Connectivity Experience Matters
It’s been nearly a quarter of a century since the term “the Internet of Things” (IoT) was coined. Since then, we’ve seen a proliferation of products that can connect and exchange data via communications networks. Smart devices powered by artificial intelligence (AI) and machine learning are starting to become table stakes. Connected products open the way for organizations to offer intelligent services. Within the next five years, 88% of organizations will offer intelligent services. From mobility to medicine and personal care to production lines, more innovators are creating ecosystems containing products and services with intelligent capabilities. Could we be moving towards a future where everything will have connectivity embedded?
From a consumer and end-user perspective, a Connected World means that intelligent devices and tools will increasingly help enhance our day-to-day lives. From a business perspective, connected devices result in valuable insights that illuminate user behaviour and inform future strategy, unlocking new business models and revenue streams. From a planetary perspective, connected products and services promise to be a crucial part of a sustainable future thanks to their ability to offer more efficient ways of operating.
01
What we saw
02
View & Strategy
03
Key Takeaways
04
Our Cases
01: What we saw
The Raising Bar
Every new product and service requires resources to be built and operated. Therefore it’s important to question whether they’re worth the significant and growing resources they require. The bar to create new products and services is rising with government regulations and consumer expectations. Businesses must consider the impact a product will have throughout and beyond its lifecycle. Against a backdrop of depleting, finite resources and an urgent need for innovative solutions to tackle the climate crisis, one thing is clear: the days of gratuitous gadgetry are numbered.
Connected products and services are becoming more complex to realize. This is because they require intricate choreography across vast arrays of expertise that span design, hardware, software, data, platforms, business modelling and change management. The result is they are increasingly expensive and difficult to create. At the same time, with the cost of borrowing on the rise, longer-range moonshots are being reined in. Favour is given to products that have a more direct and shorter path to pay back with a significant return on investment (ROI) despite this increased complexity. One recent example of such a cancellation was Amazon’s package delivery robot, Scout.
While the bar is rising on new connected products and services, the potential payoff is rising too. Original equipment manufacturers (OEMs) and value-added resellers (VARs) stand to benefit from increased customer intimacy, competitive differentiation and greater efficiency that will help sustainability planning take shape. Nike has seen massive annual growth of its direct-to-consumer sales (15% as of June 2023) by focusing on the customer experience enabled by data collected via mobile apps, connected devices, web and retail, then delivering ever-more personalized experiences.
“Moving away from “the way things have always been done”
02: View & Strategy
Stay Relevant To The Changes
At this point, the true promise of a Connected World may feel overhyped and overdue. Visions of a digital utopia in which the internet saves us from ourselves have been around for a long time. For many, the dream is for our touchpoints to be seamlessly and intuitively responsive—avoiding duplication of effort—with systems intuiting our needs and next steps and suggesting novel and useful avenues to explore. As consumers, we get hints of this dream in smart home innovations by the likes of Amazon and Google. But ingenious and seamless systems created by humans are primarily found in science fiction movies, from the quick-learning abilities of the all-powerful HAL-9000 in 2001: A Space Odyssey to the next-generation operating system, Samantha, in Her.
A fully integrated and intelligent world has been on the table for decades but has yet to materialize in a truly innovative form. To deliver on the promise, business leaders and innovative thinkers must ask themselves the following:
What tangible steps can we take to build the next generation of products and services that will change the world for the better?
How can we ensure that new offerings consider both our business and our planet?
Can these new offerings be woven into a smart, future-proofed ecosystem?
Winning Strategy
Identify triggers for change
Defining a winning vision, business case and realization strategy in the face of complexity takes an awareness of the ongoing trends and an ability to anticipate the technologies of tomorrow. This process encompasses preparing for growth in new areas, identifying the best use of time and resources and finally achieving the necessary alignment to initiate action. And at the core, instilling a deep commitment to sustainability by design from day one.
Discover the right path
There are many signals that it’s a good time to begin the journey into connected products and services. Here are the four most common triggers.
Lack of data: The company does not have direct access to customer data and/or lacks broader services and revenue streams from such data, including with third-party partners.
Declining relevance: The organization, business or product has begun to lose relevance and is in need of an uplift, seeing a reduction in purchasing volume, use and engagement.
Competitive disruption: There’s a need to create a competitive advantage against disruptive new entrants.
Demand for efficiency: Leaders are seeking the realization of a credible, effective sustainability strategy and want to enable more efficiency and intelligence in business operations.
Unlocking new value
The Connected World promises many benefits. Take the example of the smart thermostat: figures show that, on average, the Nest smart thermostat saves U.S. customers about 10-12% on their heating bills and about 15% on their cooling bills while automatically keeping their homes comfortable.
In addition to offering improved efficiency and effectiveness, adding connectivity to products and services can lead to greater levels of insight to help direct future business strategies, more intimate customer relationships and new ways to connect with customers, consumers, patients and operators.
In companies with more traditional products, such as sporting goods, clothing or pet food, there’s potential to add services, such as performance or wellbeing, around them. These services can leverage expertise that is typically held inside the business for R&D—and use it to deliver much more valuable services and experiences directly to customers.
Getting past the sticking points
Developing effective breakthroughs in this space can be tough. There are various stages where organizations typically get stuck. While it seems fundamental, many companies struggle to identify or articulate the user value and business case that will underpin their success—they jump to piloting or become too enamoured with a specific technology. It’s crucial to take the time to identify a significant enough customer need and see a strong enough potential ROI that can survive the inevitable twists and turns of new development.
Companies making a transition from traditional products and services can struggle with the new paradigms associated with service delivery and revenue. It’s also common to grapple with the confluence of new disciplines that must be brought in to implement successfully. This can include being unsure of what to hire internally, what to outsource and how to get disparate teams collaborating. On top of that is the associated organizational and supply chain impacts of any incoming change. To break through these sticking points, companies need to sharpen what is and will become, core to the business in its future state—investing in the teams and structures needed to enable these areas while outsourcing and triaging the rest.
It’s essential to get comfortable with mess. During the transition, it won’t all be perfectly clear and tied up with a bow. However, taking the steps to ensure there is a clear business goal and plan and an understanding of what's involved is key. So, get ready to demystify the initial stage in order to take the first systematic and deterministic steps that inspire the confidence to take big, bold steps.
Aim for iconic
We live in an incredible moment of transformation and acceleration. The way we interact with the world surrounding us is elevated by a completely new way of understanding people, communities and their context. This is enabled by new forms of sensing and new kinds of data, as well as new ways of interpreting data and delivering value. More connections are being made than ever before—as is the potential for innovative leaders to draw insight into human behaviours from those connections. The challenge is to translate this into designs that people enjoy using and will pay for.
Creating game-changing experiences for users is pivotal to standing out in the crowd. Through a combination of behavioural design, human-centred and planet-centered approaches to technology, it’s possible to align tech potential with user value. It’s time to push the boundaries of the physical and digital domains to help realize breakthrough value for customers, stakeholders and businesses alike.
Finding the place of convergence
A critical aspect of connected products and services is that customers must not only be willing to pay—they must also be willing to provide their data. The higher the value provided to the customer, the easier it is to convince them to exchange their data in return.
To deliver the full potential of the Connected World, the entire spectrum of design capabilities and disciplines must be mobilized. A convergent design approach is crucial to accessing new sensing capacities through physical products, as well as activating the service design around the data that is captured or the layer of services that could be enabled with digital experiences.
Good design gives us the opportunity to augment and supercharge people across all aspects of their lives—whether private or professional, from customers to clients, consumers and employees. To do so, we must first level up on human comprehension. Truly understanding people means going beyond the known Google-able insights and digging deeper, using tailored research and analysis. Equipped with knowledge, you can explore the challenges faced: shedding new light, finding unique angles and raising new provocations. From there, it’s about making designs that anticipate and solve untapped human needs and wishes. With connected products and services, it’s possible to create a virtuous cycle of customer insight, delivering increasingly personalized and valuable experiences.
Make things possible
At its core, innovation is a route to enabling previously impossible value—whether that’s sensing hard-to-get data, interacting with users in seamless ways, delivering insights or even changing the physical world itself. To work with the art of the possible means opening up to look at the world through fresh eyes. A prime part of moving forward is exploring perceived limitations, sometimes requiring an exploration of first principles and scientific fundamentals. The end goal? Innovation that breaks through constraints to challenge the status quo.
Established tools and approaches, including prototyping and testing, give the ability to efficiently de-risk and make confident predictions of outcomes when in new territory. When surveyed, 48% of fast movers said they’re stuck at the pilot or proof of concept (PoC) stage. Sometimes this means facing challenges in achieving the feasibility of new innovations. Other times, getting stuck means overcoming real-world interactions with customers or stress-testing new business models. Companies are most likely to be successful when they create interim milestones and smaller steps along the way, with a willingness to build and expand over time.
Innovate only where it matters
Innovation engineering is essentially the building of something that’s never been built before. In many cases, there’s no way to be sure upfront that something can be done. Riskier than repeating known engineering since the steps involved are fundamentally different, it’s a process that includes focusing on the biggest risks and aggressively reducing those risks early and iterating.
An easy trap to fall into is innovating for innovation’s sake. For many, intellectual property, and exploring what’s hot and new, is exciting. But building new connected products and services, even from existing technologies, is already a complex undertaking on its own. To avoid excessive complexity, it’s critical to identify where innovation really matters—for the experience, business model or competitive advantage—and triage the rest. One clear place innovation may be needed is custom sensor development to capture data that is otherwise inaccessible. Another may be in the algorithms and AI needed to generate insights from data.
Enlivening products
The Connected World is alive with possibility. The launch of a connected product is just the beginning of the journey. Because there’s the opportunity to add new features and services over time, it’s helpful to think in terms of “living products.” That’s where servitization comes in. Another hot topic in the world of products and services, servitization comes with many acronyms such as SaaS (Software as a Service) and MaaS (Mobility as a Service). But essentially, servitization is about moving beyond one-off sales to instead sell “outcome as a service.” In entertainment, think of the move from buying DVDs to renting them to subscribing to the SaaS company Netflix. In mobility, e-scooters from the likes of Voi, Bird and Lime that can be rented with an app in cities around the world are examples of MaaS in action.
These additions can lead to enhanced experiences for end users as well as enable the activation of new business opportunities and new services added over time. By doing so, businesses can build up incremental and unconventional revenue streams. However, realizing these benefits means designing and engineering them at the right time in development: once unconstrained, early iteration has identified a viable path forward, but before setting an architecture in stone that is not scalable. This decision typically must be made before the first committed revenue stream has emerged. That’s where a bold vision is needed.
03: Key Takeaways
New Norm
Find the opportunity in our sustainable future
The planet is changing, and it’s up to today’s innovative leaders and organizations to evolve our human-built world—or risk obsolescence. With the bar to creating new products and services rising, we must ask ourselves the big questions, going beyond revenue and into bold visions for the direction of our organizations. This means looking holistically for ways to transform business strategy itself: reducing overall resource use and impact while delivering ever more value for customers. This includes considering the inherent cost each product and service has to the planet and questioning the appropriateness of building at all.
Fuel intelligent insights with direct access to new data
We are firmly in the age of AI, seeing the potential to deliver valuable insights and services for customers based on data. A key enabler of this future is the collection of novel, first-party data through connected sensors and human-machine interfaces. By exploring the value of creating connected products and services, businesses must hold their creations to new standards and find a balanced exchange of value with their customers for the data needed to support even more robust service ecosystems.
Push for transformation
The shift from traditional products and services requires new teams, structures and ways of operating. While daunting, this is a journey that must be taken to maintain relevance and drive results in a rapidly changing, highly competitive landscape. With an approach that considers desirability, viability, feasibility and sustainability at each step of the way, bold companies can clear the rising bar, crafting breakthrough connected products and services that bring huge value for customers.
04: Our Case
