The Smart Product Economy - Uncertainties And Opportunities
The opportunities unleashed by smart products are seemingly endless for any company seeking game-changing innovation or new levels of efficiency
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From smartphones to smart toothbrushes, smart technologies are finding their way into, and around, the everyday things we like to buy. The opportunities unleashed by smart products are seemingly endless for any company seeking game-changing innovation or new levels of efficiency. However, product companies need to get on board, and fast, to ensure they are not left behind in the quickly intensifying and accelerating smart product market. If properly instrumented and personalized, smart products can exude reams of insight on product usage and status across the value chain, and can also inform continuous product improvements and influence strategic moves into connected and/or radically adjacent markets.
The digital data emanating from smart products is where value or alchemy can be found. By distilling and applying the insights gleaned from product intersections, manufacturers (and other players in the value chain) can strengthen customer relationships and create new and more profitable sales channels. But along with these opportunities, there is a flipside: Smart products also introduce uncertainty as they dramatically disrupt marketplaces and existing business models. Leaders need to plan for a period of profound change and uncertainty, and lay the groundwork to forge a new business model with data mastery at its core.
Navigating the Next Decade of Market Uncertainty
Three broad phases will shape this crucial time period. In the first phase, smart products will get gradually smarter and physical products will gain virtual identity. Business model experimentation will start as revenue, pricing and channels adapt to smarter products.
The following phase, a period of hyper-competition, will see the emergence of the interoperable "product cloud" to underpin the technology. Data Mastery would dominate; product functions and data feeds would start to optimize one another.
The final phase will be the era of industry realignment around consortia. An interconnected product economy will emerge. New finance and collaboration models could unlock the smart product opportunity.
Each phase will require careful planning and readjustment to market realities. Market success will require an intensive ecosystem approach toward product innovation and service delivery, as well as a sophisticated approach to partnering.
The vast IP product infrastructure that is currently being built allows companies to add intelligence to almost any object or device, learn from it, and enable product data to be shared and applied to strategic business decisions. As such, companies that wish to lead and capture the opportunity of smart product strategies must consider the following:
o Identify a smart product initiative and focus. The short-term technical aspects of making a product smart are relatively easy to accomplish and source. Making meaning from product data, however, requires new types of skills that are externally sourced or built and redeployed from within the organization.
o Engage customers at the start of the journey. The initial move toward smart products requires experimenting and engaging with a wider set of players in a product ecosystem. Customer insight will ensure that an organization adds features and capabilities that are highly desirable, which will encourage more interaction and thus more data. Building a robust customer scenario model can help forecast the long-term impacts for the business model.
o Develop the mindset to experiment. Winning companies will use proprietary and third-party product data to experiment and develop innovation streams and enriched customer experiences.
o Recalibrate processes and the business model. A winning smart products model will feature "co-opetition" on steroids, as technology and go-to-market interactions accelerate when multiple providers make up a product ecosystem. As customer insights emerge, revenue, pricing and channel models must adapt to large-scale adoption of smart products.
o Start the process of striking new, innovative partnership approaches. New partnership models will evolve to reduce development costs, access external capacity and share the risk and reward from integrated product development. Success in the smart product arena will be achieved by companies that offer the best set of integrated services to capture customer spending or spot a new market opportunity.
Digital Disruption Writ Large
Success with smart products means integrating the explosion of product data into the monolithic 20th century industrial model. The ability to listen closely to the customer - or partner with someone that can - will fuel seemingly endless and unforeseen value creation as the blending of a product's physical characteristics with its virtual capabilities becomes the rule rather than the exception.
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