Strategies in Smart Service Systems Enabled Multi-Sided Markets: Business Models for the Internet of Things Tayfun Keskin University of Washington Bothell tkeskin@uwb.edu Deanna Kennedy University of Washington Bothell dkennedy@uwb.edu Abstract Internet of Things has the potential to disrupt industries through changing products, services, and business models just as the Internet did in the ‘90s. Machine-to-machine communication is at the core of Internet of Things. Machines that we interact with in everyday life will start interacting with each other, collect data, and even use advances in data technologies to make decisions for us. Organizations, in order to achieve the highest profit, should also redesign their business service models conscientiously around externalities across markets that link through platforms and be specific about which markets to serve. In this research, we aim to build business ownership strategies to further two- sided markets and platforms literature. Herein, we focus on a number of business service models that link four sides of a market, and compare the advantages and disadvantages of network externalities generated by Internet of Things in each model. 1. Introduction What is the technology that lets us control our thermostat at our homes using mobile phones, or the technology our refrigerators use to order groceries automatically? These are examples of a technology trend called Internet of Things, which uses the power of the Internet and advances in hardware technology to enable objects of everyday life to communicate with each other and make intelligent decisions. We are familiar with smart devices such as computers, tablets, and smart phones etc. that use the Internet to communicate with each other. The phenomenon by which all the other devices, which are not perceived to be smart that use the Internet to communicate with each other, is called “Internet of Things”. Internet of Things (IoT) is a phenomenon that is on path to change our lives just as the Internet did in the 1990s. IoT was referred to by various names like Machine-to-Machine (M2M) communications, Device to Device (D2D), etc. before the name “Internet of Things” was officially coined [1]. The main components of IoT are objects that communicate with each other, the Internet that is the communication medium, hardware that collects data from objects, and platforms that enable communications and making decisions. Prior research surveyed the computing realm relevant to IoT [2, 3], defined key constructs, investigated security issues [4, 5], developed deployment schemes for sustainable IoT [6], and even recommended architecture frameworks [7]. However, they did not investigate the industry structure or recommend viable business service models. Our preliminary interviews with practitioners revealed these strategic aspects such as market presence, complementarities and e-Commerce service models. In brief, the main issue we observe is the need of a prospectus for strategic planning. First movers for earlier disruptive information technologies could not always monetize their leader role because, although they might have a good grasp of the technology itself, they usually fail to understand market dynamics, complementarities, and the multi- sided nature of the contemporary industries. For example, AltaVista, one of the earliest search engines could not recognize that advertising (another side in the search market) could be the key for monetization, and Google took over the entire search engine market. Similarly, Netscape could not identify strategic complementarities between their internet browser product and other information goods such as an operating system, hence disappeared from the internet browser realm. Firms that could not predict how an industry might change or develop because of a new and potentially disruptive technology typically fail regardless of its technological purview. These examples lead to the main motivation for this research, which is the lack of extension beyond an outline of a technical concept. We address the need for identifying the player structure of the IoT enabled 2015 48th Hawaii International Conference on System Sciences 1530-1605/15 $31.00 © 2015 IEEE DOI 10.1109/HICSS.2015.176 1443