Smart, growth, such as new approaches for differentiation

Smart, connected products are
different with Internet of Things which provides low-cost connectivity
everywhere. Meanwhile, in smart, connected products, it is the products themselves
are enabling revolution. Smart, connected products have similar components to
existing products, but also have new features like sensors and software that
make them more intelligent. Currently, users can control the products through
various interfaces. In
addition, many products are connected to the internet and the “product cloud”
which runs remote software connected to the products. For example, Tesla,
which is a leader in the smart, connected car market, has develop cars which
can be continually improved and optimized through software updates made through the cloud, instead
of visiting the dealer.

Smart, connected products have
the capabilities to monitor and report on themselves and their environment;
enable users to control through software embedded; optimize product operation,
capacity utilization, and predictive maintenance using algorithms and
analytics; as well as combine other capabilities that will enable autonomous
operation, self-coordination, and self-diagnose. These capabilities of smart,
connected products give an opportunity to increase profitability and growth,
such as new approaches for differentiation and segmentation; component
standardization that will lower the cost because most of functionalities are
driven by software; higher barriers to entry the market for competitors. On the
other hand, smart, connected products also bring out the following challenges: high
fixed cost such as software development and building the product cloud; promoting
“arms race” that will lead to higher cost and low profitability; decline in product
demand due to infrequent use and increase of product sharing; as well as new industry
entrants.

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Data is a critical new
resource in smart, connected products. Therefore, companies must store and
manage product, external, and enterprise data, then aggregate them into a “data
lake”. Besides, companies must also analyze and act on the data to create a
competitive advantage. Selling smart, connected products can affect every
aspect of value chain. These are several impacts of smart, connected products
on value chain, i.e. product design
will become constant and if the physical product remains unchanged, it can be
updated through its software (product development); companies also gain new
knowledge about customer segmentation and product customization (marketing and
sales); product components become simpler as functionality changes from
mechanical parts to software (manufacturing); it becomes possible to provide
remote service and sensor data can predict when parts are about to break which enables
predictive maintenance (after-sales service); and companies are now required to
embed the security in product design and every value chain (security).

Smart, connected products are driving manufacturing companies to become
both hardware and software companies. Manufacturing companies must develop four new
functions, i.e. unified data
organization which captures, aggregates, and analyzes data for organizations; tighter
IT and R&D collaboration; Dev-Ops groups which manage the product cloud
since the products stop functioning if the product cloud fails; customer
success management which ensure that customers obtain full value from their
products. In addition, smart, connected products are also driving efficiency
and productivity improvements in the service industries such as airline
industry, healthcare, and even parking garages.