Smart phone with Internet of things (IoT) word and objects icon,Internet networking concept.
Information Technology, repeatedly has brought tremendous opportunities for businesses to gain competitive advantage. Over the past fifty years, there have been two significant waves, where IT radically reshaped competition and strategy. The first wave came in during the 1960s when IT transformed the manufacturing sector with automated value chains and CAD. The businesses which took this leap made tremendous gains, with the operational benefits and productivity increase. The second wave was the Internet. Companies in the 1980s witnessed, even more productivity increase through the coordination and inter-connectivity between suppliers, vendors, channels and even geographies.
Today, we are riding on the third wave of digital transformation. Gone are the days when we thought of Internet of Things (IoT) as a phenomenon of the future. IoT is already transforming businesses and competition in ways never imagined before. And, as the IoT wave continues to spread, businesses will have to re-imagine their business models and how they think about profitability.
The Evolution of Product to Product-as-a-Service
While the first and the second IT waves changed the way business is done, the third wave will transform the products themselves. Products will evolve from being standalone units to complex systems involving hardware components, sensors, storage, microprocessors, software and connectivity modules. They will no longer be a one-and-done deal. They will enable businesses to understand and respond to consumer behavior, which was never possible before.
They will enable businesses to understand and respond to consumer behavior, which was never possible before. This ability to gain real-time understanding of consumer behavior makes it bigger than the first and second waves of IT revolution. Getting insights right from the point where a customer is browsing through a store, buying a product to using it and thereby figuring out what more can be done to enhance the experience is a tremendous opportunity in itself.
Smart Connected Products
Smart connected products are essentially products equipped with the capability of capturing and sending real-time data from your products to your network where they can be analyzed to derive meaningful business insights. For example, Schindler’s PORT Technology reduces elevator wait times by as much as 50% by predicting elevator demand patterns, calculating the fastest time to destination, and assigning the appropriate elevator to move passengers quickly. Businesses capturing data from their products will unlock their potential for:
- Better insights on product usage, which can open opportunities for new functionality
- Enhance customer satisfaction
- Identify new revenue streams
- Increase profitability
Businesses selling or renting out hardware products which, back in the days, comprised of only electrical and mechanical parts, will soon be competing in the market place with smart connected products. This essentially means that the industry structure would change and these products will expose businesses not only to new opportunities but also to new threats.
Adapting to these changes will entail that the business will have to make strategic choices around how this data is collected, maintained and utilized for value creation and value capture. For example, in medical devices, monitoring will be the core element of value creation. Medtronic’s digital blood-glucose meter uses a sensor inserted under the patient’s skin to measure glucose levels in tissue fluid and connects over the Internet (wireless) to a device that alerts patients and clinicians up to 30 minutes before a patient reaches a threshold blood-glucose level, enabling appropriate therapy adjustments.
With Smart connected products in the market, opportunity of product differentiation will expand and move away from traditional “price only” competition. The new age of competition will be based on enhanced service offerings, value added services, customization for niche segments probably with a higher price margin etc. It’s time that the businesses start thinking on these strategic lines.
What do you think about the potential of connected devices? And what can be the challenges of this revolution for businesses. Do you think it will add value to your business? Do share your thoughts.
Note: This is an introduction blog. In my next blog, I will talk about what smart-connected products can actually do, with real-life scenarios and what impact they have on business. We will also delve deeper into few specific industries to help you understand this revolution better.
Business Analyst – Digital Business Consulting, RapidValue