Last year I wrote about how EDS is exploring opportuty windows with Network-enabled smart objects and sevices. Jeff Wacker, EDS's inhouse futurist recently asked a thought provoking question at a talk he gave in Toronto in July 2006 ....."Who would benefit by knowing that my package has just passing mile marker number 26 on route 192 ?" (see Smart Technologies need a New Business Model to be Effective)
In a recent newsletter, Harbor Research Inc makes a compelling case for merging product and service development under one techno-umbrella via a new emerging capability called network-enabled Smart Objects
"Products and services, (like peanut butter and jam--my analogy,) while complementary, have historically had opposite strategic goals.As a result, each function has had to seek out its own distinct strategies. Intelligent device networking, however, is initiating a blending of the two models. The salient characteristics of each model are increasingly coming into question as product development and service organizations re-think their roles and functions based on the impact of networking. Products alone and services alone will rarely provide any appreciable competitive advantage today. Both are too easily copied. Success will come to those companies that realize the combined potentials of both by applying them in specific formats that make it nearly impossible for a competitor to invade."....... ( and create brand new-to-the-world, copy-proof "clustered" business models)
1) Because of rising R&D costs and decreased product revenues (due to shorter product life cycles) — companies are finding it increasingly difficult to justify investments in stand-alone, in-house innovation for new products and services.2) New Business Models (see Crowd-sourced Manufacuring; Buy-what-you-design) are shifting power away from the OEM toward to consumer/designer.
3) The U.S. has created the first post-consumer society in which a majority of people have run out of waking hours to consume. Total consumption of all things is dropping towards the 1% growth rate of the population.
4) Instead of a growing demand pulling products through the channel profitably, many product manufacturers are trying to push too much supply through channels, even at losses, thinking perhaps that someday they will make it up on volume.
5) With today's global-glut supply and saturated demand, end-users express their growing power in many ways. Consumers now expect perfect quality goods and services, unconditionally guaranteed forever. All end users want “over choice” in product selection, flexibility in the types and quantity of services available, convenience, user-friendliness in buying, speed in delivery and lower prices. End customers are steadily getting more of these needs met by more suppliers.
6) Manufacturing technology and methods continue to move towards the make-anything, in-any-quantity-now factory. This will please end-users, but it creates the growing problem of how to market micro-segmented products through traditional commodity channels and mass media.
7) Instead of selling through lots of small, independent agents, distributors and retailers that could be controlled, manufacturers are faced with selling to big chains or cooperative groups that control market share or shelf space and can push the manufacturers around.
8) Progressive manufacturers would like to sell their fragmenting line of goods to more and smaller segments of potential customers which their existing channel intermediaries haven't pursued and may not be geared to serve.
9) Most product OEMs have enormous services and value added opportunities surrounding them, but the natural effect of their (conventional ) business mode ( and business models) blinds them from objectively seeing these opportunities."
"By 2010, the Pervasive Internet (the 24/7, everywhere internet (or what I call the xtranet )and Smart Services could drive a total opportunity in the hundreds of billions of dollars for the companies involved in device enablement, device monitoring, and new services driven by device-generated data. The largest opportunity will exist for value-added integrated product and services providers, and thus access to device information will become a de facto part of most service or sales contracts."
- "Because in any given market, the first players to do so will own the information feedback loop to the customer, and it will be very hard for competitors to pull customers out of that loop. ( the lock-in factor and opportunity swtiching costs)
- Inside this “information circle,” a whole world of new, attractive, and more profitable services will take shape.
- Because those next-generation services cannot be offered without device information, and because even traditional service relationships will be made vastly more efficient inside the information circle, channel partners can no longer cut an OEM out of the services action.
- In fact, the real-time enterprise turns “disintermediation” completely on its head. When a company decides to make a smart product that sends out its “heartbeat,” the company owns access to that heartbeat, and thus access to the customer. Now, no third party can sell profitable services to the manufacturer’s customer without making some arrangement with the manufacturer for access to the diagnostic or status data coming from the networked product or device."
"With too much supply and not enough demand, product OEMs in virtually all markets are experiencing profit erosion. So, consolidation via acquisition of players at each step in the chain has been the norm for growth and value creation for some time. Further, the historical approach of most product OEMs has been to aim for the “center” in designing their products and go-to-market architectures, hoping to maximize their access to a somewhat homogeneous set of mainstream customers. However, as suppliers attempt to meet the increasingly diverse and sophisticated requirements of customers, the middle-ground approach to product and market delivery design has been rendered significantly less rewarding—suppliers are finding a broad, central thrust to be less effective in pleasing any group of customers. Traditional-thinking market participants are, in other words, putting their heads in the sand.
Ultimately, the worst of it all for most product OEMs is the fact that the consolidation cycle was for so many markets a 1990s phenomenon – that is, most product OEM markets have consolidated and most product OEMs are so large that the size of acquisition required to move the “equity value meter” is either too costly or, more often, not available. Bottom line, we’ve run out of things to acquire. Today’s executives are realizing, “Heavens….. this means I will really have to innovate and grow organically."
Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "
The Smart Economy Bog: Read, enjoy, explore, speculate, comment !!
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