How Smart, Connected Produces Are
Transforming CompaniesBy MICHAEL E. PORTER AND JAMES E. HEPPELMANN
Harvard Business Review
Fahmy Amrillah - 1506772744
Strategic Marketing
Background
Evolution of products into intelligent, connected devices is radically reshaping companies and competition
The relationship a firm has with products and customers is becoming continuous and open-ended.Smart, connected products substantially changes the work of virtually every function within the manufacturing firm.
What is smart, connected product ?
Smart, connected products have many of the same physical components that products have always had but also have new features that make them
more intelligent
Sensors and Software
What is smart, connected product ?
Smart, connected products have three core elements
Physical components
Connectivity components
Smart components
SensorsMicroprocessorsData storageControlSoftwareEmbedded OSDigital UI
MechanicalElectrical parts
PortsAntennaeProtocolsNetworks
What is smart, connected product ?
Many products are connected to the Internet and the “product cloud” which runs remote software connected to the products
named “Technology Stack”
It requires a whole new supporting technology infrastructure
provides a gateway for data exchangeintegrates data from business systems, external sources, and other related productsserves as the platform for data storage and analytics, runs applications, and safeguards access to products and the flowing data.
New Capabilites of Smart, Connected Products
Control
Optimization
Autonomy
MonitoringCan monitor and report on themselves and their environment in real time, creating new data and insights.
Can be controlled through software embedded within or in the cloud.Gives users the unprecedented ability to customize.And to operate them in hazardous or hard-to-reach environments.
Algorithms and analytics can optimize product operation, capacity utilization, and predictive maintenance
Enables autonomous operation, self-coordination, and self-diagnosis.
Data : reshaping the value chain
The new data resources
• In the past, data was generated primarily by internal operations, information gathered from surveys, research, and other external sources
• Now, sources of data are being supplemented by product itself
• Data now stands on par with people, technology, and capital as a core asset of the corporation
• its value increases exponentially when it is integrated with other data
Data : reshaping the value chain
Data Analytics
• Ability to unlock the full value of data becomes a key source of competitive advantage
• Powerful insights by identifying patterns in thousands of readings from many products over time
• Uses mathematics, computer science, and business analysis techniques
• Collected data are often unstructured -> emerging solution is a “data lake”
Data : reshaping the value chain
Data Analytics
• The data from “data lake” can be studied with a set of new data analytics tools
• Descriptive• Diagnostic• Predictive• Prescriptive.
Data Analytics
Transforming The Value Chain
Powerful new data and new capabilities of Smart, connected products, is restructuring the traditional functions of business
Product Development
Product development shifts from largely mechanical engineering to true interdisciplinary systems engineering
Design teams are shifting from a majority of mechanical engineers to a majority of software engineers
Transforming The Value Chain
Low-cost variabilitySoftware makes variability far cheaper. Ex:
Product Development
Evergreen design
Software also makes it easier to localize products for different countries and languages
Companies will improve products continuously Can be updated via software in the cloud. Ex:
Product Development
New user interfaces and augmented reality
Augmented reality applications tap into the product cloud and generate a digital overlay of the product.
The digital user interface enabling remote operation and even eliminating the need for controls in the product itself
enabling continuous monitoring of real-world performance data
Product Development
Connected service
allowing companies to identify and address design problems that testing failed to expose
Product can be used to monitor product health and performance and warn service personnel of failures
Ongoing quality management
Support for new business modelSmart, connected products let companies switch from transactional selling to product-as-a-service models.
Product Development
System Interoperability
The responsibility for and associated cost of maintenance remain with the manufacturer
Through codesign, companies can simultaneously develop and enhance hardware and software across a family of products, including those of other companies.
Transforming The Value Chain
Smart factories
Manufacturing
Simplified componentsSmart, connected machines are reshaping manufacturing plants
Machines increasingly can be linked together in systems
Shift from mechanical parts to software
Smart, connected products create new production requirements and opportunities. Such as shift final assembly to the customer
Physical complexity of products decreases but the quantity of sensors and software rises -> new complexity.
Reconfigured assembly processSoftware in the product or in the cloud can be loaded or configured well after the product leaves the factory
Transforming The Value Chain
Manufacturing
Continuous product operations
manufacturing has been a discrete process that ended once the product was shipped
Smart, connected products create new production requirements and opportunities. Such as shift final assembly to the customer
operate and improve throughout the product’s life
Transforming The Value Chain
it can be done continuously, wherever products are, and provides rich information – current and location history, condition (their temperature, say, or exposure to stresses), and surrounding environment.
Logistics
Transforming The Value Chain
Marketing and Sales
Direct and ongoing dialogue with consumers through smart, connected products = new customer relationship
New business models will emerge as products can be o ered as a service.
As companies gather and analyze product data, they gain new insights into customer segmentation and product customization
Teams will need broader knowledge to position offerings as part of larger smart, connected systems.
Transforming The Value Chain
After-sales service
Sensor data can predict when parts are about to break that makes predictive maintenance possible
Service technicians can use augmented reality applications that tap into the product cloud and generate a digital overlay of the product.
Smart, connected products make it feasible to deliver service remotely.
Transforming The Value Chain
Security
Companies tasks are safeguarding firms’ data centers, business systems, computers, and networks
The job of ensuring IT security now cuts across all functions.
As IT is pushed into products, security concerns become important
New expertiseskills needed to design, sell, and service smart, connected products are in high demand but short supply
Human Resources
New Cultures
skill requirements shift from mechanical engineering to software engineering, from selling products to selling services.Establishing a physical presence in Boston and Sillicon Valley
Manufacturing smart products require far more coordination across functions and disciplines than traditional manufacturing doesIntegrating staff with varied work styles and from more-diverse backgrounds and cultures
New compensation modelNeed new approaches to attracting and motivating talent
Human Resources
Perks like job flexibility, concierge services, sabbaticals, and free time to work on side projects of personal interest are the norm in high-tech firms
Implication For Organizational Structure
As manufacturing firms become hybrid hardware and software companies, they must adopt new organizational structures.
Four new functions are developed
Unified data organizationA chief data officer leads this group, which captures, aggregates, and analyzes data for the entire organization.
Tighter IT-R&D CollaborationThe new need for IT in product development.
Implication For Organizational Structure
As manufacturing firms become hybrid hardware and software companies, they must adopt new organizational structures.
Four new functions are developed
Dev-opsDev-Ops groups manage the product cloud
Customer Success Management
Since smart, connected products stop functioning if the product cloud fails, companies must carefully maintain, upgrade, and find bugs in the product cloud.
Companies must ensure that customers receive full value from their products
Implication For Organizational Structure
Making The Transition
Smart, connected products will need to coexist with traditional products for a sustained period
At business level unit, IT might be assigned the lead role for product strategy and deployment.
Special steering committee made up of the functional heads may be asked to champion and oversee this effort
Organizational transformation will be evolutionary, not revolutionary,
Making The Transition
Stand-alone business unitseparate new unit, with profit-and-loss responsibility, is put in charge of supporting the company’s smart, connected products strategy
Center of excellence It does not have profit-and-loss responsibility but is a cost center that business units can count on.
At corporate level
Cross-business-unit steering committee Summoning a committee of thought leaders across the various business units
champion of opportunities, share expertise, and facilitate collaboration
usually lack formal decision-making authority
Broader Implication
Smart, connected products will free us to purchase only the goods and services we need, to share products that we do not use much, and to get more out of the products that we already have.
The effects are not confined to manufacturing, but are spreading to other industries that use—or could use—smart, connected products, including services.
Broader Implication
New industries, new services, and new roles will be created that can allow more people to work more productively and in less rote and repetitive ways.
Impact on employment and growth is likely to be positive
Companies and other institutions that can speed this journey will prosper and make a profound difference for society
Thank You
Top Related