In the modern industrial age, the principal model for organizing economic activity has been linear value chains running from component supplier to OEM to end customer. The Internet of Things (IoT) presents a new opportunity for value creation—and a risk for those who ignore it.

The opportunity: industry incumbents that aggregate data from their own products or their customers’ business processes can establish an IoT platform or ecosystem business that serves a single- or multi-industry user base. (See the sidebar, “Defining Platforms and Ecosystems.”) Other companies can contribute data, products, and services to make the platform more valuable. Platforms and ecosystems have the potential to dramatically alter linear value chains by breaching industry barriers and establishing new value pools.

The risk: incumbents that do not participate in the new IoT models could become mere suppliers of commodity hardware and see their customer relationships erode.

Here’s how we think a major transformation in the B2B industrial economy will play out.