The analyst firm Gartner noted in their newsletter that digital disruption is the single biggest change facing organisations today. There is an evidence of that:
- The S&P 500 is forecasted to turnover half of its membership in the next 10 years.
- The analyst firm IDC is forecasting that 30% of the global 2000 manufacturers will offer “product as a service”, going beyond the traditional business model, and
- CapGemini’s research arm is suggesting that 50% of the products on the market are going to be smart and connected.
The question is: what are your competitors doing?
Smart Connected Products and New Value Chain
According to CapGemini, almost 75%, three-quarters, of manufacturers are fundamentally changing the way they do business. Almost 1 in 5 (20%) of manufacturers intend to move away from selling the product at all—moving to a service-oriented business. And more than half are going to layer value-added services on top of their products, looking to monetize the data streams that connected products generate.
Have you considered how your product portfolio will be positioned in this changing competitive landscape? Because companies that are not moving in this direction are at a disadvantage—largely because their overall value chain won’t be as efficient or cost-effective as it could be—impacting sales and margin.
In a typical manufacturer’s value chain, products are sold to an operation of some kind where operators have their hands on the equipment, there’s a site management team that’s responsible for the overall performance of the location, and a maintenance team charged with keeping the equipment up and available. And product gets shipped and put into use.
But there are a couple of problems with this scenario—and they start with connectivity. It’s pretty common for internal operations to have an institutional problem with sharing data—systems were never created to enable that to happen. Once that product leaves your shop, unless it’s connected, you don’t know how your product is being used—or even if it’s being used. In fact, the first report you’re likely to get is when your customer is unhappy.
But by making your products smart and connected, you get to unify—to tie together—your value chain, and to connect it with your customer’s chain, as well.
All of a sudden, your product managers see what features are being used, or should be removed from future designs. How often does the sales team call on customers with long-lived capital equipment? Every year, two years or three years? Now, the sales team knows who needs a call—if they’re running at 85% capacity, that customer may need additional equipment—or worse, if they’re running at 10%, what’s wrong?
·The R&D group can test and validate designs with real-time data, so they hit the target with new products—AND they get immediate feedback if design life cycles are being met.
·The service department is often the first area to see benefits with operational improvements like predictive maintenance, but also in warranty administration.
·And the operations team gets real time data to plan for spare parts use and consumables requirements.
And your customer, the end user? You can keep that equipment running, deliver warnings about problems before they happen, and show them that your equipment doesn’t deliver just the best features and functions, but it’s the most profitable equipment for them to run. And what supplier is the most “sticky” in this scenario? And when it’s time to sell additional equipment, who is in the best position?
Konektio can help you create the strategy that is appropriate to your business.
- Start with financial goals that matter to your investors.
- Determine the value drivers that have the greatest influence on those financial goals.
- We can work together to figure out which applications of technology—or “use cases” will move those value drivers.
- And together, we can put together the business case and the expected operational impacts that make the investment worthwhile.
How Smart, Connected Products Are Transforming Competition
IT is becoming an integral part of the product itself, and these smart, connected products:
- Require companies build and support an entirely new technology infrastructure
- Enable four new categories of capabilities: monitor, control, optimize, automate
- Create breakthroughs in differentiation, operational effectiveness, and customer experience
The 10 Strategic Choices
To capitalise on these opportunities companies face 10 new strategic choices, for example:
- Which set of smart, connected product capabilities should the company pursue?
- How does the company manage ownership and access rights to product data?
- Should the company change its business model?
This article provides a framework for developing a strategy and achieving competitive advantage in a smart, connected world.