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.
Your company has spent hours working with suppliers to find the optimal balance of price and quality. You have negotiated, compromised, and signed contracts; so, what happens now? In the past, many companies would dismiss the supplier until the next order or delivery was needed. Not anymore. The attitude toward supplier relationships has changed over the past decade. Companies now understand the importance of maintaining close relationships with their suppliers. In 2014, 53%  of procurement departments made improving collaboration a top strategy for the year.
There are many reasons to improve relationships with your suppliers. This article will focus on what we believe are the three important reasons for most businesses.
Knowledge is the Key to Success
It may help to think of your suppliers as gate-keepers. Their knowledge extends beyond the products they supply you with, and very often can encompass production processes or use cases you would never have known about. As your relationship with your supplier deepens, they are likely to be more open to providing their own alternative solutions or products that could decrease your costs, increase your quality, or could provide new product innovations for your company entirely.
Knowledge transfer from both parties is paramount to success in a customer/supplier relationship. Only when both customer and supplier can understand each other’s deeper motives throughout the decision-making process, can all parties can provide better service. The shared information will vary from industry to industry, but the ideas are the same. If you let your supplier be a friend rather than simply a means to an end, both parties will benefit.
Competing on Innovation instead of only Price
“Let us ask our suppliers to come and
help us to solve our problems” –W. Edwards Demming
Your suppliers are consistently innovating on their own ideas and processes. While some of these innovations may have trickled down to your company, you can be sure that some were kept for their best customers. As the relationship grows between your company and your suppliers, your key customer status may provide you with benefits that were previously unavailable.
Depending on the industry, benefits can be defined in many way. , For example, Procter and Gamble expects more than half of their innovations will come from outside their own R&D group this year. While Procter and Gamble is likely a bigger customer to their suppliers than most companies, the story is similar. If you have a good relationship with your suppliers, they can provide you with innovations that could put you in the forefront of your market.
Long-Term Relationships Create Financial and Strategic Value
Close relationships, both inside and outside of the business world, have the potential to create value for you in many ways. For a customer/supplier relationship the benefit can be both financial and strategic. In its most basic form, a close supplier could provide your company with volume discounts, ensure your deliveries arrive on time by putting you first, and work with you to lower inventory costs.
It is important to realize that as your company grows, you become a larger part of your supplier’s revenue, and in doing so, the success of both companies become intertwined. This is the point where strategic value is jointly created. This value could be created by sharing innovation, allowing your company to be first to market with a new technology, or by jointly creating new ideas. In some cases, one party may financially assist a big growth move that could jointly impact both companies. Regardless of the way the value is created, an ongoing relationship is paramount to organic growth that is fueled by factors outside of your company.
These are just three of the many reasons to reevaluate the relationship you have with your suppliers. Every day, more companies are moving to a supplier relationship model that enhances competitiveness in an ever-growing marketplace.
Do you think your company can benefit from changing your mindset towards suppliers? We at Spartan Consulting encourage you to take a deeper look at your supplier relationships to ensure you are positioning yourself correctly for your future growth.
Josh Palmer is a Director at Spartan Consulting, and is currently pursuing his MBA at Michigan State University.