Informa(on Technology &

Systems
Session 15
Internet of Things: Smart, Connected Products
Nest Thermostat (Google: $3.2B: Jan 2014)

11/20/23 ITS S14 | Vimal Kumar M | IIM Calcutta https://youtu.be/20367DapHlc 2

What business
am I in?
What about the industry?

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Internet of ‘Things’
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 https://hbr.org/2014/11/strategic-choices-in-building-the-smart-
Joy Global connected-mine

11/20/23 ITS S14 | Vimal Kumar M | IIM Calcutta https://youtu.be/SbaBKnn9P8c 5

 Smart
Connected
Products
(SCPs)
Components

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 What will
connectivity serve?
• Information exchange between product and
operating environment, makers, users, and other
products and systems.
• Enables some functions of the product to exist
outside: product cloud

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 Why now?
• Technological innovations have converged to make
smart and connected products technically and
economically feasible.
• A new IPv6 internet registration system opening
trillions of new addresses

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How to Manage this SCP?
The New Technology Stack

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Source: Porter and Heppelmann, 2014, HBR.
 What Smart, Connected
Products Do?

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 Capabilities of Smart Connected Products

Source: 11/20/23
Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 13
Capabilities of Smart Connected Products

11/20/23 ITS S14 | Vimal Kumar M | IIM Calcutta https://youtu.be/LFYyimOBomU 14

 Capabilities of Smart Connected Products

Source: 11/20/23
Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 15
Amazon Silver Eco

https://youtu.be/YvT_gqs5ETk
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 Capabilities of Smart Connected Products

E.g.: Wind Turbine, ATMs

Source: 11/20/23
Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 17
 Capabilities of Smart Connected Products

Source: 11/20/23
Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 18
Capabilities of Smart Connected Products

https://youtu.be/tZ0bq-jIg-o
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 How smart, connected
products are transforming
competition?

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 Revisit of the Five forces: SCPs
+ Higher barriers to entry
Threat of New Entrants New entrant can leapfrog incumbents

Expended opportunities for

+ Shift rivalry away from price,
broaden Value Proposition + Differentiation, Segmentation,
and Switching costs
Arms race can eat-up profit Product as Service

Suppliers’ Bargaining Power Fierceness of

Competition Customers’ Bargaining Power

+
Less dependence on
mechanical components,
new suppliers
Rise of new suppliers
Higher utilization and product
Threat of Substitutes sharing, substitute for product
ownership
22
 Redefining Industry Boundaries

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Source: Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 23
Amazon Go

11/20/23 ITS S14 | Vimal Kumar M | IIM Calcutta https://youtu.be/zS9U3Gc832Y 24

Implications for
organizations
producing SCPs
• New Processes
• Remote services
• Preventive services
• New Functions
• Security
• Warranty compliance
• Data management
• Organizational restructuring
• Chief Data Officer
• Decision rights

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 Smart connected Objects: Implications for strategy

1. Which set of smart, connected product capabilities and features should

the company pursue?
• Too many features != Value
2. How much functionality should be embedded in the product, and how
much in the cloud?
• Response time, Automation, Network Availability, Security, Location of use, UI and
Frequency of upgrades
3. Should the company pursue an open or closed system?
4. Should the company develop the full set of smart, connected product
capabilities and infrastructure internally or outsource to vendors and
partners?
5. What data must the company capture, secure and analyze to maximize
the value of its offering?

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Source: Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 26
 Smart connected Objects: Implications for strategy

6. How does the company manage ownership and access rights to its
product data?
7. Should the company fully or par;ally disintermediate distribu;on
channels or service networks?
8. Should the company change its business model?
9. Should the company enter new business by mone;zing its product
data through selling it to outside par;es?
10. Should the company expand its scope?

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Source: Porter and Heppelmann, 2014, HBR. ITS S14 | Vimal Kumar M | IIM Calcutta 27
Mistakes to Avoid
• Adding functionality that customers don’t want to pay for
• Underestimating security and privacy risks
• Failing to anticipate new competitive threats
• Waiting too long to get started
• Overestimating internal capabilities

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EOS!