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Information technology is revolutionizing products. Once composed solely of mechanical and electrical parts, products have become complex systems that combine hardware, sensors, data storage, microprocessors, software, and connectivity in myriad ways. Information technology is revolutionizing products, from appliances to cars to mining equipment.
Products once composed solely of mechanical and electrical parts have become complex systems combining hardware, sensors, electronics, and software that connect through the internet in myriad ways.
The changing nature of products is disrupting value chains, argue Michael Porter and PTC CEO James Heppelmann, and forcing companies to rethink nearly everything they do, from how they conceive, design, and source their products; to how they manufacture, operate, and service them; to how they build and secure the necessary IT infrastructure. Smart, connected products raise a broad set of new strategic choices for companies about how value is created and captured, how to work with traditional partners and what new partnerships will be required, and how to secure competitive advantage as the new capabilities reshape industry boundaries.
Smart, connected products offer exponentially expanding opportunities for new functionality, far greater reliability, much higher product utilization, and capabilities that cut across and transcend traditional product boundaries. The changing nature of products is also disrupting value chains, forcing companies to rethink and retool nearly everything they do internally. These new types of products alter industry structure and the nature of competition, exposing companies to new competitive opportunities and threats.
They are reshaping industry boundaries and creating entirely new industries. Smart, connected products raise a new set of strategic choices related to how value is created and captured, how the prodigious amount of new and sensitive data they generate is utilized and managed, how relationships with traditional business partners such as channels are redefined, and what role companies should play as industry boundaries are expanded.
Yet this phrase is not very helpful in understanding the phenomenon or its implications. The internet, whether involving people or things, is simply a mechanism for transmitting information. Companies must look beyond the technologies themselves to the competitive transformation taking place. This article, and a companion piece to be published soon in HBR, will deconstruct the smart, connected products revolution and explore its strategic and operational implications. Twice before over the past 50 years, information technology radically reshaped competition and strategy; we now stand at the brink of a third transformation.
Before the advent of modern information technology, products were mechanical and activities in the value chain were performed using manual, paper processes and verbal communication. The first wave of IT, during the s and s, automated individual activities in the value chain, from order processing and bill paying to computer-aided design and manufacturing resource planning.
The productivity of activities dramatically increased, in part because huge amounts of new data could be captured and analyzed in each activity. This enabled coordination and integration across individual activities; with outside suppliers, channels, and customers; and across geography.
It allowed firms, for example, to closely integrate globally distributed supply chains. The first two waves gave rise to huge productivity gains and growth across the economy.
While the value chain was transformed, however, products themselves were largely unaffected. Now, in the third wave, IT is becoming an integral part of the product itself.
Embedded sensors, processors, software, and connectivity in products in effect, computers are being put inside products , coupled with a product cloud in which product data is stored and analyzed and some applications are run, are driving dramatic improvements in product functionality and performance.
Massive amounts of new product-usage data enable many of those improvements. Another leap in productivity in the economy will be unleashed by these new and better products. In addition, producing them will reshape the value chain yet again, by changing product design, marketing, manufacturing, and after-sale service and by creating the need for new activities such as product data analytics and security.
This will drive yet another wave of value-chain-based productivity improvement. The third wave of IT-driven transformation thus has the potential to be the biggest yet, triggering even more innovation, productivity gains, and economic growth than the previous two. As with the internet itself, smart, connected products reflect a whole new set of technological possibilities that have emerged.
But the rules of competition and competitive advantage remain the same. Navigating the world of smart, connected products requires that companies understand these rules better than ever. Smart components amplify the capabilities and value of the physical components, while connectivity amplifies the capabilities and value of the smart components and enables some of them to exist outside the physical product itself.
The result is a virtuous cycle of value improvement. In a car, for example, these include the engine block, tires, and batteries. Smart components comprise the sensors, microprocessors, data storage, controls, software, and, typically, an embedded operating system and enhanced user interface. In a car, for example, smart components include the engine control unit, antilock braking system, rain-sensing windshields with automated wipers, and touch screen displays.
In many products, software replaces some hardware components or enables a single physical device to perform at a variety of levels. Connectivity components comprise the ports, antennae, and protocols enabling wired or wireless connections with the product. Connectivity takes three forms, which can be present together:. Connectivity serves a dual purpose.
First, it allows information to be exchanged between the product and its operating environment, its maker, its users, and other products and systems. Second, connectivity enables some functions of the product to exist outside the physical device, in what is known as the product cloud. To achieve high levels of functionality, all three types of connectivity are necessary.
Smart, connected products are emerging across all manufacturing sectors. This alerts utility control centers to possible overload conditions, allowing adjustments that can prevent blackouts before they occur.
In consumer goods, Big Ass ceiling fans sense and engage automatically when a person enters a room, regulate speed on the basis of temperature and humidity, and recognize individual user preferences and adjust accordingly. Why now? An array of innovations across the technology landscape have converged to make smart, connected products technically and economically feasible.
These include breakthroughs in the performance, miniaturization, and energy efficiency of sensors and batteries; highly compact, low-cost computer processing power and data storage, which make it feasible to put computers inside products; cheap connectivity ports and ubiquitous, low-cost wireless connectivity; tools that enable rapid software development; big data analytics; and a new IPv6 internet registration system opening up trillion trillion trillion potential new internet addresses for individual devices, with protocols that support greater security, simplify handoffs as devices move across networks, and allow devices to request addresses autonomously without the need for IT support.
Cutting across all the layers is an identity and security structure, a gateway for accessing external data, and tools that connect the data from smart, connected products to other business systems for example, ERP and CRM systems. Smart, connected products require companies to build and support an entirely new technology infrastructure. This technology enables not only rapid product application development and operation but the collection, analysis, and sharing of the potentially huge amounts of longitudinal data generated inside and outside the products that has never been available before.
Building and supporting the technology stack for smart, connected products requires substantial investment and a range of new skills—such as software development, systems engineering, data analytics, and online security expertise—that are rarely found in manufacturing companies.
Intelligence and connectivity enable an entirely new set of product functions and capabilities, which can be grouped into four areas: monitoring, control, optimization, and autonomy.
Each capability is valuable in its own right and also sets the stage for the next level. For example, monitoring capabilities are the foundation for product control, optimization, and autonomy. A company must choose the set of capabilities that deliver its customer value and define its competitive positioning.
The capabilities of smart, connected products can be grouped into four areas: monitoring, control, optimization, and autonomy. Each builds on the preceding one; to have control capability, for example, a product must have monitoring capability. Using data, a product can alert users or others to changes in circumstances or performance.
This data has important implications for design by reducing overengineering, for example , market segmentation through the analysis of usage patterns by customer type , and after-sale service by allowing the dispatch of the right technician with the right part, thus improving the first-time fix rate.
Monitoring data may also reveal warranty compliance issues as well as new sales opportunities, such as the need for additional product capacity because of high utilization.
In some cases, such as medical devices, monitoring is the core element of value creation. Monitoring capabilities can span multiple products across distances. Joy Global, a leading mining equipment manufacturer, monitors operating conditions, safety parameters, and predictive service indicators for entire fleets of equipment far underground.
Joy also monitors operating parameters across multiple mines in different countries for benchmarking purposes. Smart, connected products can be controlled through remote commands or algorithms that are built into the device or reside in the product cloud. Control through software embedded in the product or the cloud allows the customization of product performance to a degree that previously was not cost effective or often even possible.
The same technology also enables users to control and personalize their interaction with the product in many new ways. For example, users can adjust their Philips Lighting hue lightbulbs via smartphone, turning them on and off, programming them to blink red if an intruder is detected, or dimming them slowly at night. Doorbot, a smart, connected doorbell and lock, allows customers to give visitors access to the home remotely after screening them on their smartphones.
The rich flow of monitoring data from smart, connected products, coupled with the capacity to control product operation, allows companies to optimize product performance in numerous ways, many of which have not been previously possible. Smart, connected products can apply algorithms and analytics to in-use or historical data to dramatically improve output, utilization, and efficiency. In wind turbines, for instance, a local microcontroller can adjust each blade on every revolution to capture maximum wind energy.
And each turbine can be adjusted to not only improve its performance but minimize its impact on the efficiency of those nearby. Real-time monitoring data on product condition and product control capability enables firms to optimize service by performing preventative maintenance when failure is imminent and accomplishing repairs remotely, thereby reducing product downtime and the need to dispatch repair personnel. Even when on-site repair is required, advance information about what is broken, what parts are needed, and how to accomplish the fix reduces service costs and improves first-time fix rates.
Diebold, for example, monitors many of its automated teller machines for early signs of trouble. Often these can occur remotely, via software. Monitoring, control, and optimization capabilities combine to allow smart, connected products to achieve a previously unattainable level of autonomy.
At the simplest level is autonomous product operation like that of the iRobot Roomba, a vacuum cleaner that uses sensors and software to scan and clean floors in rooms with different layouts. Autonomy not only can reduce the need for operators but can improve safety in dangerous environments and facilitate operation in remote locations. Autonomous products can also act in coordination with other products and systems. The value of these capabilities can grow exponentially as more and more products become connected.
For example, the energy efficiency of the electric grid increases as more smart meters are connected, allowing the utility to gain insight into and respond to demand patterns over time. Ultimately, products can function with complete autonomy, applying algorithms that utilize data about their performance and their environment—including the activity of other products in the system—and leveraging their ability to communicate with other products.
Human operators merely monitor performance or watch over the fleet or the system, rather than individual units. Equipment is monitored continuously for performance and faults, and technicians are dispatched underground to deal with issues requiring human intervention.
To understand the effects of smart, connected products on industry competition and profitability, we must examine their impact on industry structure. In any industry, competition is driven by five competitive forces: the bargaining power of buyers, the nature and intensity of the rivalry among existing competitors, the threat of new entrants, the threat of substitute products or services, and the bargaining power of suppliers.
The composition and strength of these forces collectively determine the nature of industry competition and the average profitability for incumbent competitors.
Industry structure changes when new technology, customer needs, or other factors shift these five forces. Smart, connected products will substantially affect structure in many industries, as did the previous wave of internet-enabled IT.
The effects will be greatest in manufacturing industries. Smart, connected products will have a transformative effect on industry structure. The five forces that shape competition provide the framework necessary for understanding the significance of these changes.
Smart, connected products dramatically expand opportunities for product differentiation, moving competition away from price alone.
Oct 17, Glossaries 18 comments. Like any industry we have a multitude of terms that are commonly used. If you have any others to add, please add them in the comments below. ABC Analysis. A form of Pareto analysis applied to a group of products in order to apply selective inventory management controls.
How Smart, Connected Products Are Transforming Competition
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It's best to buy important parts from the right partner. We offer a complete range of spare axle and brake parts, as well as components for chassis and steering. To get you back on the road quickly, safely and properly. We cover a particularly large range in this area. Our extensive selection makes this a brilliant area. A wide range of chemical products for all vehicle and workshop requirements awaits you.
Stymied by stickering? Exasperated by XML? And just what is Poka Yoke , anyway? Let Inbound Logistics' glossary of transportation, logistics, supply chain, and international trade terms help. ABC Analysis: A classification of items in an inventory according to importance defined in terms of criteria such as sales volume and purchase volume. ABC Classification: Classification of a group of items in decreasing order of annual dollar volume or other criteria. This array is then split into three classes called A, B, and C. ABC Model: In cost management , a representation of resource costs during a time period that are consumed through activities and traced to products, services, and customers, or to any other object that creates a demand for the activity to be performed.
How to Account for Spare Parts under IFRS
The predecessor to ITE was the International Harvester Company, which built and sold agricultural equipment, which was seasonal. With a more diverse suite of products, seasonalities have been minimized. The parts business have experienced 14 consecutive years of growth but corporate manufacturing growth is heavily dependent on economic conditions. The ITE warehouse is a service parts facility: It ships spare parts on demand.
Он обернулся к Хедрону, стоявшему в еле различимом прямоугольнике двери, и на секунду воцарилась напряженная тишина. Оба выжидали, не решаясь заговорить Решение было принято за .
Подлинный же Элвин ждал, затаив дыхание и лишь слегка сопротивляясь силам, с которыми, как он знал, бороться невозможно. Он рисковал: нельзя было заранее предвидеть, подчинится ли его ненадежный союзник только что полученным сложнейшим приказам. Ни при каких обстоятельствах, сказал он роботу, ты не должен слушаться последующих команд, пока я не буду в безопасности в Диаспаре.
Таков был приказ. Если он будет исполнен, то, значит, Элвин вывел свою судьбу из пределов человеческой досягаемости. Машина без колебаний мчала его по тщательно обрисованному заранее пути. Второе "я" Элвина все еще сердито требовало выпустить его, но он знал, что уже находится в безопасности.
И вскоре Серанис тоже поняла это, ибо силы в его мозгу прекратили враждовать друг с другом.
Glossary of Supply Chain Terms
Очень может быть, что они и были людьми. Верно, что в этом здании было очень много комнат и помещений, проникнуть в которые могли только летающие существа, но это вовсе не означало, что строители зданий и сами были крылаты. Они могли, скажем, пользоваться индивидуальными гравитационными устройствами, которые когда-то были широко распространены, но от которых в Диаспаре сейчас не осталось и -- Да мы можем потратить миллионы лет, исследуя все эти здания, -- очнулся наконец Хилвар.
-- Ясно же, что их не просто бросили -- их тщательно освободили от всего ценного, что они могли содержать. Мы только зря тратим -- Ну и что ты предлагаешь.
По дороге к Эрли роботу не повстречалось ни одной живой души. Странно это было -- сидеть в неподвижном космическом корабле, в то время, как его взгляд без малейших усилий с его стороны скользил по знакомой тропе, а в ушах звучал шепот леса. Он все еще не мог полностью отождествить себя с роботом, и поэтому усилия по управлению им еще приходилось затрачивать Почти стемнело, когда он достиг Эрли, маленькие домики которого словно бы плавали в озерцах света.
Робот держался затененных мест и уже почти доплыл до дома Сирэйнис, когда его обнаружили. Внезапно раздался сердитый, высокий жужжащий звук, и поле зрения оказалось закрытым мельтешением крыльев. Олвин невольно отпрянул, но тотчас понял, что произошло.
How to Account for Spare Parts under IFRS
Она здесь используется нечасто. Это откровение слегка насторожило Элвина, но все же не слишком поразило .
Heavy Earthmoving Equipment Experts
Элвин знал, что в действительности он по-прежнему находится в своей комнате, и мириады людей, которые, казалось, окружали его, подобным же образом пребывают у себя дома. Пока он не двигался, иллюзия была полной.
Олвин с интересом отметил незначительные, но о многом говорящие различия в одежде и даже физическом облике людей от поселка к поселку. Цивилизация Лиза состояла из тысяч отличающихся друг от друга культур, каждая из которых вносила в общее дело что-то. Мобиль был как следует загружен прославленным фруктом Эрли -- небольшими желтыми персиками; кому бы Хилвар их ни предлагал, персики эти всегда принимались с благодарностью.
Для людей, чей рассудок был устроен таким образом, подобное существование являлось совершенно удовлетворительным. То, что оно было также абсолютно бесполезным, даже Элвин еще не уразумел.
С удалениям Элвина и Алистры от сердца города число людей на улицах медленно убывало. Когда они плавно остановились у длинной платформы из мрамора ярких расцветок, вокруг было совсем пусто.