W5: Porter & Heppelman (2014): How Smart, Connected Products are Transforming Competition Flashcards
Smart, connected products
Offer exponentially expanding opportunities for new functionality, far greater reliability, much higher product utilisation, and capabilities that cut across and transcend traditional product boundaries. These new types of products alter industry structure and the nature of competition, exposing companies to new competitive opportunities and threats
‘Internet of things’
Has arisen to reflect the growing number of smart, connected products and highlight the new opportunities they can represent. What makes them fundamentally different is not the internet but the changing number of ‘things’
First wave of IT
Occurred in the 1960s and 1970s. It automated individual activities in the value chain. The productivity of activities dramatically increased. This led to the standardisation of processes across companies
Second wave of IT-driven transformation
Due to the rise of the internet. It allowed coordination and integration across individual activities, outside supplies, channels and customers, and geography
Third wave
IT is becoming an integral part of the product itself. There are dramatic improvements in product functionality and performance. Another leap in productivity in the economy will be unleashed by these new and better products. The value chain will be reshaped again. There will be a new need for new activities such as product data analytics and security, which will drive another wave of value-chain-based productivity improvements
One-to-one (connectivity)
An individual product connects to the user, the manufacturer, or another product through a port or other interface
One-to-many (connectivity)
A central system is continuously/intermittently connected to many products simultaneously
Many-to-many (connectivity)
Multiple products connect to many other types of products and often also to external data sources
Technology stacks
Enables rapid product application development and operation. It also allows the collection, analysis, and sharing of potentially huge amounts of longitudinal data generated
Monitoring
Smart, connected products enable the comprehensive monitoring of a product’s condition, operation, and external environment through sensors and external data sources. It can alert others to changes in circumstances and it allows customers/companies to track a product’s operating characteristics. It has implications for design, market segmentation, and after-sale service. In some cases, it is the core element of value creation. Monitoring capabilities can span multiple products across distances
Control
Smart, connected products can be controlled through algorithms embedded in the device or cloud. These algorithms direct the product to respond to changes in its condition or environment. Through software, it enables customisation of product performance and allows users to control and personalise their interaction with the product, e.g. Philips Hue
Optimisation
Smart, connected products generate a rich flow of monitoring data which combined with control capabilities, enables companies to optimise performance in new ways. Products can use algorithms and analytics to improve output, utilisation, and efficiency. Real-time monitoring also enables firms to perform preventative maintenance and make repairs remotely, reducing downtime and costs. Smart, connected products can be updates for feature enhancements, often remotely via software
Autonomy
All together, these capabilities allow smart, connected products to achieve a previously unattainable level of autonomy. Sophisticated products are able to learn about their environment, self-diagnose their own service needs and adapt to users’ preferences. It also improves safety. The value of these types of products grow exponentially as more products connect. Ultimately, products can function with complete autonomy, applying algorithms that utilise data about their performance and environment
