Oct/Nov 2013

The 20th century was best known economically for the advent of mass manufacturing and, in turn, mass marketing. Successful manufacturing and brandmanagement companies focused on the functions of design, engineering, production, distribution, sales, and service. As computer systems grew in popularity and shrunk in size during the second half of the century, it was the information enabling each of these functions that was most valuable to the leadership. For reasons of maximizing efficiencies, reducing time to market, and in the past few decades, reaching consumers (digital marketing) the boards governing these companies authorized the investment in IT and technology capabilities. In that setting, during that era, shareholder value was believed to be increased through this IT enablement.

As we turned to the the new century, the ability to unlock, access, and apply data has grown to be one of the keys facets for any firm. By now most companies’ IT leaders have put in place data-centric programs to collect and organize their firm’s data. CIOs are now turning their attention, through sophisticated analytic approaches, to finding competitive value in the information they manage. These programs are typically branded as BI (business intelligence) or predictive analytics. Because of the volumes of information, they are often grouped in with the rapidly ascending phrase of the 2010s—Big Data.

The irony is that for many product companies, one of the historically underutilized sources of relevant and valuable information has been about the product itself. Information has been efficiently recorded about how products were designed, engineered, and sold. However, data about how products were used daily has been fairly stagnant. Whether your firm manufactures white goods, cars, or sporting equipment, when the product is carried, driven, or worn out of the retail store, the opportunity to understand how that consumer is using the brand’s product goes with it.

For an increasing number of companies, this is shifting. Many product engineering groups are engaged in some form of “embedded electronics program” that includes a form of connection back to the Internet. These M2M or connected product programs are often being built on the back of a functional area seeking the next wave of advantage. Functional leaders are supporting connected strategies that improve scope of responsibility. This could range from the manufacturing group looking to reflash software in a product after it has rolled off the line, to a CMO (chief marketing officer) exploring ways to “touch” owners rather than just shoppers.

The question being asked is, “How does connecting the product truly impact value to the firm?” There are several broad value propositions:

  • Internal/Workforce Connectivity – A connected workforce is a satisfied workforce, and is one that effectively attracts the next generation.
  • Retail Connectivity – A highly connected retail environment makes the shopping and buying process seamless with consumer’s everyday lives, while increasing both closure rate and increasing revenue.
  • Connected Product and Usage – Product-in-use information allows for proactive quality measures as well as a more relevant overall customer conversation.

Ultimately, the greatest question is just now emerging. It is coming from a place that the leadership of the connected movement has rarely been invited before—the Board Room. The directors sitting in those high backed seats are not concerned with any particular functional value proposition. They are keenly focused on maximizing shareholder value, a stakeholder that often gets forgotten about in next-generation technology conversations. Throughout the next decade, will those firms connecting their company, inclusive of their core products, find a competitive advantage over those that do not?

In turn, will Wall Street reward the shareholders, board, and executive management that understand “connected” has grown well beyond a technological endeavor to a new enabler of the traditional enterprise? The next decade will certainly see a tremendous amount of new connections. Perhaps the most compelling “connection” will prove to be that of the shareholder, with the value Wall Street places on the “connected firm” that he or she owns.

Gregg Garrett leads a team that advises clients on how to harness innovation in the connected economy as CEO and president of CGS Advisors. He lectures at several universities and contributes to Connected World. Previously, he served as chief strategy roles at Volkswagen Group of America and Deutsche Telekom in North America. He can be reached at greggory.garrett@cgsadvisors.com

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