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How smart, connected products are transforming companies presentation (edited - non video)

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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. 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.

by Michael E. Porter and James E. Heppelmann

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How smart, connected products are transforming companies presentation (edited - non video)

  1. 1. How Smart, Connected Produces Are Transforming Companies By MICHAEL E. PORTER AND JAMES E. HEPPELMANN Harvard Business Review Fahmy Amrillah - 1506772744 Strategic Marketing
  2. 2. Background Evolution of products into intelligent, connected devices is radically reshaping companies and competition The relationship a firm has with products and customers is becoming continuous and open-ended. Smart, connected products substantially changes the work of virtually every function within the manufacturing firm.
  3. 3. What is smart, connected product ? Smart, connected products have many of the same physical components that products have always had but also have new features that make them more intelligent Sensors and Software
  4. 4. What is smart, connected product ? Smart, connected products have three core elements Physical components Connectivity components Smart components Sensors Microprocessor s Data storage Control Software Embedded OS Digital UI Mechanical Electrical parts Ports Antennae Protocols Networks
  5. 5. What is smart, connected product ? Many products are connected to the Internet and the “product cloud” which runs remote software connected to the products named “Technology Stack” It requires a whole new supporting technology infrastructure provides a gateway for data exchange integrates data from business systems, external sources, and other related products serves as the platform for data storage and analytics, runs applications, and safeguards access to products and the flowing data.
  6. 6. New Capabilites of Smart, Connected Products Control Optimization Autonomy Monitorin gCan monitor and report on themselves and their environment in real time, creating new data and insights. Can be controlled through software embedded within or in the cloud. Gives users the unprecedented ability to customize. And to operate them in hazardous or hard-to-reach environments. Algorithms and analytics can optimize product operation, capacity utilization, and predictive maintenance Enables autonomous operation, self-coordination, and self-diagnosis.
  7. 7. Data : reshaping the value chain The new data resources • In the past, data was generated primarily by internal operations, information gathered from surveys, research, and other external sources • Now, sources of data are being supplemented by product itself • Data now stands on par with people, technology, and capital as a core asset of the corporation • its value increases exponentially when it is integrated with other data
  8. 8. Data : reshaping the value chain Data Analytics • Ability to unlock the full value of data becomes a key source of competitive advantage • Powerful insights by identifying patterns in thousands of readings from many products over time • Uses mathematics, computer science, and business analysis techniques • Collected data are often unstructured -> emerging solution is a “data lake”
  9. 9. Data : reshaping the value chain Data Analytics • The data from “data lake” can be studied with a set of new data analytics tools • Descriptive • Diagnostic • Predictive • Prescriptive.
  10. 10. Data Analytics
  11. 11. Transforming The Value Chain Powerful new data and new capabilities of Smart, connected products, is restructuring the traditional functions of business Product Development Product development shifts from largely mechanical engineering to true interdisciplinary systems engineering Design teams are shifting from a majority of mechanical engineers to a majority of software engineers
  12. 12. Transforming The Value Chain Low-cost variability Software makes variability far cheaper. Ex: Product Development Evergreen design Software also makes it easier to localize products for different countries and languages Companies will improve products continuously Can be updated via software in the cloud. Ex:
  13. 13. Product Development New user interfaces and augmented reality Augmented reality applications tap into the product cloud and generate a digital overlay of the product. The digital user interface enabling remote operation and even eliminating the need for controls in the product itself
  14. 14. enabling continuous monitoring of real-world performance data Product Development Connected service allowing companies to identify and address design problems that testing failed to expose Product can be used to monitor product health and performance and warn service personnel of failures Ongoing quality management
  15. 15. Support for new business model Smart, connected products let companies switch from transactional selling to product- as-a-service models. Product Development System Interoperability The responsibility for and associated cost of maintenance remain with the manufacturer Through codesign, companies can simultaneously develop and enhance hardware and software across a family of products, including those of other companies.
  16. 16. Transforming The Value Chain Smart factories Manufacturing Simplified components Smart, connected machines are reshaping manufacturing plants Machines increasingly can be linked together in systems Shift from mechanical parts to software Smart, connected products create new production requirements and opportunities. Such as shift final assembly to the customer Physical complexity of products decreases but the quantity of sensors and software rises -> new complexity. Reconfigured assembly process Software in the product or in the cloud can be loaded or configured well after the product leaves the factory
  17. 17. Transforming The Value Chain Manufacturing Continuous product operations manufacturing has been a discrete process that ended once the product was shipped Smart, connected products create new production requirements and opportunities. Such as shift final assembly to the customer operate and improve throughout the product’s life
  18. 18. Transforming The Value Chain it can be done continuously, wherever products are, and provides rich information – current and location history, condition (their temperature, say, or exposure to stresses), and surrounding environment. Logistics
  19. 19. Transforming The Value Chain Marketing and Sales Direct and ongoing dialogue with consumers through smart, connected products = new customer relationship New business models will emerge as products can be o ered as a service. As companies gather and analyze product data, they gain new insights into customer segmentation and product customization Teams will need broader knowledge to position offerings as part of larger smart, connected systems.
  20. 20. Transforming The Value Chain After-sales service Sensor data can predict when parts are about to break that makes predictive maintenance possible Service technicians can use augmented reality applications that tap into the product cloud and generate a digital overlay of the product. Smart, connected products make it feasible to deliver service remotely.
  21. 21. Transforming The Value Chain Security Companies tasks are safeguarding firms’ data centers, business systems, computers, and networks The job of ensuring IT security now cuts across all functions. As IT is pushed into products, security concerns become important
  22. 22. New expertise skills needed to design, sell, and service smart, connected products are in high demand but short supply Human Resources New Cultures skill requirements shift from mechanical engineering to software engineering, from selling products to selling services. Establishing a physical presence in Boston and Sillicon Valley Manufacturing smart products require far more coordination across functions and disciplines than traditional manufacturing does Integrating staff with varied work styles and from more-diverse backgrounds and cultures
  23. 23. New compensation model Need new approaches to attracting and motivating talent Human Resources Perks like job flexibility, concierge services, sabbaticals, and free time to work on side projects of personal interest are the norm in high-tech firms
  24. 24. Implication For Organizational Structure As manufacturing firms become hybrid hardware and software companies, they must adopt new organizational structures. Four new functions are developed Unified data organization A chief data officer leads this group, which captures, aggregates, and analyzes data for the entire organization. Tighter IT-R&D Collaboration The new need for IT in product development.
  25. 25. Implication For Organizational Structure As manufacturing firms become hybrid hardware and software companies, they must adopt new organizational structures. Four new functions are developed Dev-ops Dev-Ops groups manage the product cloud Customer Success Management Since smart, connected products stop functioning if the product cloud fails, companies must carefully maintain, upgrade, and find bugs in the product cloud. Companies must ensure that customers receive full value from their products
  26. 26. Implication For Organizational Structure
  27. 27. Making The Transition Smart, connected products will need to coexist with traditional products for a sustained period At business level unit, IT might be assigned the lead role for product strategy and deployment. Special steering committee made up of the functional heads may be asked to champion and oversee this effort Organizational transformation will be evolutionary, not revolutionary,
  28. 28. Making The Transition Stand-alone business unit separate new unit, with profit-and- loss responsibility, is put in charge of supporting the company’s smart, connected products strategy Center of excellence It does not have profit-and-loss responsibility but is a cost center that business units can At corporate level Cross-business-unit steering committee Summoning a committee of thought leaders across the various business units champion of opportunities, share expertise, and facilitate collaboration usually lack formal decision- making authority
  29. 29. Broader Implication Smart, connected products will free us to purchase only the goods and services we need, to share products that we do not use much, and to get more out of the products that we already have. The effects are not confined to manufacturing, but are spreading to other industries that use—or could use—smart, connected products, including services.
  30. 30. Broader Implication New industries, new services, and new roles will be created that can allow more people to work more productively and in less rote and repetitive ways. Impact on employment and growth is likely to be positive Companies and other institutions that can speed this journey will prosper and make a profound difference for society
  31. 31. Thank You

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