Smart connected products: Changing daily life
Smart connected products are changing how we make, sell, and use things. The impacts of this new dynamic include changes to the competitive landscape, product designs, and how value is created for customers. These shifts will affect every industry.
Smart connected products will enable the rise of a new IT-driven era of productivity and growth for companies, customers, and the global economy. We at Predikto agree that the swell is huge, but the wave just started. Prior IT innovations drove productivity focusing on standardisation enabling cost cutting. The next IT wave will be the tsunami of Product-as-a-Service business models allowing users to have full access to a product but pay only for the amount of product they use, says Mario Montag, CEO and founder, Predikto.
These products are disrupting traditional supplier relationships and redistributing bargaining power. The “smarter components” making up the new smart products, deliver more value relative to traditional “non-smart components”. The reality is that the physical equipment or component can now be commoditised or even replaced by software over time. Another example of how “software is going to eat the world” as stated by Mark Andreessen. With the introduction of “smarter” products, are new suppliers that were never part of the supply chain or competitive cycle before.
These suppliers have access to smart product data, earning them bargaining power that did not exist in the traditional product/vendor relationship. Their leverage stems from visibility into product usage and access to end users. Now, suppliers can offer new services based on usage, equipment maintenance, and analytics.
When a product is delivered as a service, the responsibility for and associated cost of maintenance remain with the manufacturer. Rolls Royce started this more than 10 years ago with selling power by the hour instead of engine turbines. GE is making a big push in this direction as well. They no longer just sell you a locomotive; they sell you power with specific service level agreements and service mandates. Companies are offering customers the opportunity to pay for the wash cycles instead of the washing machine. The Product-as-a-Service will also impact the design of the product itself since the function can be shared across many users. A product where the reliability and performance risks shift from the customer to the manufacturer will require design modifications to enable better real-time visibility into the working condition of the equipment. The sensoritisation boom around IoT is an enabler of these product design changes.
While the end product remains relevant, the power has shifted. Consumers are no longer interested in purchasing a product as long as the services are still provided. With this transition, companies that provide Products-as-a-Service are at an advantage. They now have the power to create a “data lake”. Advanced analytics is the key to tapping into the potential value created by the massive amount of data available. The challenge we see at Predikto is that most customers only have the tools and capabilities to analyse the past. The true value is achieved at the crossroads of Diagnostic, Predictive, and Prescriptive analytics. At this intersection, manufacturers will be able to predict equipment failure, reliability, and maintenance needs simply based on external factors like the weather and other sensor collected data.
Therefore, get ready for the new wave of IT innovation that will be fueled by the growing number of companies offering Products-as-a-Service as a result of their ability to fully gain visibility and understanding of the behavior and condition of their components and equipment in real time. It’s going to change everything.
The author of this blog is Mario Montag, CEO & founder, Predikto
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