Amidst rapid commoditization of products, evolving customer expectations, reducing profit margins and uncertain macroeconomic environments, companies are being forced to rethink their entire product strategy and associated business models.
Whether we talk about automobiles, home devices (television, vacuum cleaner, washing machine) or even cities, smart technologies are rapidly proliferating their way into everyday things that we use and interact with. From personalized services to promotional offers, the spectrum of opportunities made available by technology enabled products are incredible. Not only do such products serve as means to enhance revenue for enterprises, but they also help improve product life and drive increased customer loyalty.
FutureFactor360 has authored this short blog as an introduction to the emerging world of “Smart Products”.
What are Smart Products?
A product or group of products are said to be ‘Smart’ if they have the ability to:
Capture and collect information from physical and cyber-physical systems from within /around it to generate insights
Analyse streams of data and events to yield consistent, comprehensive and correct information for reporting and visualization in real time
Actionize based on the information generated to control, automate, optimize and transform products and processes
Key design principles of a smart product
Situated: Sensor information is sent to the computing engine in a manner that can be leveraged to automatically make decisions based on the current context
Connected: The product is connected to the cloud/ other peripheral devices enhancing its capabilities through networked intelligence
Aware: The product continuously understands the environmental conditions and accordingly interprets the context of its usage
Serviceable: The product can be handled, controlled and maintained remotely
Integrated: The product can be integrated with other products and systems seamlessly
Intelligent: The product provides insights into usage, performance and behaviour (often in real-time)
Adaptive: The product can self-optimize and behave in a way that is expected of it in different operating conditions
What is driving the rapid growth of Smart Products?
a. Evolving Customer Expectations
Thus far, the key metric for a product to be categorized as ‘fit or good’ has been limited to its ability to meet the pre-defined objective that it was designed for throughout its expected life duration. Consider a simple example of an alarm clock: Earlier, it was only expected to ring at the set time every day. However, as competition increased and the world became more connected, customers started expecting more from their products. The goal of new-age products is to combine sensing and semantic technologies to synthesise available information, put it together with the customer persona, and make necessary offerings available. In today’s context, the alarm clock is expected to make the customer’s morning routine as easy as possible by offering additional features such as dynamic alarm-time based on parameters such as calendar schedule, traffic, weather conditions, customized alarm tones based on user mood and even generate sleeping tips and sleep quality profile like a personal health coach. In essence, the context of the alarm clock has evolved from a simple mechanical device to that of an intelligent personal assistant.
Using this example, it is now easy to extrapolate the limitless potential that products will start to deliver through their ‘smartness’ quotient.
b. Need for new revenue streams
Facing bleak demand and growth forecasts in the short-medium term, manufacturers today are looking beyond their traditional business boundaries and exploring new revenue streams to diversify their risks as well as overcome any fluctuations in product-specific customer demand
c. Disappearance of product lifecycle :
Emergence of fast evolving customer trends, start-ups with innovative business models and demand for reduced time to market are challenging traditional lifecycles. The older, linear approach to product design is now being replaced by a more dynamic approach that focuses on creating continuous feedback loops. Through backward integration and analysis of product usage data, manufacturers are continuously improving their product design and R&D efforts in order to deliver more successful products in shorter time spans.
d. Need for Product differentiation :
The increasing commoditization of hardware has created a need for manufacturers to differentiate their products by providing technology enabled personalized services and features that customers are often ready to pay a premium price for.
How are companies addressing the Smart Product imperative?
Companies are looking at innovative ways to pursue the Smart Product opportunity including:
Investing in building their network of digital technology (AI, IoT) partners and collaborators
Co-developing products though multi-industry collaborations to drive synergies
Acquiring niche start-ups to quickly build necessary capabilities and I.P
Participating in consortiums to jointly innovate products that lead to mutual value for all participants
As these trends become mainstream, enterprises will continue making investments to create smarter and more intelligent products. Companies must innovate not just around products, but also their business and operating models to translate real-time data into profitable business decisions.
Smartness and Intelligence features will not be an add on, but will form the core element of the design principles of the products as they become digital by design.
Products will be re born as digital first products.
Accelerated by advancements in connectivity technologies, low costs of sensors and tremendous value creation potential, Smart Products will soon become the norm and find themselves deeply embedded in the centre of the digital world of the future.