Impact of IoT on Product Innovation

Connected Landscape

IoT (Internet of Things) is fueling a gigantic proliferation in the number of smart sensors, and connected products or devices across a vast array of industries. Billions of these internet-connected things have also given rise to a massive explosion in the amount of data that is produced, which must be properly managed, secured, and utilized in a productive manner.

The nature of these smart sensors and connected devices differ vastly from industry to industry, and range from simple RFID type of sensors, to powerful smart phones, and extremely sophisticated sensors in aircraft engines, turbines, and automobiles. There is a fundamental transformation happening in various industries – for example, smart switches and connected home appliances giving rise to sophisticated home automation, smart sensors connected to industrial equipment leading to predictive maintenance solutions, offer a glimpse of the potential of IoT.

As businesses try to understand the impact of this unprecedented technology disruption, they must acknowledge and realize the following fundamental features of the connected landscape:

• The biggest and most fundamental change is the realization that everything is digitized and software is the primary driver to connect these smart products and services
• The realization that they are no longer building a standalone product, and that they must architect and develop products that fit into a product ecosystem

Software is a strategic differentiator

Over the past decade, a continuous storm of technology disruption, primarily driven by software has forced businesses to realize that software is no longer an operational nice-to-have, but is a key strategic differentiator, and to survive they must acquire capabilities to build and support their own software products and services. In other words, every company must become a software company, and develop mature capabilities in software innovation.

IoT has not only reinforced this trend, but has greatly enhanced the pressure on businesses to embrace this fundamental transformation.

Product has become a means to deliver a service

In this new connected landscape, a product has also become a means to deliver a service. Consider the example of Biotronik, a medical device company that used to sell standalone pacemakers and insulin pumps, which now offers a sophisticated home health-monitoring system that allows physicians to remotely monitor their patient’s clinical status. Businesses must open their eyes to the enormous potential for offering value added services through smart, connected products.

Challenges

For both technology companies as well as traditional manufacturers that produce physical products, the proliferation of smart, and connected devices is posing unprecedented challenges, such as:

• Designing and developing for a product ecosystem, instead of a standalone product
• Interoperability, integration, and interfaces
• Continuously evolving standards
• Consumerization of software – scaling for mass market, security, privacy, multi-device support etc.
• Handling huge data volumes
• Shorter ROI cycles

Opportunities

This connected landscape also offers tremendous opportunities for businesses to deliver new and innovative services built around smart products:

• New business models giving rise to new revenue streams
• Direct connect with the end user/customer
• Mass adoption, as well as personalization, that can lead to hyper-customization
• Enhanced utilization
• Decision support systems based on data that can lead to new business models (Ex: FedEx SenseAware solution for healthcare and life sciences companies, or GE’s predictive maintenance solutions based on real-time data produced by sensors attached to its turbines)
• Potential to be a part of different business models and different platforms
• Huge potential for monetization in multiple (unanticipated) ways

Impact on business processes and organizational structure

As businesses try to transform their processes and organizations to handle the challenges of the connected landscape, they must consider the following key aspects:

• Every process must be available 24×7
• Business models are distributed across organizations, needing distributed business processes to support them – also a business can be both a consumer and supplier in the value chain, depending on its role in any given ecosystem
• It is no longer enough to have an internal lean process; businesses must be agile in all aspects to deal with partners across the ecosystem
• Consumers and partners are also part of the organizational continuum now, more than ever before
• Organizational structure and roles will be transformed to suit the new landscape – Ex: A company like Uber which doesn’t own any physical infrastructure is dominating the market with the strength of its business model. This precisely illustrates the need for a Product Manager transforming into a Business Model Manager
• Decision making systems, work flow processes and tools (automation) to support the new organizational needs
• Need to use new and upgraded software tool-sets to serve the distributed and always connected organization

Build strategic partnerships

As businesses seek to build products for a platform ecosystem to handle the multitude of connected products and devices, which must coexist and interact with each other, they must realize that it will no longer suffice if the product design and architecture is merely focused on features and functionality. While performance and scalability continue to be important, other non-functional aspects such as interoperability, security, and integrations become critical architectural design considerations in a connected ecosystem.

Given the complexity of this connected landscape, it will be impossible for any business to master or excel in all the areas. While these companies must retain ownership of their core IP and must support it irrespective of the technology/engineering challenges, they can’t do it on their own. In this new ecosystem, businesses must build strategic partnerships with mature service providers and leverage their technology strengths.