The Rise of the Smart Product Economy

Making products smart can deliver game-changing innovation, enriched customer experiences and new, across-the board levels of efficiency. From R&D and manufacturing, through distribution and after-sales support, product data is changing how products are built, sold and cared for. Our latest research reveals practical steps business leaders can take to benefit from this quickly intensifying and accelerating trend.
Whether it is smartphones, smart cities, smart cars or even smart toothbrushes, smart technologies are finding their way into, and around, the everyday things we like to buy. Witness the “smart” Johnnie Walker bottle, which sends a personalized message to every customer who waves a smartphone in front of it, whether it’s a promotional offer (pre-transaction) or a cocktail recipe (post-purchase, once embedded sensors detect the bottle has been opened).
The bottle can now be tracked across the supply chain, from its point of manufacture to its point of consumption. The opportunities unleashed by smart products are seemingly endless for any company
seeking game-changing innovation or new levels of efficiency. However, product companies need to get on board, and fast, to ensure they are not left behind in the quickly intensifying and accelerating smart product market. Smart products are emerging across industries and, as the smart whisky bottle example reveals, are already having a profound impact on product development, manufacturing, marketing, sales and the customer experience. Ifproperly instrumented and personalized, smart products not only exude reams of insight on product usage and status across the value chain, but they can also inform continuou sproduct improvements and influence strategic moves into connected and/or radically adjacent markets.
The digital data emanating from smart products is where value — or alchemy — can be found. Imagine the instrumented whisky bottle exchanging data with a chilled glass to help uncover the perfect temperature for that drinking experience. By distilling and applying the insights gleaned from product intersections, manufacturers (and other players in the value chain) can strengthen customer relationships and create new and more profitable sales channels. But along with these opportunities, there is a flipside: Smart products also introduce uncertainty as they dramatically disrupt marketplaces and existing business models.
To understand the smart product phenomenon, Cognizant’s Center for the Future of Work — in partnership with the Economist Intelligence Unit (the research arm of The Economist magazine) — surveyed over 200 product design and innovation executives across the U.S. and Europe to chart the rapidly developing wave of smart products (see full methodology, page 20). Key findings revealed by our investigation include:

Smart products offer unprecedented customer insight.

The information that surrounds almost every physical thing reveals how a customer uses, or wishes to use, a product. Companies are using data and analytics to identify the meaningful connections and cor
– relations among the different conditions involved in a product’s manufacture, sale and customer experience.

Product data radically changes how products are built and sold.

Product data increasingly underpins finer-grain product personalization and richer customer experiences. Smart products reveal insights for remaking how products are built, priced and sold —
directly and through channel partners. We predict an “arms race” as various players compete to win control of the customer.

Seismic shifts in revenue will impact profitability.

The very newness of the smart product opportunity is throwing traditional business models into a state of flux. New subscription- based services are feeding perceived uncertainties surrounding revenue and margins, and are setting off waves of analysis-paralysis. A new alchemy is at work as decision-makers believe smart products are important yet are unsure how to unlock value from them.

Mastery with product data and sharing predicate success.

Successful smart product strategies require healthy doses of embedded intelligence to capture and share data across a product’s ecosystem, as well as an engrained ability to read customer sentiment
and foretell overall market direction. The stakes are very high — a failure to devise a strategy could undermine market relevance over the medium to long term.

The start of a new smart product economy has begun.

We predict the rise of an interconnected smart product economy over the next five to 10 years. It’s already emerging, as our research shows. Smart products enable tightly interwoven ecosystems and commercial consortia for capturing new opportunities and extending advantage. Companies are already sharing product data and co-investing in smart product development to establish
a beachhead and catalyze a business model/ecosystem makeover

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