AGENDA INTRODUCTION TO SMART, CONNECTED PRODUCTS DRIVERS FOR THE ADVENT OF SMART DEVICES REDIFINING INDUSTRY BOUNDRIES AND COMPETITION IoT TO IOT STRATEGY . Smart, connected products are dramatically changing opportunities for value creation in the economy. The range of potential new services enabled by smart, connected products is limited only by the imagination. Whatever the leadership structure, security cuts across product development, dev-ops, IT, the field service group, and other units. When these include information about a products service needs and step-by-step repair instructions, service efficiency and effectiveness can increase dramatically. Beyond this, software firms have already moved in directions essential to competing in smart, connected products, such as evergreen design, remote upgrading, and product-as-a-service models. This occurs as the basis of competition shifts from discrete products, to product systems consisting of closely related products, to systems of systems that link an array of product systems together. But just because a company can offer many new capabilities does not mean that their value to customers exceeds their cost. Because the products themselves often have limited processing power, they cannot support modern security hardware and software. They can also have supporting information for executing the repairs. When monitoring detects that a Tesla vehicle is due for repairs, the car either autonomously calls for a remote repair via software or sends a notification to the customer with an invitation to request that a valet deliver it to the Tesla facility. The firm transmits software upgrades to its cars, continually improving the customer experience and giving drivers the equivalent of the new car smell with each update. 6. New entrants in a smart, connected world face Expand 23 Yet OE is rarely a source of sustainable advantage, because competitors will implement the same best practices and catch up. Products will change the basic principles of product design. However, the organizational model for managing security is still being written. The organizational model needs to change, and most companies do not understand this yet. In this Harvard Business Review spotlight on managing the Internet of Things, the authors share an in-depth explanation of how smart, connected products are poised to reshape competition within industries. The Internet simply provides ubiquitous connectivity at low cost. This transformation started with product development but is playing out across the value chain. First, products can monitor and report on their own condition and environment, helping to generate previously unavailable insights into their performance and use. While some of them may not care how their data is used, others may feel strongly about data privacy and reuse. New apps can be added or touchscreen keyboards set up for different languages. The second in a two-part series. Product-as-a-service models can increase buyers power, because customers may be able to switch after the contract period (if the product is not embedded as with an elevator), unlike with perpetual ownership. Alerting is not available for unauthorized users, Right click and copy the link to share this comment, One of the 10 key strategic choices to be made is of particular interest to me since my team and I work around the, How Information Gives You Competitive Advantage, How Smart Connected Products Are Transforming Competition, SAP Billing and Revenue Innovation Management (BRIM) solution, ISSUU - VanillaPlus Magazine Dec 2014 - Jan 2015 by Prestige Media. In fleets of vehicles, information about the pending service needs of each car or truck, and its location, allows service departments to stage parts, schedule maintenance, and increase the efficiency of repairs. In conventional products, variability is costly because it requires variation in physical parts. For example: On the other hand, smart, connected products also present challenges: A) With smart, connected products, data is a critical new resource. Technicians often must inspect a product to identify the reason for a failure and the parts needed to correct it and then make a second trip to perform the repair. The manufacturer, through access to product data and the ability to anticipate, reduce, and repair failures, has an unprecedented ability to affect product performance and optimize service. First, it must decide which features will deliver real value to customers relative to their cost. But collecting data requires sensors, which add cost to the product, as does transmitting, storing, securing, and analyzing this data. However, in modern lingo the term "connected device" primarily refers to a product with a real-world function that's connected to the Internet in order to transmit data or be controlled . Product-as-a-service business models, for example, allow users to have full access to a product but pay only for the amount of product they use. Managing organizations. Finally, as smart, connected products expand industry scope and the boundaries of competition, many companies will need to rethink their corporate purpose. Should the company fully or partially dis-intermediate distribution channels or service networks? Ongoing security risk is part of the business case for which data to collect and how to manage it. A function like IT might be assigned the lead role for smart, connected product strategy and deployment. Information technology is revolutionizing products. A closed approach may result in one manufacturers system becoming the de facto industry standard, enabling this company to capture the maximum value. Using predictive analytics, organizations can anticipate problems in smart, connected products and take action. We believe that the exponential opportunities for innovation presented by smart, connected products, together with the huge expansion of data they create about almost everything, will be a net generator of economic growth. Data about the performance of a products components, for example, could be valuable to suppliers of those components. The first two waves gave rise to huge productivity gains and growth across the economy. In a farm setting, data from humidity sensors can be combined with weather forecasts to optimize irrigation equipment and reduce water use. The data organization, along with IT, will normally be responsible for securing product data, defining user access and rights protocols, and identifying and complying with regulations. The vast amounts of data that smart, connected products gather are creating new ways for service personnel to work individually, together, and with customers. Smart homes, which involve numerous product systems including lighting, HVAC, entertainment, and security, are another example. Now companies need new forms of collaboration and entirely new functional units. For example, automated tillers inject nitrogen fertilizer at precise depths and intervals, and seeders follow, placing corn seeds directly in the fertilized soil. Clearly, shared usage will reduce the need for urban residents to own bikes, but it may encourage more residents to use bikes since they do not have to buy and store them. As noted, these interfaces are less costly to implement and easier to modify than physical controls, and they enable greater operator mobility. Customers pay for the use of the product (such as cars or bikes) when they need it, and the company (such as Zipcar or Hubway) is responsible for everything else. As per Porter The net effect of smart, connected products will be different in every industry, but across the board the nature of competition will change. Such as, 6. This path has resulted in slower job growth, slower improvements in wages and living standards for the average citizen, a diminished sense of economic opportunity, doubts about capitalism, and reduced public support for business. Yet this phrase is not very helpful in understanding the phenomenon or its implications. Product companies are also facing challenges from other nontraditional competitors like Apple, which recently launched a simpler, smartphone-based approach to managing the connected home. These "smart, connected products"made possible by vast improvements in processing power and device miniaturization and by the network benefits of ubiquitous wireless connectivityhave unleashed a new era of competition. What is clear is that in this new world of digitally transformed business models Run Simple is a necessary pre-condition for the agility required. However, the complexity facing users in operating these interfaces will increase. How the IOT will change one of the topics (SCM, Enterprise, etc.) These smart, connected products offer exponentially expanding opportunities for new functionality, far greater reliability, and capabilities that cut across and transcend traditional product boundaries. Source How Smart, Connected Products Are Transforming Competition, HBR, November 2014. Data on warranty status becomes more valuable when combined with data on product use and performance. Should the company change its business model? With the development of smart, connected products, however, IT must assume a more central role. Product-as-a-service models can increase buyers power, because customers may be able to switch after the contract period (if the product is not embedded as with an elevator), unlike with perpetual ownership. Thesis smart, connected products implications for business need to adjust strategies creating new industries Recent article Newer smart, connected products Lots of new considerations IoT + valid points + reputation of Michael Porter + real world examples - Get started for FREE Continue. The emergence of product systems and systems of systems raises at least two types of strategic choices about company scope. These smart, connected productsmade possible by vast improvements in processing power and device miniaturization and by the network benefits of ubiquitous wireless connectivityhave unleashed []. As data streams in, the twin evolves to reflect how the physical product has been altered and used and the environmental conditions to which it has been exposed. Some have suggested that the internet of things changes everything, but that is a dangerous oversimplification. Smart, connected products raise a broad set of new strategic choices for companies about how value is created and captured, how to work with traditional partners and what new partnerships will be required, and how to secure competitive advantage as the new capabilities reshape industry boundaries. Download Now Many of the organizational shifts that smart, connected products are bringing to manufacturing mirror changes that have already taken root in the software industry. With its new Babolat Play Pure Drive system, which puts sensors and connectivity in the racket handle, the company now offers a service to help players improve their game through the tracking and analysis of ball speed, spin, and impact location, delivered through a smartphone application. Today its common to see click through agreements giving broad consent to collect product data the first time a smart, connected product is used. A hybrid approach, in which a subset of functionality is open but the company controls access to full capabilities, occurs in industries like medical devices, where manufacturers support an industry standard interface but offer greater functionality only to customers. The company also makes it easy to connect smart home devices from a variety of other manufacturers to its hub and has built an extensive partner ecosystem that already encompasses more than 100 compatible products. The basic tenets of strategy still apply. HOW SMART, CONNECTED PRODUCTS ARE TRANSFORMING COMPETITION 5 The real transformation is when smart, connected products are brought together into a connected "product system" where the smart, connected tractor is integrated with other farm equipment to optimize the entire farming operation. But not only the product itself is being affected. At the broadest level, the rich data and real-time feedback from smart, connected products challenge the traditional centralized command-and-control model of management in favor of distributed but highly integrated choices and continuous improvement. Withings, for example, has reduced its blood pressure monitor to a cuff and sensor, eliminating the display through an app that can track blood pressure and send updates directly to clinicians. The company can also update a machine with preventive fixes when feature enhancements are added, sometimes remotely. Smart, connected products ultimately can function with complete autonomy. For many firms, smart, connected products will force the fundamental question: What business am I in? This article provides a framework for developing strategy and achieving competitive advantage in a smart, connected world. A Tesla vehicle in need of repairs can autonomously call for a corrective software download, or, if necessary, send a notification to the customer with an invitation for a valet to pick up the car and deliver it to a Tesla facility. In addition, far more intense coordination among functions is now required. Products will be designed to be part of systems and have evergreen design so they can be continuously services and upgraded, with product usage data enabling rapid redesign. Another option for handling data rights and access includes the establishment of a data-sharing framework with component suppliers for providing information about the components condition and performance but not about its location. The company gets on its own, steeper learning curve, which can help maintain its competitive advantage. The companies and other institutions that can speed this journey will prosper and make a profound difference for society. Smart, connected products dramatically expand opportunities for product differentiation, moving competition away from price alone. Using data, a product can alert users or others to changes in circumstances or performance. Marketers can apply this deeper knowledge to tailor special offers or after-sale service packages, create features for certain segments, and develop more-sophisticated pricing strategies that better match price and value at the segment or even the individual customer level. In addition, customers may have strong relationships with resellers and channels that offer them a broader product line and deep and local field-based expertise. They are creating the first true discontinuity in the organization of manufacturing firms in modern business history. The relationship a firm has with its productsand with its customersis becoming continuous and open-ended. Companies whose products and designs have the greatest impact on total system performance will be in the best position to drive this process and capture disproportionate value. HOW SMART, CONNECTED PRODUCTS ARE TRANSFORMING COMPETITION 1 "During this time [waves one and two], products stayed largely the same. The productivity of activities dramatically increased, in part because huge amounts of new data could be captured and analyzed in each activity. Sysmex originally added connectivity to its instruments to allow remote monitoring but now uses it to provide service as well. Equipment is monitored continuously for performance and faults, and technicians are dispatched underground to deal with issues requiring human intervention. Security will affect multiple functions. The importance of traditional suppliers to total product cost will often decline, and their bargaining power will fall. They may also capture first-mover advantages and the ability to influence the direction of technology development. A smartphone app will guide drivers to open spaces, reducing congestion and improving space utilization. Early warnings about impending failure of parts or components can reduce breakdowns and allow more efficient service scheduling. Smart, connected products create new production requirements and opportunities. The evolution of products into intelligent, connected devices is revolutionizing business. This has enabled the Rush Hour Rewards program, which raises residential customers air conditioning thermostat temperature to reduce energy use during peak demand periods and precools a home before peak demand begins. 2014: " How Smart Connected Products Are Transforming Competition " The Internet of Things now allows companies to create new capabilities for differentiation and operational effectiveness. Products once composed solelyof mechanical and electrical parts have become complex systems combining hardware, sensors, electronics, and software that connectthrough the internet in myriad ways. However, smart, connected products often introduce powerful new suppliers that manufacturers have never needed before: providers of sensors, software, connectivity, embedded operating systems, and data storage, analytics, and other parts of the technology stack. It now can alter the horsepower of a standard physical engine using software alone. 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