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How Do Business Executives Transform Their Company to Capitalize on the IoT

What are the key questions business executives should be asking to capitalize on smart, connected products?

Do we need to reorganize or establish entirely new functions?

Many of the organizational shifts that smart, connected products are bringing to manufacturing mirror changes that have already taken root in the software industry. Smart, connected products require functions within manufacturing firms to collaborate in new ways. As a result, firms’ structures are rapidly evolving. A new functional unit focused on data management is starting to appear. Though rare, units focused on ongoing product development and customer success are also beginning to be recognized.

Should we change our business model?

Manufacturers have traditionally focused on producing a physical good and capturing value by transferring ownership of the good to the customer through a sales transaction. Smart, connected products allow the radical alteration of this long-standing business model. The manufacturer, through new capabilities and access to product data, opens up a spectrum of new business models for capturing value. Also, new competitors offering products with smart, connected capabilities or performance- or service-based business models can emerge quickly and reshape competition and industry boundaries.

Do we need to design, sell, and service our products differently?

The path to competitive advantage ultimately rests on strategy. Our research reveals that in a smart, connected world companies face 10 new strategic choices. Each choice involves trade-offs, and each must reflect a company’s unique circumstances. The choices are also interdependent. The company’s entire set of choices must reinforce one another and define a coherent and distinctive overall strategic positioning for the company.

What about data and security?

Until recently, IT departments in manufacturing companies have been largely responsible for safeguarding firms’ data centers, business systems, computers, and networks. With the advent of smart, connected devices, the game changes dramatically. The job of ensuring IT security now cuts across all functions. Data privacy and the fair exchange of value for data are also increasingly important to customers. Overall, knowledge and best practices for security in a smart, connected world are rapidly evolving.

How have others made the transition successfully?

At the corporate level in multibusiness companies, overlay structures are being put in place. For example, a separate new unit, with profit-and-loss responsibility, is put in charge of supporting the company’s smart, connected products strategy. The unit aggregates the talent and mobilizes the technology and assets needed to bring such new offerings to market, working with all affected business units. The Bosch Group is one company that has formed such a dedicated unit, Bosch Software Innovations. It enables the company’s product-based business units and external customers to build services for smart, connected products.