How Smart, Connected Products Are Transforming Competition - Harvard Business Review

How Smart, Connected Products Are Transforming Competition - Harvard Business Review

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. 

These “smart, connected products”—made possible by vast  improvements in processing power and device miniaturization and by the  network benefits of ubiquitous wireless connectivity—have unleashed a  new era of competition.

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.  In many companies, smart, connected products will force the fundamental  question, “What business am I in?”

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.


The phrase “internet of things” has arisen to reflect the growing number of
smart, connected products and highlight the new opportunities they can
represent. 


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. 

What  makes smart, connected products fundamentally different is not the  internet, but the changing nature of the “things.” 

It is the expanded  capabilities of smart, connected products and the data they generate   that are ushering in a new era of competition. 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.

 

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