How the Internet of Things Changes the Game
It will transform nearly every aspect of business operations.
Smart products are changing the competitive landscape for manufacturers in many ways. Smart products create a connection to the customer that can serve as a new data source to drive decision making across the organization. The Internet of Things will transform nearly every aspect of business operations, from product management to product development, from logistics to marketing, and from sales to service.
Product Management Transformation
Consumer Understanding:Every connected product can stream data about its status, its operational history, the features in use, and the problems that users encounter. Manufacturers who use this data stream to accelerate the pace of innovation and rapidly adjust to consumer feedback and market needs will have a competitive advantage.
Knowing how often or intensively consumers use a product can create value for both company and user. Manufacturers and smart home service providers can gain a greater understanding of how the consumer interacts with products and services and use this information to develop offerings that will attract new consumers. For example, manufacturers can develop alternative pricing structures to engage different consumer segments, using usage rather than upfront fees to expand adoption. In addition, manufacturers can engineer new products with targeted features and capabilities to meet the precise needs of the newly defined segments.
Companies also should not ignore the information consumers are “volunteering” about their products. Smart product customers often use app stores as a forum for product reviews and troubleshooting. Manufacturers must take advantage of this data to listen, learn, improve, respond to concerns, and address issues.
Product Differentiation:Adding connectivity and a cloud infrastructure to products can radically change markets. Product teams must make decisions on the specific remote monitoring and control features of value, what sensors and data sources are necessary to deliver those features, and how they will integrate with other systems to get external data.
Differentiation will increasingly come from software features such as control algorithms that make decisions on the owner’s behalf to automate operation, to provide convenience, to reduce operating cost, or to provide peace of mind. Successful products will provide tools that allow consumers to customize their interaction with the product.
Connectivity also enables new ways to enhance the overall process in which a product is used. For example, smart kitchen appliances have extended functionality to include software that improves the meal preparation process. The appliance becomes an integral part of a kitchen management application that consolidates recipes and helps the cook create a grocery list, prepare dishes, and assure that each dish is prepared successfully and on time.
Software Development:In today’s agile software development environment, software upgrades are executed incrementally and with great frequency. Smart products have the ability to remotely update the firmware, giving developers a method to test and evaluate new features in existing products. In addition, upgrades can be rolled out to a controlled group of preferred users who have opted in to test new features. The company can then integrate this customer feedback into the testing and development process.
New features can also be market-tested before they are developed. Proposed features can be added as a software button or link with no functionality behind it, to track potential consumer interest for the proposed addition. When pressed, the user simply sees a “coming soon” or “under construction” message, and the manufacturer gets a record of this activity. If no one clicks on the button, the button can be removed, and the feature is never developed.
User Interface:Connectivity radically alters the user experience. The interaction with a smartphone, tablet, or laptop is a significant part of the overall user experience for smart products. For many products, the mobile device app will become the primary point of interaction with the consumer, and users will expect this interaction to be seamless.
Supply Chain Optimization:Product forecasting and inventory management have become much more challenging in today’s fast-paced electronics market. Design times in the consumer electronics business have been reduced to a few months, which is nearly equal to the lead time for some components. Feedback on actual sales is essential to maximize inventory turns and mitigate the risk of obsolescence. Smart products provide the manufacturer with feedback that a product has been installed, which can be used to trigger orders and enable a lean supply chain.
Marketing Measurement: Smart products provide a key data point that can be used to judge the effectiveness of marketing efforts. While digital marketing metrics such as impressions and click-through rates provide insight on the top of the marketing funnel, no clean measurement was available at the bottom of the funnel prior to the development of smart products. Because product installations can be measured, companies now have a clear picture of the end result of all of their marketing efforts. Understanding precisely when and where a product is installed allows manufacturers to measure marketing effectiveness on a local level.
Targeting: A smart product gives manufacturers a direct communication channel to the customer that they can then use to deliver targeted promotions. Ecosystem partners can also cross-sell products and services to extend the value of their products to the consumer.
Consumer Relationship: Manufacturers can utilize the data from their devices to gain a better understanding of the customer and enhance loyalty by creating value throughout the product lifetime. Smart products allow manufacturers to enhance loyalty by providing new features, notifications, and advice.
Operational Support:Connectivity provides a communication channel for manufacturers and service providers to serve customers throughout the product lifetime. Ideally, systems will help consumers solve whatever problem they are experiencing with a single click. Simply telling the customer there is an issue and recommending a solution falls short of the ideal experience. Operational support solutions must close the loop by helping people take action to solve the problem.
Technical Support:Smart products add considerable complexity to customer support. Customer service and engineering must be more tightly integrated. Customer service must understand the product firmware upgrade process, be familiar with the schedule to roll out new releases, and be ready to provide immediate feedback when call volume changes.
Manufacturers can also leverage connectivity to provide self-help tools to consumers, providing diagnostic tools that customers can use to resolve problems before calling technical support. And when customers do require help, smart products can give customers a convenient and simple method to request service or warranty support. Remote diagnostic capabilities permit call centers to address problems remotely, lowering the cost of customer support.
Warranty Administration:Smart products can lower customer returns by providing insights into specific issues that consumers are experiencing. Given that most electronic products returned by consumers have no defect or “no trouble found,” manufacturers can provide warranty support tools where consumers can get fast support and also help everyone fully understand the problem. In some cases, the consumer may not know how to the use the product. Leveraging the connection to the product allows manufacturers to understand the problems and develop countermeasures such as providing education or simplifying the user interface to eliminate unnecessary returns.
For those issues that do require repair, remote diagnostics and remote firmware upgrades can reduce the cost to resolve the issue. If a service visit is required, the technician is armed with the right tools and parts to fix the problem in a single trip.
Quality Assurance:If a specific product has a problem such as a defect resulting in early product failure, manufacturers must act quickly to isolate the problem, quarantine inventory, stop production until the problem is corrected, and in some cases recall products from the distributors, retailers, and end customers. Smart products have the ability to upgrade firmware remotely, which may in some cases eliminate the need for a recall.
Smart products also help quality assurance teams identify when products are installed, a critical data point for failure analysis. Given that products can spend months in inventory, the manufacturing date is insufficient to understand early product issues. In addition, electronic commissioning includes product registration, which records the model and serial numbers of failed products so that manufacturers can identify precisely what group of products has an issue.
Leadership and Execution
Given the transformative impact that smart products have on the market and all aspects of manufacturing organizations, smart home strategies must extend beyond a specific product to include a more comprehensive strategy that encompasses transformation of the entire organization. Strong leadership and execution are essential in the era of the Internet of Things.