Generally, all products will become part
virtual, part physical. They will be connected, reconfigurable and – hopefully
– smart. Also, the business model for their manufacturers will be dramatically
different.
As we moved
forward through history and as technology evolved, our products and devices got
more complex. The supply chain and the number of people and skills involved in
production kept growing – as did the number of supporting factors that needed
to be in place for the device to work.
It’s hard
to see that this trend towards greater complexity and connectivity should not continue.
Large
supporting infrastructure
An old-fashioned
pencil doesn’t require much in terms of supporting infrastructure. An eraser
and a sharpener are useful additions, but most of the time, the pencil works
well on its own. It’s simple and robust, but as a communication device it’s abilities
are rather limited.
In
contrast, an electronic tablet is a very different device. It will not work
fully without electricity, software, and an Internet connection. Not only can
you write words with, you can record and edit video, and you can send it
instantly to someone else – or to everyone.
Increasingly
complex supply chain
Even
producing a simple pencil requires a complex supply chain of wood, graphite,
paint and glue – but that is nothing compared to the number of players involved
in delivering the functionality of a tablet.
Try to
think through how many companies are feeding in to the process – and which
consequently need to be coordinated and must adhere to the same standards and
conditions in order to cooperate… The network easily extends to thousands of
companies and millions of people. Display and chips, electricity, connectivity,
various software, GPS signals – plus a whole Internet’s worth of content. It
all comes together (almost) seamlessly – and that’s what it takes to produce
the next level of utility for users.
The future production
of value will take place in increasingly complex networks coordinating large
numbers of contributors. Closer collaboration is a pre-condition. No one can
produce this type of utility alone.
Hardware
and software allows reconfiguration
You can get
red, blue, green, hard or soft pencils – and you can get a certain variety of
tablets. But tablets are a different species, because it can be
completely reconfigured and customized depending on what software is installed.
The value
of the tablet comes from the combination of hardware and software. The physical
object can be standardized, we may all be using more or less the same phone or
tablet – but my tablet is likely to be set up quite differently than yours.
It’s an
advantage to have objects and devices, which are similar, so they can be mass-produced
at low cost, but which can run a wide variety of applications. However, it’s
difficult to make much money from manufacturing commodity items, which are
practically the same as everyone else’s. Instead profits will shift towards
software and services that run on top of devices.
Connected
to the network
Embedding
computing power is hardly news. Over the past decades, we’ve seen chips built
into everything from toothbrushes to doorknobs.
What
happens next significantly changes the game again: When all of those chips
connect to the Internet of Things.
They will be in touch with everything else; coordinating, exchanging data,
adjusting, learning. An increasing part of the value that the product of the
future offers, compared with conventional devices, will come from the
connectivity. This is where growth will happen.
Smart,
contextualized solutions
The product
of the future is not a stand-alone device. Whether is jet engine or food
processor it will be working in combination with many other devices to create
solutions that fit the users’ needs in a particular context. The defining unit
in the economy will not be the individual device, but the solution or process,
which solves the customer’s current needs. It’s the difference between selling
thermostats and selling comfort in a building.
Such
solutions will be based on the vast and detailed streams of data that our
sensing and communicating objects will create. Ideally, this will result in
”smart” systems, where all sorts of devices cooperate to deliver optimized
solutions at low cost.
And again,
this points to the basic condition; that value creation will happen in
collaboration.
Both
virtual and physical
A much
greater part of a product’s value will not reside in the physical object. What
the product offers will depend on the many services, processes and data, which
are layered on top of the physical object - virtual superstructure. Crucially, the
manufacturer of the physical device will not make many of these services. Applications,
tutorials, and user forums, support services – these can be created by third
parties and users themselves. Never the less, they contribute to the value and
competitiveness of the device.
Objects will
be individually identified. They will have an address, an increasingly detailed
profile, and an Internet presence that others can interact with. The materials
that it was made from, and it’s consumption and yield will be tracked
throughout the product’s life cycle. In a sense each object will have virtual
doppelganger, consisting of all the data associated with it. Increasingly, it
will be meaningless to distinguish between the physical and virtual sides of an
object’s functionality. And yes, this includes toothbrushes, doorknobs… anything, basically.
Instances,
created for the moment
How objects
are created may be very different, too. Although, most of our physical objects
will still be mass produced and probably more standardized across the globe,
many products or parts of products will be made specifically for the user.
Flexible robots and 3D printers will make it ever cheaper to customize objects.
Such
products exist virtually – basically as a collection of instructions and
design, which can be modified or mixed with parts from other companies. It will
only be manufactured physically once a particular user has configured it and
clicked the “buy” button.
Just like the
utility of a product will emerge when it’s combined with a number of other devices
and services to create a solution that fits the current context, the physical
product itself becomes a solution, assembled for a specific context. It may
never be made exactly the same way again. One could call it an instance.
From
finished products to tools for collaboration
This will
require a change in approach to design and development. 3D printing naturally
lends itself to collaboration and participation from many contributors,
including the end-users. For companies, this implies that they may be selling
blueprints to parts or selling access to systems that allow users to configure
individual instances of an object. However, this business model requires a
shift in focus. Instead of designing and delivering finished objects, a company
must create tools that invite users and other companies to use the company’s
designs and participate in co-creation.
No
manufacturing, no distribution costs
One
consequence could be that companies drop manufacturing their products
altogether. Since the final instructions can be sent and printed out on any
printer, a company can distribute globally at almost no cost. Factories may function
as local, generic centers, which can print and assemble whatever customers
upload for manufacturing.
Old
categories and roles are mixed up. It’s hard to distinguish one company from another;
they collaborate for a solution, and then regroup with others to generate the
next instance. It’s like the “Hollywood economy”, where movies are produced by
assembling a new team of actors, photographers, director, distributor etc. for
each film.
Access
rather than ownership
The way we
access products will change as well. If the next level of value for users is a
matter of how well a number of products can be coordinated to serve the user in
a particular situation, then flexibility
is crucial.
It becomes
less attractive to own a product permanently, and better to have access to
combine lots of different products to match changing needs and circumstances.
Already products like carpets, cars, apartments and specialized tools are sold
as services, which users subscribe to or rent.
As the cost
of coordinating resources and needs fall, more products will be accessed
temporarily through digital platforms – as we see in so-called sharing economy. Obviously, this will
require new business models – similar to the way the music and media industry
has been forced to change.
This
changes everything…
All of these
changes will affect more or less any product. Whether its cars, hospital beds,
tennis rackets, lamps, valves, office chairs, their future version will be
different in many of the same ways that a tablet is different from a pen.
They will
be connected, networked, coordinated and reconfigured for specific contexts.
They will be both virtual and physical, and their main value will not be what
they can do on their own, but how well they can be integrated into larger
solutions.
Obviously, the
companies that produce them will also need to organize their business model and
value creation in very different ways in order to thrive in the future.
