Question

Explain why smart devices are desirable and give two examples of how businesses could benefit from smart devices.

Answer 1

Before products became smart and connected, data was generated primarily by internal operations and through transactions across the value chain—order processing, interactions with suppliers, sales interactions, customer service visits, and so on. Firms supplemented that data with information gathered from surveys, research, and other external sources. By combining the data, companies knew something about customers, demand, and costs—but much less about the functioning of products. The responsibility for defining and analyzing data tended to be decentralized within functions and siloed. Though functions shared data (sales data, for example, might be used to manage service parts inventory), they did so on a limited, episodic basis.

Now, for the first time, these traditional sources of data are being supplemented by another source—the product itself. Smart, connected products can generate real-time readings that are unprecedented in their variety and volume. Data now stands on par with people, technology, and capital as a core asset of the corporation and in many businesses is perhaps becoming the decisive asset.

This new product data is valuable by itself, yet its value increases exponentially when it is integrated with other data, such as service histories, inventory locations, commodity prices, and traffic patterns. In a farm setting, data from humidity sensors can be combined with weather forecasts to optimize irrigation equipment and reduce water use. In fleets of vehicles, information about the pending service needs of each car or truck, and its location, allows service departments to stage parts, schedule maintenance, and increase the efficiency of repairs. Data on warranty status becomes more valuable when combined with data on product use and performance. Knowing that a customer’s heavy use of a product is likely to result in a premature failure covered under warranty, for example, can trigger preemptive service that may preclude later costly repairs.

Smart, connected products require a rethinking of design.

As the ability to unlock the full value of data becomes a key source of competitive advantage, the management, governance, analysis, and security of that data is developing into a major new business function.

While individual sensor readings are valuable, companies often can unearth powerful insights by identifying patterns in thousands of readings from many products over time. For example, information from disparate individual sensors, such as a car’s engine temperature, throttle position, and fuel consumption, can reveal how performance correlates with the car’s engineering specifications. Linking combinations of readings to the occurrence of problems can be useful, and even when the root cause of a problem is hard to deduce, those patterns can be acted on. Data from sensors that measure heat and vibration, for example, can predict an impending bearing failure days or weeks in advance. Capturing such insights is the domain of big data analytics, which blend mathematics, computer science, and business analysis techniques.

The businesses could benefit from the smart devices in following ways-

Faster, more effective product updates and development. Because manufacturers can continuously monitor products in use, they can update their products, patch problems, and rethink functionality—all of which improves customer satisfaction. The intelligence from smart, connected products can also inform future product features and new product development. We are all familiar with automatic app updates on our phones, giving us access to new features or fixing problems over the air. Smart, connected products can update themselves in the same way. Diebold, for example, can update and add new features to its smart, connected ATMs remotely via software.18 Fitbit has been able to increase its new product development thanks to the information it has on how customers use the fitness band—and those new offerings can come in the form of either hardware or software options.

Cheaper, more efficient maintenance and repair. Because smart, connected products can be monitored in the field, that data can be used to significantly streamline the process of maintenance and repair. Rolls Royce tracks the health of thousands of aircraft engines operating worldwide using onboard sensors and live satellite feeds. Its Engine Health Management system can predict when something might go wrong to address it proactively or transmit data on an engine problem so airlines can have their service technicians ready with the right part to make repairs when it lands, resulting in less downtime.

New, better business models. Many industrial manufacturers are remaking themselves as service providers by creating new business lines based on the analysis of smart product data. GE Digital, for example, launched its Brilliant Manufacturing software and service using real-time visibility into smart, connected machines to help customers maintain equipment based on operating conditions (rather than a breakdown), thus driving greater efficiency.
In fact, some companies may see a benefit in shifting their business models from selling goods to renting products and offering services. Michelin, for example, has gone to market with a smart, connected tire that is a product-service hybrid. Fleet customers sign up for their customized tire lease programs and pay by the mile for their usage while Michelin oversees any maintenance or repair.The data that manufacturers gather from their smart, connected products may also have value to other companies or organizations that would pay for it. For example, analysis of P&G’s Oral-B Genius data could be sold to retailers or dentists who could use that intelligence to better run their own businesses. Or, consider the opportunity that an automaker has to send useful information to motorists through an in car infotainment system—such as the location of a parking lot or a nearby event. The automaker becomes a medium through which other businesses communicate to prospective customers.