Title: Can Traditional Product Companies Catch Up with Digitally Native Businesses in the Intelligent Products and Services Landscape?
The digitization of products and services has been largely dominated by digitally native companies, leveraging software-driven offerings and services to meet the evolving demands of consumers and businesses. However, a recent survey conducted in 2022 revealed that traditional product companies are actively retooling for the future and embracing intelligent products and services as a means to protect and grow their businesses. The survey, which encompassed 1,000 manufacturers across 11 countries, including automotive, consumer products, high tech, medical device, and industrial manufacturers, shed light on the growing interest in technologies such as connected cars, remote health monitoring, and smart home devices.
According to the survey, 59% of the traditional B2C and B2B companies surveyed already have well-defined visions and strategies for intelligent products and services. These organizations are already reaping the benefits, including new revenue streams, increased customer loyalty, greater efficiency, reduced costs, and improved competitive advantage. However, the remaining 41% are facing challenges that hinder their full realization of the value derived from intelligent products and services.
Intelligent products and services are characterized by their ability to seamlessly interact within a larger ecosystem through APIs and platforms. These products can be continuously enhanced using real-time feedback and empowered by AI, machine learning, predictive analytics, and other tools to deliver personalized customer experiences. Moreover, they open doors to servitization, a concept wherein traditional manufacturers transition into offering intelligent services alongside their products. For instance, an industrial manufacturer previously focused on selling equipment alone could develop an intelligent service guaranteeing a certain level of product uptime. By integrating sensors, data analytics, and AI/ML, predictive maintenance can be provided, preventing unplanned outages and reducing the need for scheduled service calls.
Servitization not only generates value but also improves customer experience and fosters loyalty. By proactively handling product maintenance and updates, companies offering intelligent products and services meet customer needs as they evolve, surpassing those that do not offer such anticipatory services. Additionally, these organizations can make significant progress towards their environmental, social, and corporate governance (ESG) goals—84% of manufacturers reported lower CO2 emissions and reduced environmental impact through the adoption of intelligent products and services.
With the substantial benefits at stake, it is crucial for organizations not classified as fast movers to expedite their journey towards adopting intelligent products and services. The survey indicated that 48% of manufacturers were in the proof-of-concept phase. Only a mere 7% had fully scaled use cases, while 31% had partially scaled use cases. Moreover, 13% had identified use cases but had not yet created a proof of concept.
Long-established manufacturers encounter various barriers during this transition. Siloed business functions, lack of agile culture, talent gaps in data-related roles, inadequate data collection and analytics infrastructure, and challenges in storing and handling the data generated by intelligent products and services are among the hurdles faced. Embedding security into hardware design also presents a new challenge for manufacturers, with 68% of those surveyed highlighting this as an obstacle to protecting their intellectual property.
Overcoming these challenges requires organizations to adopt a holistic, innovation-driven strategy that centers around the customer, informing talent acquisition, strategic partnerships, and governance changes. Starting with small-scale initiatives and adopting a test-and-learn approach allows for continuous evolution, product iteration, and improved visibility across the product lifecycle.
As more manufacturers clear these hurdles and embrace the value proposition of intelligent products and services, a shift is anticipated in how consumers and businesses select products, engage with brands, and foster loyalty. The potential for revenue generation from intelligent services is expected to increase significantly, with 43% of companies predicting that these services will contribute more than 20% of their revenue within the next three years. This seismic shift represents an opportunity for traditional product companies to compete with their digitally native counterparts and thrive in the modern marketplace.
In conclusion, traditional product companies are recognizing the value of intelligent products and services and are actively pursuing strategies to leverage these offerings. However, challenges arise during the implementation process, necessitating the adoption of a comprehensive approach that prioritizes customer-centricity, talent acquisition, infrastructure development, and security measures. By embracing these changes, manufacturers can unlock new revenue streams, enhance customer experiences, and position themselves for long-term success in the digital era.
