Information technology is transforming products from stand-alone components to complex systems call recording that combine hardware, sensors, data storage, microprocessors, software, and connectivity in myriad ways.
Smart, connected products change how value is created for customers and how companies compete, and they expand industry boundaries. They also create new strategic choices for companies as they navigate the changing product landscape.
Autonomy
Autonomy is the ability of a system to sense, perceive, plan and act without human intervention. It includes systems like cars with driver support features such as lane keep assist and advanced braking, robotic surgery devices and robot vacuums.
While most fully autonomous systems remain too costly, data-intensive or power-consuming to be widely used, semi-autonomous technologies are beginning to emerge. These include smart, connected products that can monitor themselves and others in their environment, detect faults, self-diagnose problems and respond to user preferences with algorithms that reside in or on the product itself.
As an example, iRobot's Roomba robotic vacuum cleaner is equipped with sensors and software to determine the layout of floors and detect objects. It can also learn to identify specific tasks, adapt to changing needs and communicate with other connected products.
This enables it to operate in a safe, efficient and cost-effective manner. It also means it can operate in remote locations where it is not feasible for a human operator to be present.
The technology behind these autonomous devices is constantly evolving. For example, new software applications for data fusion and predictive analysis help the system better understand sensor information by filtering, localizing, interpreting and classifying it. Algorithms such as the Kalman filter and Bayesian networks are also employed for navigation and tracking.
In addition, these devices need to reliably communicate their status and status updates with other systems and the outside world. Secure data communications and over-the-air (OTA) updates ensure that the data arrives without disruption.
To realize the full potential of these technologies, organizations need to adopt a comprehensive strategy that combines automation with other blockbuster technologies such as IoT, AI and ML. This will allow them to derive the optimum benefits from their investments and ensure that they are not left behind in the fast-paced technological landscape.
Monitoring
Smart communications products are capable of capturing and analyzing data in ways that were previously unheard of. For example, a company's fleet of high-end sedans might include a smart device whose main function is to track and report the location of every driver at any given time. Using the information in hand, the company can optimize its occupants' commute to and from work or play in a big way. A similar scheme is employed to keep a fleet of limos well behaved at all times. The result is a more pleasant and efficient ride for passengers, drivers, and chauffeurs alike.
Data analytics
Smart communications products capture data about how their features are used. This can have significant implications for product design and market segmentation. It also enables companies and customers to monitor the performance of a product in the field and improve its after-sale service.
Several types of data are required to build an effective monitoring system, including data from sensors and external sources. The data must be captured, stored, analyzed, and protected. This can add cost and complexity to a product system.
Another type of data analytics is predictive, which mixes historical data with a range of statistical models to predict future trends and business outcomes. Predictive analysis can be particularly useful in industries such as finance, where it helps financial institutions to predict cash flows and avoid unexpected losses. It can also be beneficial in entertainment, where it helps marketers gauge how consumer choices may influence their future marketing campaigns.
A large number of companies use data analytics to analyze their operations. These include banks, credit card companies and e-commerce businesses. In addition, healthcare organizations mine patient data to evaluate the effectiveness of various treatments.
The process of data analytics varies according to the application. Most involve collecting the data that's needed for an analytics application, integrating it into a single format and loading it into a analytics system. In addition, data profiling and cleansing tasks are run to ensure that the information in a data set is consistent and free of errors.
Once the data is collected, the analytics application's developers use the information to create analytical models that provide accurate results. These models are developed and tested, then reworked as necessary. They also apply data governance policies to make sure that the data is being used properly.
Shifting rivalry
Shifting rivalry is a key characteristic of the era of smart communications products. It means that companies will not have to compete against other manufacturers solely on price, but they can also focus on differentiated value-added services and tailor products for specific customer needs.
This shift in rivalry is made possible by a convergence of technological innovations that have come together at once to make smart, connected products technically and economically feasible. These innovations include breakthroughs in the performance, miniaturization, and energy efficiency of sensors and batteries; low-cost computer processing power and data storage; cheap connectivity ports and ubiquitous, low-cost wireless connectivity; tools for rapid software development; big data analytics; and a new IPv6 internet registration system opening up 340 trillion trillion trillion potential new internet addresses for individual devices, with protocols that support greater security, simplify handoffs as devices move across networks, and allow devices to request addresses autonomously without the need for IT support.
Incumbent competitors will likely struggle to keep pace with this transformation, as best-of-breed vendors that provide turnkey connectivity solutions and product clouds, secure high-performance application platforms, and ready-to-use data analytics become more common. They will need to either invest in in-house or custom product development, or outsource it to these new partners.
These partnerships can help firms reduce costs, as they spread the fixed cost of developing the technology stack over a larger number of units. This is an economy of scale effect that encourages firms to sell more units, thus increasing their profits.
However, it can also lead to higher prices. Firms that produce a large amount of product must compete to get their fixed costs down, which leads to increased rivalry.
Industry structure
Smart, connected products are reshaping industry structure in ways that require companies to adapt. This shift will vary by industry, but it involves the construction of a new technology stack--new hardware, embedded software, connectivity, a product cloud, data storage and analytics, and a suite of security tools.
These components are designed to amplify the capabilities and value of the physical product. As a result, they create a virtuous cycle of value improvement.
However, the increased capabilities of smart, connected products can tempt firms to compete in a feature and function arms race--a dynamic that escalates costs and reduces industry profitability. It also can exacerbate rivalry between competitors, as a company attempts to capture disproportionate value by connecting its smart products with external data and optimizing the performance of broader product systems.
This is especially true in industries whose boundaries are expanding beyond discrete products to product systems that connect an array of disparate product systems together. Farm automation, for example, is moving from farm machinery to agricultural irrigation and nutrient sources, along with weather information, commodity futures prices, and other external information that can be used to optimize total farm performance.
This change in industry structure enables new suppliers to gain a significant amount of leverage by providing the technology stack--sensors, software, connectivity, embedded operating systems, and data storage and analytics--that smart, connected products need. These suppliers have talent and capabilities that traditional manufacturers may not have needed but that can be important to product differentiation and cost. These suppliers also have access to product usage data, which can provide them with valuable insights into how best to integrate new features into smart products.