The Business Value of Smart Connected Products
I probably won’t surprise you with a fact that the global industrial equipment market is enormous:
The research firm, IHS, puts the global industrial equipment and transportation market at $1.6 trillion. The World Bank estimates the equipment portion at over $700 billion, and the total of medium duty and high tech equipment business at $3.6 trillion. While Global Market Insights predicts the industrial machinery market to grow to over $770 billion in 2024.
These are big numbers in highly diversified businesses, so what are the common issues among suppliers? for example:
- How much of their annual revenue repeats? These are often capital items that customers don’t buy year-after-year.
- How much more cost is available to be removed from products that have been in service, in some cases, for decades.
- And once these, often complex systems are shipped, and not purchased again for years, what do suppliers know about how well the product is working, how, or (worst case) even if the customer is using the product, and therefore, how satisfied they are?
- And how long does it take to get that feedback? Is it available in time to take the right actions?
Technology has advanced to address those needs. The idea of digital transformation—that all the information required to make proper, timely business decisions is available to anyone who needs it, is now part of the industrial sector’s look at the future. Connected products provide instant performance feedback and traceability. Connected manufacturing and service functions make use of unified data flows to keep equipment running at unprecedented levels.
Business Value of Smart Connected Products
In a series of articles authored by Harvard Business School professor Michael Porter and Jim Heppelman, PTC’s CEO, they note the requirement for closer coordination among business functions—and conclude that smart connected products are a key element of enabling that coordination and in building business value.
In speaking with our customers, new, additional business value opportunities always seem to surface in these categories:
- Improving Customer Experience by leveraging data from connected products for improved service, support and usability. For example, to proactively monitor a product, identify issues, and fix them before breakdown will improve the customer experience. so will a smart, phone app that compliments the product by providing visibility or a better UI to control the product.
- Optimising Business Processes is all about increasing efficiency and taking cost or time out of an organisation by combining real-time data with existing systems. For example, data about a product’s condition can reduce the time it takes a technician to troubleshoot or reduce the number of visits required to repair, i.e. improve first time fix rate.
- Driving New Revenue Streams by unlocking new business models and realise new value-add opportunities. For example, pay per use billing or product as a service or selling the data to new customers or entirely new industries.
- Differentiating Offerings by increasing the pace of product and service innovation. For instance, if the hardware is a commodity or under heavy competitive pressure, the software and applications that come along with the product can help differentiate, i.e. able and organisation to charge more for the offering.
Analyst firms report that these trends are real and critical to business’s futures. For instance, Forrester notes that any IoT strategy requires rethinking business processes in general. IDC research shows that 40% of the Top 100 discrete manufacturing companies will pursue Product-as-a-Service strategies, which are made more workable with connected product portfolios. VDC surveys indicate over half of their respondents believe that IoT is critical to their future success.While Aberdeen has uncovered that 84% of products that come from digital, model-based engineering processes hit their launch KPIs. Overall, McKinsey summarises it, here: that a digital thread–connecting all the critical data from a manufacturer’s value—is real, and it’s here.
In short, this digital transformation, tying all of the information about a company’s products together, will benefit the entire enterprise, across all business functions—and regardless of the industry in which they compete.
Smart Connected Products and Return On Investment
The overarching idea around connecting with your products in the field is having real-time performance data touch every function in the organisation. What could your company do with that data?
Our customers implementing use cases in the Services area have:
- Reduced mean-time-to-repair by 50%
- Cut customers’ unscheduled downtime by 40%
- And solved 40% of help requests remotely.
What could those savings add up to for your company?
In Customer Operations, our customers have reduced on-site calls by up to 42%, by enabling better customer self-service and remotely pushing software updates, among other techniques. In a digitally-transformed environment, training and technical documentation can be pushed to both customers and in-house service and tech support teams as it’s created or updated. What would these advantages be worth to your company?
If your company were fully digital, could your Sales Team know when to up-sell and cross-sell if they knew utilisation and performance data? If you could guarantee 97% uptime, could you offer higher-margin service agreements or warranties? Could they close deals faster with virtual demos that show the offered equipment right where it’s intended to go? What would your competitive position be if you could go to market with your product-as-a-service?
With products reporting their use, the manufacturing and supply chain teams have increased the turnover of spare parts inventories by 35%. They have also optimised aftermarket parts and consumables planning by seeing both use and as-deployed configurations. If your systems were connected during production could you ship 0-defect systems and supply individual certificates of compliance, in-line?
And with the benefit of live data from the field, Engineering can design out failure modes as they occur, getting new parts into production immediately and producing technical documentation and work instructions in near-real-time.
Smart Connected Products and Opportunities
These are the kinds of benefits that come to companies that take the journey of digital transformation. This progression has been described in the Harvard Business Review articles that I mentioned earlier written by professor Michael Porter and our CEO Jim Heppelman. They describe how companies are moving from stand-alone products, to smart products, to smart-connected-products. Technical advances are allowing the interconnection of smart-connected-products into more complete product systems. And when those systems can be further integrated, consider how a system-of-systems can add to productivity, reduce costs and drive business value.
Learn How Smart, Connected Products Are Transforming Companies
In their second Harvard Business Review article, How Smart, Connected Products Are Transforming Companies, co-authors Michael Porter of the Harvard Business School and Jim Heppelmann, President and CEO of PTC, examine the impact of the Internet of Things on companies’ operations and organisational structure.
- Learn how companies transform their organisations to capture the IoT opportunity
- See examples from dozens of companies that have successfully transformed their organisations and provides three models for how companies are making the transition.