Transforming business with smart connected products: PwC

Connected physical products (CPPs) that harness the power of the Internet of Things (IoT) present a remarkable opportunity for organizations. These innovations are transforming industries by enabling unprecedented data sharing and connectivity. Businesses that embrace these products stand to gain significantly.

Creating new revenue streams with connected physical products

Connected physical products are equipped with sensors that exchange data with other smart products or platforms. These products can unlock new revenue streams, including subscription-based services, data monetization and value-added offerings. Consider the influence connectivity has had on cars. Once limited in communication capabilities, modern vehicles now provide drivers with real-time traffic updates, performance analytics and tire pressure monitoring thanks to IoT-connected services. Consider also continuous glucose monitors that track blood sugar levels for diabetes patients, or a smart pet bowl that makes personalized food recommendations.

With the right strategy, a business that struggles with barriers to entry can shift from selling a piece of equipment or product to a service-based model that provides even greater benefits to customers. Despite this potential, many businesses have yet to embrace the transition. A vast majority — 88% — of business executives struggle to capture value from their technology investments and 85% acknowledge that updating their operating models to support new visions poses a significant challenge to ROI.

Simply deciding to add a sensor to a product or create an app isn’t likely to be sufficient. Embracing IoT-enabled solutions demands a holistic strategy encompassing new business relationships, ecosystems and operational processes. This is the crux of business model reinvention — reimagining and transforming how your company creates, delivers and captures value.

Product connectivity puts new stakes on tech stacks

While nearly 60% of executives report strong consensus on their company’s future vision, only 41% say the same about the execution path. This may be because developing smart, value-driven connected products demands a complex interplay of sensors, software, physical components, connected platforms and IoT ecosystems. All of which can be distinct from traditional analog or digital product development — and not easily found in manufacturing providers.

Each capability builds on the previous one, creating a layered approach to development from monitoring to control to optimization to autonomy. Technologies like artificial intelligence (AI) and machine learning (ML) also play pivotal roles in a connected physical product strategy, presenting critical questions for leaders. What technology are we going to use to connect the device? How is that data going to be sent to the cloud? How do we leverage ML and AI to realize the true value of that data and deliver it to our customers?

Consider a voice-enabled device. It requires more than just a microphone and speaker. These components should interface seamlessly, with output performance enhanced through acoustic tuning and noise suppression. As these capabilities become standard, the complexity and expectations grow. There’s also the cyber security concern. Business transformation and cyber transformation should be one in the same as organizations deploy connected solutions.

To compete in the world of connected physical products, organizations may need to consider how these technologies and components necessitate new capabilities, skills and operating models.

Warehouse workers with connected wearables can gain access to specific areas or enable certain machinery, enhancing both safety and productivity. This interconnectedness extends to the development of dashboards and visualization tools to provide real-time productivity insights that help improve decision-making in manufacturing environments. These connected devices also enhance energy usage. By gathering performance data from various devices and systems, the warehouse can automatically adjust lighting, heating, cooling and machinery operations based on usage patterns and demand.

By embracing these advanced solutions, this smart warehouse can significantly improve efficiency, safety and profitability.

Unlocking value ultimately rests on strategy

Companies should have a clear strategy and strong confidence in their value proposition before making significant investments. Without a holistic strategy, your organization risks fragmented efforts that fail to leverage the overall potential of connected physical products and revenue streams. Hardware development — especially with embedded IoT — is inherently complex, costly and time-consuming.

A well-defined strategy can help you remain deliberate and confident throughout the product reinvention journey to unlock the overall potential of technological investments and transform effectively.

Define business objectives and use case first

Clear objectives provide direction and purpose to your strategy, guiding every decision, and can help your organization achieve more tangible results. Do you want to boost revenue? Launching a new IoT-enabled product or service with connected features may be the way to go. Are customers looking for a more enhanced experience? Deep insights and data on user preference and behavior can offer more proactive support.

You should identify pain points that the technology can solve and assess the market’s willingness to pay for these solutions. Here are a few common use cases.

Predictive maintenance enhances equipment uptime by forecasting failures before they occur.
Automated decision-making improves operations through real-time data analysis.
Remote monitoring and control systems enable businesses to manage assets and processes from anywhere, improving responsiveness and efficiency.

Strategy components

Technology

Decide what tech you’ll use to connect the device. Is it going to be Bluetooth, Wi-Fi, cellular or another technology? How is that data being sent to the cloud? How close to real time should it be? Do we want to build the technology internally — or purchase or lease? Consider how business operations and resource allocation may change based on these decisions.

Crafting a technology roadmap that outlines these choices, along with timelines and resource requirements, can help provide a structured and informed approach to technology adoption.

Providers and ecosystems

A holistic CPPs strategy often relies on a network of providers and a supportive ecosystem. This can include device manufacturers, software providers, data management services and analytics tools.

Collaboration with the right providers can accelerate development, enhance capabilities and provide access to critical resources and experience. Can the provider conduct rapid prototyping or provide a minimum viable product (MVP)? Does it understand engineering, the impact of certain materials and manufacturing processes? Does it know what it takes to scale, sustain and enhance customer experiences? The right provider(s) can enable your company to adapt to changing market demands and technological advancements while keeping your vision at the center.

Governance

Effective governance structures oversee the implementation and ongoing operations of CPPs solutions. This includes making sure systems are safeguarded and compliant with legal and regulatory requirements. A governance strategy should include a number of critical factors.

Data management policies to cover data retention, privacy, security and accessibility
Incident response procedures to handle data breaches or malfunctions, including notifying affected parties and regulatory authorities if necessary
Compliance with data privacy, security and intellectual property regulations
Security measures such as encryption and firewalls to help prevent unauthorized access and cyber threats
Device and data standardization for interoperability and scalability to drive future growth
Risk management that addresses both technical and nontechnical risks, helping maintain a resilient and compliant framework

Monitor and measure

Continuous monitoring and measurement of performance against business objectives, use cases and technical requirements allow you to track progress, identify issues and make informed adjustments to achieve desired outcomes.

Using advanced analytics and reporting tools, you can learn from system performance, user behavior and operational efficiency. These metrics can help keep the strategy in sync with business goals while remaining agile enough to change with changing needs and market conditions. This constant process of checking, evaluating and improving can help keep your initiatives effective and relevant.

Cybersecurity and compliance

Data privacy, fast changing regulations, malicious actors — many connected devices require a multipronged approach to safeguarding data, devices and networks, especially when collecting and transmitting sensitive information. On top of encryption, access controls and other security protocols, a cyber security strategy should focus on closing the collaboration gap between information technology (IT) and operational technology (OT) teams on many fronts — including cyber attack mapping, OT asset management, OT security monitoring, vulnerability management, and reporting and recovery initiatives and protocols. Proactive risk management, including regular security audits and incident response planning, further fortifies technology infrastructure and compliance practices.

Go-to-market

A go-to-market strategy is a plan that covers what is needed to build the product and how it can be realized in the world. It covers how to reach new customers and use new distribution channels while offering innovative pricing models for connected product and service solutions. It also includes effective sales strategies, service and support as well as data and analytics to drive customer acquisition, retention and satisfaction.

Choose your own connected physical products journey

Having a well-defined connected physical product strategy is just the beginning. The next step is exploring the myriad of pathways your company can take to leverage this strategy for growth and innovation. Here are some of the most promising directions.

Product innovator

Market diversifier

Service shifter

Agility architect

Supply chain unifier

Data-driven decision-maker

Whether your organization is just beginning to explore the world of connected physical products or already producing world-class products, embracing them through IoT offers multiple routes to transform your business and deepen customer relationships in ways you may have never imagined. To succeed, your organization should consider a broader range of initiatives — and apply them in combination with one another, including the service relationships and strategies needed to close capability gaps and keep pace with technology.