Human history has been defined by periods of innovation, which have ultimately changed the way humans interact with the world. One such innovation is the internet. The advent of internet has enabled the introduction of new efficiencies in existing business practices, and has given birth to entirely new businesses and industries. Currently, humanity is on the brink of another revolution, even bigger than the internet itself- the Internet of Things.
The Internet of Things (“IoT”) is a network of physical objects embedded with software, sensors, and network connectivity. These technologies enable everyday devices to sense, communicate, and control, transforming these objects into “Smart Connected Products.” The devices that are a part of IoT ecosystem primarily include, but are not limited to, RFID tags, sensors, barcodes, quick response codes, thermostats, and actuators. These devices have been around for quite some time. However, recent innovations in the technology space, such as miniaturization of physical components, increases in computing power, and the rise of smartphones have made connecting these devices technically and economically feasible. We now have the ability to seamlessly process the data collected by these devices, and convert it into valuable information.
While consumer adoption of the IoT in the form of wearable technology and connected home appliances generate majority of the media buzz, the impact of IoT in the business world is potentially far greater. McKisney Company estimates that the IoT will create as much as $11.1 trillion in economic value globally. This article explores a few approaches that companies could adopt to gain competitive advantage in the transitioning world.
1. Understand to Accel
The entire IoT ecosystem is built around gathering, analyzing and processing of data. It is not surprising that any company who wants to succeed in this new world needs to have a great appetite for collecting and analyzing large amounts of data to recognize the hidden value. It is recommended that the companies should invest in developing capabilities to collect, store and analyze data efficiently. Data collected from smart products will help companies establish stronger relationships with its customers. Monitoring the constant stream of data coming from thousands of products will accurately reveal how customers use a given product. This understanding will have huge implications in advertising, product design, market segmentation, and after sales service. By understanding the value of a product to a specific customer, companies will be able position their offerings to the right customer, at the right place, and the right price.
2. Design to Delight
Gone are the days when companies designed products to satisfy customers’ demand. Today, the business landscape is ruled by the companies who create innovative product offerings that can drive consumer behavior, and create demand. To gain a competitive edge in the future, companies will need to design products that not only satisfy customers, but also delight them. Until recently, products represented the simple integration of mechanical and electrical components to accomplish largely singular tasks. New, smart-connected products will offer exponentially expanding opportunities for newer functionalities, greater customization, and higher utilization rates. Companies should focus on designing products that enable users to monitor, control, optimize and automate, though some of these capabilities will be interdependent. For example, to control its environment, it is essential for a product to monitor its surrounding. Depending on where in the value chain the company wants to position itself, it should wisely choose to offer one or more capabilities listed above. At the same time, companies should be careful not to get into a race to offer more features than what customers are willing to pay for.
3. Collaborate to Conquer
New capabilities introduced by the IoT will not only reshape the competition within industries, but also redefine the boundaries across industries. New products will need to communicate with the user as well as other products existing in its surrounding, to optimize its performance and achieve full functionality. For example, in smart homes, a thermostat will communicate with a car to identify when someone is about to reach home, then pass on this information to the HVAC system and set the desired temperature. Thus, the competition will shift from individual products, to a system of products. In such an environment, companies that establish early partnerships to explore synergies for their products will have leverage over competition. Companies can collaborate to push boundaries of design, and offer broader set of choices to customers than they could provide individually.
Developing smart, connected products will require skill sets such as software development, systems engineering, data analytics, and online security expertise— skills that are rarely found in manufacturing companies. To overcome this skill gap, companies should either develop in-house, capabilities or collaborate with companies who have expertise in these functions.
Do you think your company has what it takes to compete in this new world of smart and connected products? Spartan consulting can help you form a strategy and gain competitive edge over the Internet of Things.
Riyaj Gilani is Director at Spartan Consulting, and is currently pursuing his MBA at Michigan State University.