One hundred and thirty years ago, on January 29, 1886, Karl Benz patented the gasoline-driven automobile. The car was born.
From the industrial economy to the Internet economy, each economic revolution has utilized technology advancements to drive major shifts in the way businesses operate and how people live and work. The intersection of recent technology trends indicates that the world is again poised for another economic revolution… the Digital Economy.
This new reality is being powered by the unique convergence of hyperconnectivity, super-computing, cloud computing, a smarter world, and cyber security. Each of these technology trends have matured and hit scale at the same time, creating an environment ripe for business innovation.
Digital transformation has become a strategic priority. Finding new ways to connect the business with assets, customers, and suppliers has already led to the development of smarter products and new business models – for example, a snack food vending machine that anticipates and makes smart purchase recommendations to customers based on their profiles and historical purchase patterns. This same machine also gathers customer demographic information, such as age and gender, and passes it back to the vendor, who uses the information to make smarter inventory decisions, thereby increasing purchasing frequency and revenue.
New product and service offerings often provide much-needed differentiation in the marketplace and form the foundation for innovative business models, which is one reason behind a recent push for developing innovative “smart” products. While sensors have been embedded in large assets for many years, digital technology now has made them smaller and more affordable. To compete in the new digital economy, companies can start by taking an existing product or device created to perform a single function, and add sensors, allowing it to transmit and collect vast amounts of data. As a result, products are changing in several ways:
- Intelligent and self-aware. First, embedding sensors in products can make them more intelligent and self-aware of their status so they can solve problems autonomously. For example, using real-time insight, mill machines can now self-diagnose failures and automatically trigger maintenance procedures.
- Connected. Soon everything will be connected; every asset, supplier, worker, and stakeholder. This means products can work together to get jobs done more quickly and safely than ever before. For example, embedded sensors enable crane-to-crane communication on a construction site. When multiple cranes are moving in tight spaces, it’s important to keep them separated to avoid collisions. Intelligence-enabled cranes constantly transmit distance data to each other so multiple cranes can safely move containers or service the same area without collision. Product connectivity also opens up a world of possibilities for improving how products interact with the world around them including people and supply chains. As a case in point, take a look at a forklift. Cloud-based vehicle networks are already in development, which connect many types of smart vehicle-related products and services for an improved customer experience.
- Products are becoming platforms: We are now seeing products become platforms that drive impressive new services in ways that were not imagined when the products were first designed. Consider the way humanitarian relief operations crowd-source information in real time from smartphones after natural disasters.
- Mass personalization. Companies can now manufacture customized products at the efficiency of mass production to give customers what they want, when they want it, while streamlining the supply chain. Using advanced digital technologies on the shop floor, manufacturers are able to automate production lines, thereby making it possible to quickly change configurations to adapt to the needs of specific customers. Harley-Davidson, for example, can build 1,700 bike variations on one production line and ship a customized bike approximately every 90 seconds (SAP Thought Leadership Paper, Internet of Things).
To meet the information requirements necessary to capitalize on the digital economy, companies must first digitize, connect, and collect data on all of their assets, suppliers, workers and stakeholders. They also need high-speed platform technology capable of quickly analyzing the data from multiple angles and combining internal content with external information. Finally, all information must be viewed in the right business context and with the customer experience in mind across all channels.
Early adopters of the digital economy are winning by growing shareholder and stakeholder value faster than their counterparts. 74% of U.S. and European retail, healthcare and manufacturing companies have already developed smart products (The Economist Insights). By proactively embracing the digital economy, these industry leaders are harnessing the power of real-time data analytics to develop the next generation of products that connect people and businesses in ways we are just beginning to understand.
IDC predicts the worldwide market for IoT solutions will grow from $1.9 trillion in 2013 to $7.1 trillion in 2020. The digital economy will allow companies to redefine who they are and where they want to go. Yet they must remain focused on the customer outcomes of their decisions.
For more on how the digital economy is transforming business, see Digital Transformation Is A Journey, Not A Destination.
This story originally appeared in the SAP Business Trends community.Comments