key business levers that drive value in IoT solutions and provide a framework for evaluating investment potential. Although we use the Australia/New Zealand (ANZ) market as a running example, the insights apply globally and across industries, empowering both entrepreneurs and investors to craft differentiated IoT offerings.

Read Part 2 here.

Understanding the value‑chain economics is the first step toward assessing business potential. At its core, the IoT value chain consists of: 1) the “Things” – devices that are smart by design or retrofitted with sensors; 2) edge computing hardware such as gateways; 3) connectivity solutions; 4) back‑end platforms; and 5) supporting services. For context, Australian revenues across all these segments are projected to hit AUD 30 billion by 2022.

Most “Things” are now equipped with sensors and communication modules, and the cost of adding these components is relatively low for established manufacturers. Consequently, the “Things” segment is likely to be dominated by global manufacturing hubs that can scale sensor and device production. Sensor manufacturing, however, remains capital‑intensive and highly specialized, creating a high barrier to entry that protects incumbents.

The next tier – IoT edge – is a highly competitive space. Edge gateways can be built on inexpensive hardware such as Intel NUCs (AUD 500‑600) or low‑cost boards like Raspberry Pi and Arduino (AUD 30‑200). While the hardware barrier is modest, the market is crowded, and solutions are easily replicable. This low innovation floor and high imitability discourage deep investment, except where vertical‑specific customization adds value. For example, manufacturing, mining, healthcare, and utilities often require gateways that support proprietary protocols such as Profinet, creating niche opportunities for differentiated offerings.

Even as the market leans toward commoditization, advanced edge features—such as local analytics and hybrid edge‑cloud architectures—offer avenues for value creation. Startups that can embed industry‑specific compliance, robust security, and edge analytics into their gateway solutions stand to capture significant upside.

Connectivity providers form the backbone of IoT deployments. In the current landscape, unlicensed short‑range technologies (e.g., Zigbee, Z‑Wave, Wi‑Fi) are expected to dominate due to their scalability and cost advantages. Low‑Power Wide‑Area Network (LPWAN) technologies, such as LoRa and NB‑IoT, sit at the second tier, with ongoing competition between cellular and non‑cellular incumbents. While 5G promises high‑bandwidth, low‑latency performance for specific use cases, its overall market penetration remains uncertain, and traditional cellular operators face significant regulatory and economic challenges.

Given the oligopolistic yet competitive nature of the telco market, investing in licensed bands is risky. Conversely, the emerging unlicensed LPWAN segment offers a relatively untapped playground for investors and entrepreneurs, especially as standardization and regulatory frameworks evolve. Collaborating with new MVNOs that specialize in IoT can also unlock innovative business models and accelerate market entry.

In short, the two segments that present the greatest potential for differentiation and strong returns are: 1) customized gateway development for vertical markets, and 2) unlicensed LPWAN network solutions. These areas allow businesses to create compelling USPs while capitalizing on market gaps that are less accessible to larger incumbents.

Read Part 2 here.

The authors of this blog are Arpit Khosla, Founder of IoT Australia Consulting Services, and Praneet Thakur, Advisor of IoT Australia Consulting Services.