Light the way for smart cities: lessons from Philips Lighting

Smart cities are one of the dominant manifestations of digitization with a multimillion dollar potential, where cities and companies alike are looking for ways to create and capture value. Technology-driven companies are key to making smart cities a reality, but their current product-centric business models do not meet the changing needs anymore. Based on an in-depth study at Philips Lighting of four smart city cases across a period of five years, our article illustrates four distinct business models that enable incumbent organizations to enter this smart city market. We develop and contrast the four types of business models on individual and joint value creation and value capture dimensions and show how each business model can be of value to an incumbent, depending on the project and ecosystem. We illustrate these business models with insights from Philips Lighting's transition from public lighting to smart cities and provide specific implementation suggestions for incumbent companies.