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It’s Time to Make Smart & Connected Part of Your Strategy

December 1, 2015
smart cup

Smart Connected Products are Transforming Competition. So state Porter and Hemplemann in a recent HBR article by that title. And, you don’t have to look far to see the changes around you. Last week, I had a chance to test drive a Tesla and I challenge you to come away with any other conclusion. Upgrade to the latest release of the car’s operating system (yes, you can update it much like an app on your phone) and it will auto pilot itself through traffic following road bends, keeping pace with traffic and even change lanes when requested without driver assistance. The car is a showcase for what the article terms “The Third Wave of IT-Driven Competition.” Using embedded sensors, processors, software, and connectivity to the cloud, Tesla is (excuse the pun) driving dramatic improvements in product functionality and performance.

The car eloquently demonstrates the four levels of capabilities they suggest are delivered by smart connected products: monitoring, control, optimization, and autonomy.SmartConnectedProducts

It can sense traffic all around it, can understand driving lanes and even read speed limit signs. Software allows control through multi-functional switches and a touch enabled center console that is bigger than most desk top computers and connected to the web. Navigate the settings and set a preference for the car to warn you when you exceed the speed limit by an amount you choose, or to prevent the possibility of speeding all together. The electric motors are optimized for efficiency and control; try driving in the snow and you’ll appreciate a level performance not possible in traditional transmissions. If the car senses a problem it cannot fix, it will notify the nearest service center with appropriate logs and alert you to schedule service. And, did I mention it can drive by itself? I’m told it can park itself in your garage after dropping you off at the front door.

Now ask yourself, how does this apply to products and services you offer? What important data do or should you collect? How can you use the data to drive efficiency or improve your business’ performance? As traditional IT becomes a commodity, how can your internal IT use shared data to customize your offerings and drive new value for customers? How could customers benefit from an API into the data they or others generate? How do relationships with suppliers and buyers change? As products gain autonomy, how does the user and company role change for a single product, a fleet of products and a set of interconnected products? When all products are smart, is there a need for individual ownership of your products or can products themselves be delivered on demand as a service? How will you fit into a smart home, smart business, smart community? How will you differentiate your new offerings to command a price premium and/or operate at a lower cost?

Porter explains in some detail how advances from smart connected products will change the five forces that shape competition: the bargaining power of buyers, the nature and intensity of the rivalry among existing competitors, the threat of new entrants, the threat of substitute products or services, and the bargaining power of suppliers. In short, they will dramatically disrupt incumbents that are not nimble and allow for new entrants to capture value with re-imagined business models. It’s time to make smart and connected part of your strategic plan.

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