developing smart products

1© The Economist Intelligence Unit Limited 2015

Developing smart products

Contents

Executive summary 2

About this report 4

Introduction 5

Business model revolution 7

Infrastructure and design 10

Expanding ecosystems 12

Conclusion 14

Appendix: Survey results 15

2 © The Economist Intelligence Unit Limited 2015


Executive summary

In an age of low-cost electronic components and almost ubiquitous wireless connectivity, it is now both technically and economically feasible to embed computing and networking functionality into almost any object – from industrial equipment and vehicles to clothes and accessories.

The resulting smart products could prove revolutionary. However, they will also radically change the way companies interact with customers, how they bring products to market, and how entire industries operate.

Companies that are pursuing smart-product strategies therefore face profound questions about their role in the value chains in which they participate. Indeed, companies face a wave of disruption equal to the turbulence first created by the Internet over 20 years ago.

This report explores how the smart-product revolution is unfolding. Written by The Economist Intelligence Unit (EIU) and sponsored by Cognizant, it is based on a survey of over 200 R&D and product-design professionals in Europe and the US, desk research and interviews with innovation professionals at major international businesses, the report explores how the smart-product revolution is unfolding.

The key findings are as follows:

For companies involved in their development, smart products are a strategic priority. The majority of respondents report that the CEO owns their organisation’s smart-product strategy, a sign that companies see smart products as critical to their long-term interests.

Smart products will reinvent the relationship companies have with their customers. Almost three-quarters of respondents say that smart products are allowing them to interact directly with customers for the first time, and almost half say that smart products provide customer insights that were previously impossible to acquire.

Reinventing customer relationships will reshape organisations and their business models. Over 50% of respondents say they have adopted a subscription-based business model as a result of selling smart products. More change is on the way, as companies are evidently still wrestling with the financial consequences of smart products.

Companies are rebalancing their capabilities for the smart-product era. Smart products require new approaches to design; they require new technical infrastructure; and they demand



ten say they have established joint go-to-market strategies with new partners.

Smart products look set to have just as much of an impact on business ecosystems as the Internet. In the era of digital business, analysing web traffic and online behavior has become critical to understanding customers. Smart products will make this kind of analysis vital for product development and distribution, customer service and support, and many other corporate functions.

that the information produced by smart products is effectively integrated into business processes. No wonder companies are looking to both upskill and partner to improve their capabilities.

The structure of entire industries will evolve as smart products reconfigure value chains. Smart products will unleash new dynamics in the sales channel, such as putting manufacturers in direct contact with their customers. Nearly half of respondents say they are selling their smart products through new channels, while four in



l Jeroen Tas, CEO, informatics solutions and services, Philips Healthcare

l Venky Balakrishnan, global vice president, digital innovation, Diageo

l Kyle Nel, executive director, Lowe’s Innovation Labs

The EIU would like to thank these interviewees for their time and insight.

The report was written by Jessica Twentyman and edited by Pete Swabey.

Developing smart products is a report by The Economist Intelligence Unit, sponsored by Cognizant. The report investigates the challenges and opportunities that companies face in designing, selling and supporting products with added digital functionality.

The research draws on a survey of 205 senior R&D, innovation and product-development executives from companies in the retail, healthcare and manufacturing industries in the US and Europe.

It incorporates interviews with the following executives:

About this report



Introduction

Futurists have been predicting the advent of smart products – from refrigerators that know when you are running out of milk to lawnmowers that cut your grass automatically – for decades. The revolution is now under way, according to a new survey of senior executives in research and development (R&D) and product design, conducted by The Economist Intelligence Unit (EIU) and sponsored by Cognizant.

The EIU surveyed 205 R&D, product-design and innovation executives from companies in the healthcare, retail and manufacturing sectors who are involved in developing smart products. Of these companies, 74% say they have already successfully developed such products.

Defined as products that incorporate computing components (sensors, data storage, embedded operating systems, for example) and network connectivity, smart products offer consumers new functionality, new information and greater ease of use. For manufacturers and retailers, they provide a direct link to customers, capable of delivering valuable data about their products and their customers.

Companies evidently recognise the potential and the stakes. In our survey, 59% of respondents say the CEO is the owner of their organisation’s smart-product strategy.

So why, given this momentum, are we not already surrounded by smart products? According to Jeroen Tas, CEO of the healthcare informatics business at Dutch electronics giant Philips, it is partly a matter of market acceptance. Consumers are not yet clamouring for products to be smarter.

“But I feel we’re at a tipping point,” he adds. “As people become accustomed to the enhanced ‘smartness’ of a product, they get more use from it. And as they get more use from it, they get

Who among the C-Suite owns thesmart-product strategy at yourorganisation?(% respondents)

Chart 1

CEO

Chief innovationofficer or equivalent 15%

Chief technologyofficer or equivalent 12%

Chief marketingofficer or equivalent 7%

Chief informationofficer or equivalent 3%

Chief strategyofficer or equivalent 3%

Chief digitalofficer or equivalent 0%

59%

Source: The Economist Intelligence Unit.



more value from it too. Pretty soon, if you’re lucky and you’ve designed your smart product well, the customer will feel that they couldn’t live without it,” he says.

As customer demand grows, so too will the benefits for businesses, says Venky Balakrishnan, global vice president of digital innovation at UK- headquartered drinks manufacturer Diageo.

“We may make a very traditional object – a bottle of liquid – but it exists in a digital world of connected supply chains and smart supermarket shelves. Building even a small level

of intelligence into that bottle allows us to know more about where it is, the people who buy it, when they buy it, where they shop. Even a small amount of intelligence can unlock a Swiss Army Knife of applications and insight.”

The smart product revolution is “creeping up on all of us”, Mr Balakrishnan says. “It isn’t about someone turning on a switch and we all shift, overnight, into a brave new world of smart products. But every single day small advances happen that, over time, amount to big progress. We’re adding inches daily, and before we know it, we’ll have covered a huge distance.”

Even a small amount of intelligence can unlock a Swiss Army Knife of applications and insight.”



BUSINESS MODEL REVOLUTION1Smart products have the potential to disrupt many traditional industries, and companies are eager to claim the first-mover advantage.

When asked about their strategic objectives in developing smart products, the top response is to launch product categories that are new to the market, cited by over half (52%) of those surveyed. But being a market leader is never easy, and there are many challenges to address.

Companies are already wrestling with the financial impact of smart products. For example, 37% of respondents identify “pricing” as one of their most difficult operational challenges, more than any other category.

Most agree that smart products will command a higher price than their non-smart predecessors: 42% of respondents say they have already increased the average selling price of products.

But when asked about the likely impact on revenue, the picture becomes more confused. Thanks to smart products, 41% expect overall revenue to increase in the next three years, but over half (51%) expect it to decrease. The consensus on costs, by contrast, is clearer: 84% anticipate a rise in costs. This shows that companies developing smart products are unsure what the financial benefits will be, but they are well aware of the costs they face.

“The process of taking any product and making it smart is expensive,” explains Mr Tas at Philips. “You have to add smart components, you have to add connectivity. But you also need to build software apps to run on the product and integrate it with your back end. You need to provide support for your newly smart product on a 24/7 basis. It all adds up quickly, and that’s the main reason why the market isn’t yet filled with these products.”

Launch product categories thatare new to the market

Which of the following are the most important strategicobjectives you are pursuing through the development ofsmart products?(% respondents)

Chart 2

Launch product categories thatare new to your organisation

Improve understandingof your customers

Gain greater proximity/directrelationship with customer

Defend against disruptionby rivals

Grow sales/market share inestablished product categories

Grow reputation for innovation

Improve the customerexperience

52%

43%

43%

42%

35%

34%

19%

15%Source: The Economist Intelligence Unit.



What impact do you expect smart products to have on yourrevenues and costs in the next three years?

Revenue Costs

(% respondents)


Increase

No change

DecreaseDecrease

Decrease

Chart 3

84%51%41%

Increase

10%

6%

No change

5%

Indeed, when asked about the organisational challenges they face in developing smart products, almost half (47%) say that they do not have the budget or that it is too costly.

Addressing the financial consequences of smart products requires more than just money. For many, they demand an entirely new business model, such as subscription-based pricing, in order to pay for the ongoing data services that accompany them.

Philips, for example, is already selling MRI systems to hospitals worldwide on a subscription basis, charging them per use, rather than demanding an upfront multi-million-dollar investment. Over half of survey respondents (52%) say that they have adopted a subscription model for smart products.

But switching to that new model, while delivering financial results that investors want to see, is not easy. “The economics question is a tough one to answer for many organisations,” says Mr Tas. “The market looks quarterly at your revenue, and in many cases you’ll be moving to a subscription model, where revenue and costs are spread out over the lifetime of a smart product. New

financial patterns are bound to emerge that don’t correspond to the patterns that came before.”

The financial implications of smart products are foremost in the mind of many companies developing them, but it may be their impact on customer relationships that proves more disruptive.

Smart products create a new connection between a manufacturer and its customers, an exchange of data that becomes a new facet of the customer relationship. This is not just a side-effect of digital connectivity: for many companies, it is the primary driver for launching smart products. Forty-three percent of those surveyed state that one of their smart-product goals is to improve their organisation’s understanding of its customers. Almost as many (42%) report a desire to achieve a closer, more direct relationship with customers.

In this respect, they are already seeing solid results: almost three-quarters (74%) say smart products allow them to interact directly with customers for the first time, while 46% report that smart products are giving them information about customers that it was previously not possible or cost-effective to acquire.

When asked how they use or plan to use the data received from smart products, the most popular answers relate to the customer relationship: the data are used to automate customer service (40%) and to analyse how customers use their products (39%). This promises to have a revolutionary impact on the way many markets operate.

In the consumer product industry, for example, the customer relationship is traditionally mediated by retailers. Manufacturers have relied on retail partners not only for sales but also for market insight and, in some cases, the ability to communicate with customers. The direct customer connection enabled by smart products promises to redraw the power balance in the relationship.



Which of the following effects havesmart products already had on yourrelationship with customers?(% respondents)

Chart 4

Allow us to interact directlywith our customers for thefirst time

Allow us to earn morerevenue per customer

Give us information about ourcustomers it was not previouslypossible or cost effective toacquire

Require us to spend more oncustomer service per unit sold

Grow customer referrals

Improve customer satisfaction

Require us to change our brandidentity and marketing messages

74%

46%

48%

39%

38%

37%

20%


Retailers have much to gain too, according to Kyle Nel, executive director at Lowe’s Innovation Labs, the innovation division of US-based DIY retailer Lowe’s.

Currently, he says, many customers arrive at their local branch of Lowe’s having thoroughly researched their purchases online, often on customer-review sites.

“The perfect next step in the retail evolution is to take insight from manufacturers when we’re setting up shelves and integrate it with the shelves themselves, so that a customer can see how other customers use that product and its competitors, comparing their own intended use with that of others and delivering a new level of understanding.”

According to Mr Nel, smart products are already having an impact at Lowe’s and will soon be the norm. The challenge now emerging is to develop systems and business practices that make use of this growing “smartness”. He adds: “The next evolution is about figuring out how to integrate smart products with intelligent systems.”

The next evolution is about figuring out how to integrate smart products with intelligent systems.



INFRASTRUCTURE AND DESIGN2Introducing “smartness” to a conventional product also introduces a whole new technical and organisational infrastructure that is necessary to collect, integrate, analyse and make profitable use of the data it produces. Unsurprisingly, this presents a raft of challenges.

When asked about their organisation’s weak spots when it comes to developing smart products, 28% of respondents point to the design and deployment of back-end data systems. And their most difficult operational challenges in developing smart products, after pricing, are data management/analysis and IT security, each cited by 36% of respondents

They are right to worry, says Mr Tas. “Before you start selling a smart product, there’s a whole lot of IT work that needs to take place behind the scenes,” he explains.

This includes a database to store a smart product’s communications, analytics tools to interpret these data, a platform for building software applications, and a rules engine that dictates how the product should be used, supported and serviced. All of this must integrate with existing systems.

“The big challenge here is about linking smart products into your existing environment and

Which of the following do you considerto be the most difficult operationalchallenges in developing smartproducts? (% respondents)

Chart 5

Pricing

Data managementand analysis

Informationsecurity

Customer privacy

User interfacedesign

Technologyintegration

Selecting andmanaging partners

Product design

Marketing

Identifying marketopportunities


37%

36%

36%

34%

28%

25%

24%

22%

15%

13%

value chain,” Mr Tas explains. “If you can’t do this very well, it’s unlikely that your smart product will be a success in the market, because you won’t be able to support it well. In that case, the product may as well be dumb.”



The technological challenges that smart products present are on the agenda for companies developing them, and they recognise the need to improve their capabilities as a result. When asked which adaptations they need to their company’s product development capabilities, almost half of respondents (48%) say they need to increase their software development resources.

Four out of five respondents agree that extracting value from data through analytics is an intrinsic part of their smart-product business model. Hence 44% report that, over the next three years, they will need to hire more data scientists.

Equally critical to the success of a smart product is its design. A poorly designed product, however sophisticated its technical infrastructure, is unlikely to succeed in the market.

Respondents are confident in their product-design capabilities: one-third agree that product design is their number-one strength with respect to developing smart products, while 81% agree that they have the required product-design capabilities in-house.

It is testament to the significance of design in any smart-product strategythat many companies expect to expand their capabilities in the future. Over the next three years, 43% of respondents plan to hire more product designers. Nor will they keep the process entirely in-house: half have already outsourced some element of product design and development.

Successfully designing smart products is not simply a matter of scaling up the design practices of old. Indeed, three-quarters of respondents (75%) agree that the design challenges associated with smart products are unique.

This explains the appetite for new approaches to product design. Over half of respondents

have used open-source hardware (56%), while 42% that say they use hardware-in-the-loop simulation, a technique that uses mathematical models to simulate the performance of embedded systems under different conditions.

Perhaps the most significant new approach that companies are applying to smart products is involving customers in collaborative and crowdsourced design, as used by 53% of respondents. This reflects not just the fact that crowdsourcing has become significantly more viable in the digital age, but it also underlines the particular importance for smart-product design to reflect customer needs.

The good news is that the very nature of smart products means that customer needs can be ascertained by analysing the data they produce. “You can constantly probe customers as to what more they want, what they’d like to see improved,” says Mr Tas. “It’s a kind of crowdsourcing.”

Open source hardware

Which of the following tools and techniques have you successfullyapplied during smart product development? (% respondents)

Chart 6

Collaborative/crowd-sourceddesign incorporating customers

Outsourced product designand development

Collaborative design withone or more partners

Hardware-in-the-loopsimulation

Open source software

Rapid prototyping/3D printing


56%

53%

50%

44%

42%

28%

19%



EXPANDING ECOSYSTEMS3A smart-product strategy has many facets, including commercial, organisational and technological components. This is not a journey that most companies can undertake alone.

Which of the following are the most important kinds oforganisation to partner with when developing smart products? (% respondents)

Chart 7


Product design agency

Systems integrator

Hardware manufacturer

Information securityprovider

Analytics provider/consultancy

Market researcher

Cloud service provider e.g.Amazon Web Services

Consumer web serviceprovider e.g. Google

Telecommunications serviceprovider e.g. Telefonica, Verizon

Advertising agency

Management consultancy

52%

45%

45%

38%

23%

22%

12%

12%

12%

9%

8%

The vast majority (93%) of survey respondents agree that smart products will require them to expand their partner ecosystems. The most important partners, they say, will be product- design agencies (52%), with systems integrators and hardware manufacturers in joint second place.

The three executives interviewed for this report expect that smart products will have significant implications for their partners’ ecosystems. At Diageo, Mr Balakrishnan anticipates closer collaboration with the company’s supply-chain and retail partners, so that smart bottles of drink can be delivered in the right quantities to the right location.

Mr Tas of Philips predicts that smart healthcare products – a smart medication dispenser, for example – will be a point of connection not just between Philips and individual patients, but also the medical staff, homecare providers and health insurance companies that serve them.

“We need to create ecosystems,” say Mr Tas. “A car isn’t just a car: it’s a product that’s supported by its manufacturer, by services organisations, by insurance companies, road-toll organisations. How can I connect this product in a way that everyone wins in that ecosystem? You need to go back to the drawing board, design a new way



in which you and your partners can do business together. The changes here are far more profound than people see on the surface.”

Mr Nel of Lowe’s says that effective collaboration between smart-product providers is essential if the vision of the “smart home” – in which products “talk” to each other to provide useful outcomes – is to become a reality.

This is why Lowe’s has developed Iris, its own smart-home management system, which allows homeowners to control their smart products through a single mobile app. The fact at that retailer such as Lowe’s would build this kind of system shows how disruptive smart products are already proving to be.

This need for integration has already led to partnerships that were previously unthinkable.

In June 2014 Nest, a home monitoring specialist, announced that it was working with carmaker Mercedes-Benz to allow smart cars to communicate with its thermostats, so that the heating or air conditioning in a customer’s home can be switched on as the customer approaches his home by car.

This is not unusual. Forty-seven percent of survey respondents reveal that they are selling products through new channels, and 42% have established joint go-to-market strategies with new partners.

The changes here are far more profound than people see on the surface.



Conclusion

Smart products present businesses with a long list of challenges, from practical considerations to strategic concerns. In the short term, they require new skills and capabilities. In the medium term, they will force companies to explore new business models and partner strategies. In the long term, they will reshape many industries beyond recognition, by changing ownership of the customer relationship and the very nature of the commercial offerings that companies provide.

However, if this all sounds rather daunting, there is also reason for optimism. The very nature of smart products means that companies face these

challenges armed with an unprecedented level of insight into the way customers buy and use their products. Those companies that can extract and understand these insights and act on them will be the ones that weather the upheaval.

“We stand at very interesting times,” says Diageo’s Mr Balakrishnan. “There have been some phenomenal advances in printing, in retail technology, in image recognition, in data analytics. Why would we not take advantage of them, in getting our products to rise to the same level of sophistication as the environment they sit in?”



Appendix: Survey results

US

UK

Netherlands

Switzerland

Sweden

Finland

Germany

Belgium

Denmark

Iceland

Austria

Norway

Luxemburg

Other

49

21

8

6

3

2

2

2

2

2

1

0

0

0

(% respondents)In which country are you personally located?



Healthcare, pharmaceuticals and biotechnology

Manufacturing

Retail

Other

45

40

15

0

(% respondents)What is your primary industry?

$500m or less

$500m to $1bn

$1bn to $5bn

$5bn to $10bn

$10bn or more

50

10

23

6

11

(% respondents)What are your organisation's global annual revenues in US dollars?

CEO

Other C-level executive

SVP/VP/Director

Head of Business Unit

Head of Department

Manager

Other

37

15

21

3

7

17

0

(% respondents)Which of the following best describes your title?

Product development

Innovation

Research and development

Other

60

23

17

0

(% respondents)What are your main functional roles?

Yes, we have already developed smart products

Yes, we are in the process of developing smart products

Yes, we plan to develop smart products in the next 12 months

No

74

22

3

0

(% respondents)Is your organisation involved in developing smart products, or does it plan to become involved in the next 12 months?



Yes

No

100

0

(% respondents)Are you familiar with your company’s smart product strategy?

Smart industrial equipment

Smart packaging

Consumer home devices

Consumer wearables

Smart building/smart city products

Other (please specify)

58

57

40

19

5

6

(% respondents)Which of the following categories of smart product are you developing or have you developed? Tick all that apply

Launch product categories that are new to the market

Launch product categories that are new to your organisation

Improve understanding of your customers

Gain greater proximity/direct relationship with customer

Defend against disruption by rivals

Grow sales/market share in established product categories

Grow reputation for innovation

Improve the customer experience


52

43

43

42

35

34

19

15

0

(% respondents)

Which of the following are the most important strategic objectives you are pursuing through the development of smart products? Select up to three

Allow us to interact directly with our customers for the first time

Allow us to earn more revenue per customer

Give us information about our customers it was not previously possible or cost effective to acquire

Require us to spend more on customer service per unit sold



Require us to change our brand identity and marketing messages

None/not applicable

74

48

46

39

38

37

20

0

(% respondents)Which of the following effects have smart products already had on your relationship with customers? Tick all that apply



Require us to spend more on customer service per unit sold

Allow us to earn more revenue per customer



Give us information about our customers it was not previously possible or cost effective to acquire

Require us to change our brand identity and marketing messages

Allow us to interact directly with our customers for the first time

None/not applicable

46

40

40

36

35

21

11

2

(% respondents)Which of the following smart products effects do you expect will occur in the next two years? Tick all that apply

Adopting a subscription model for smart products

Increasing the average price of your products

Selling products through new channels

Joint go-to-market strategy with new partners

Selling data and/or insights extracted from smart products to third parties


None of the above

5228

4242

4840

4235

2630

02

14

Already adopted Expect to adopt in next 2 years(% respondents)How, if at all, have you changed your business model as a result of selling—or deploying—smart products? Tick all that apply

More competition

Higher margins

Less competition

Lower margins

Consolidation within the industry

Market growth

Increase industry collaboration

Reduce industry collaboration

None of the above

49

48

38

35

29

27

27

23

1

(% respondents)What impact do you think smart product development will have on your industry? Please select the three most important



Decrease 5% to 15% Decrease up to 5% No change Increase up to 5% Increase 5% to 15% Increase 15%+

Revenue

Cost

415

366

236483

151041

(% respondents)What impact do you expect smart products to have on your revenues and costs in the next three years?

Physical products excluding smart products

Smart products

Internal tools and processes

Digital interfaces (mobile/app)

Other (please state)

40

34

20

5

0

(% respondents)Which of the following is the number one priority for your innovation and R&D efforts?

Product/UX design

Product manufacture

Business model design Weakest

Product testing

Data back-end design and deployment

Data back-end support and maintenance

Sales and marketing

33

29

16

7

5

4

4

(% respondents)Which of the following capabilities do you think is your organisation’s strongest with respect to smart products?

Data back-end design and deployment

Data back-end support and maintenance

Product testing

Sales and marketing

Product/UX design

Product manufacture

Business model design Weakest

28

17

14

10

9

9

5

(% respondents)Which of the following capabilities do you think is your organisation’s weakest with respect to smart products?

Strongly agree Agree somewhat Disagree somewhat Strongly disagree Don't know/can't answer

We have the product design capabilities required by our smart product strategy in house

Effectively integrating multiple stakeholders in the design process is critical to success

The design challenges associated with smart products are unique

Few individuals have all the skills required to effectively design a smart product

1

19

1

314

22

332

41

51

51

33

39

30

24

31

(% respondents)To what extent do you agree with the following statements regarding your organisation’s use of design?



Open source hardware

Collaborative/crowd-sourced design incorporating customers

Outsourced product design and development

Collaborative design with one or more partners

Hardware-in-the-loop simulation

Open source software

Rapid prototyping/3D printing


None of the above

56

53

50

44

42

28

19

0

4

(% respondents)

Which of the following tools and techniques have you successfully applied during smart product development?Tick all that apply

Increase software development resources

Introduce new project management techniques

Increase electronics/hardware resources

Hire market researchers

Hire specialist project managers

Hire product designers

Hire data scientists

Acquire one or more specialist company

Reorganise the product development function

Outsource product development


None of the above

48

35

34

29

26

24

24

22

21

9

1

1

(% respondents)

Which of the following adaptations to your product development capabilities have you made in order to pursue your smartproduct strategy? Please select the three most important



Hire data scientists

Hire product designers

Hire market researchers

Increase electronics / hardware resources

Introduce new project management techniques

Reorganise the product development function

Acquire one or more specialist company

Hire specialist project managers

Increase software development resources

Outsource product development


None of the above

44

43

39

28

25

23

22

18

16

6

0

0

(% respondents)

Which of the following adaptations to your product development capabilities do you expect to make in order to pursue yoursmart product strategy in the next three years? Please select the three most important

Extracting value through data analysis is an intrinsic part of the business model for our smart products

We have internal employees with the technical skills required to effectively process and manage the data from our smart products

We have internal employees with the analytical skills required to effectively analyse the data from our smart products

Effectively analysing data from smart products requires “big data” technology – eg, Hadoop, non-relational databases, in memory computing

A lack of common data standards hinders our smart product strategy

1

1

21654

11941

222354

333237

372744

26

37

19

25

18

(% respondents)

To extent do you agree with the following statements regarding your organisations’ use of data analytics in connection withsmart products?




Automate customer service

Analyse how your customers use products

Share with suppliers to collaborate on products

Analyse product lifecycle

Personalisation of your products or services

Extract information for marketing purposes

Analyse energy consumption

Track your customers’ location

Optimise your product design / performance

Optimise your internal business processes

Improve customer service


None of the above

40

39

32

29

28

26

25

24

19

15

11

0

1

(% respondents)

Which of the following are the most important ways that your organisation uses/will use data collected from smart products? Select up to three

This function supports our smart strategy well This function supports our strategy adequatelyWe need to adapt this function somewhat in order to support our strategy We need to adapt this function significantly in order to support our strategy

Recruitment

IT

Finance

Manufacturing

Design

Sales

Marketing

Strategy

Compliance

3223638

1

1

2

2

194332

204234

4173540

1

1

164932

164732

174337

154635

3165226

(% respondents)To what extent do you believe the following business functions at your organisation support your smart strategy?



We don’t have enough budget/it costs too much

We don’t have the in-house expertise/skills

It doesn’t fit with our existing culture

We’re not agile enough

Our organisational structure isn’t right

It is not considered a priority by the business

C-suite buy-in to the smart products strategy


47

44

39

39

28

24

19

4

(% respondents)

Which of the following do you consider to be the most difficult organisational challenges in developing smart products? Select up to three

Pricing

Data management and analysis

Information security

Customer privacy

User interface design

Technology integration

Selecting and managing partners

Product design

Marketing

Identifying market opportunities


37

36

36

34

28

25

24

22

15

13

1

(% respondents)

Which of the following do you consider to be the most difficult operational challenges in developing smart products? Select up to three

CEO

Chief innovation officer or equivalent

Chief technology officer or equivalent

Chief marketing officer or equivalent

Chief information officer or equivalent

Chief strategy officer or equivalent

Chief digital officer or equivalent


59

15

12

7

3

3

0

0

(% respondents)Who among the C-Suite owns the smart product strategy?



It requires us to expand our partner ecosystem

It requires us to have a more geographically diverse partner ecosystem

It requires our sourcing/procurement function to have more technical understanding

It means that we are more reliant on the innovation of suppliers than before

It requires us to share more intellectual property with partners than we have done in the past

It means we have to manage our supply chain more strategically (eg, mitigate risk, balance cost)

65241

1

1

1

1

1

1

1

1

31946

1

173842

1856

2644

1950

30

24

26

28

(% respondents)To what extent do you agree with these statements on the impact of your smart product strategy on your partner ecosystem?


Product design agency

Systems integrator

Hardware manufacturer

Information security provider

Analytics provider/consultancy

Market researcher

Cloud service provider e.g. Amazon Web Services

Consumer web service provider e.g. Google

Telecommunications service provider e.g. Telefonica, Verizon

Advertising agency

Management consultancy

52

45

45

38

23

22

12

12

12

9

8

(% respondents)

Which of the following are the most important kind of organisation to partner with when developing smart products Select the three most important

We understand all the data protection and privacy regulations that apply to smart products in the markets we operate in

The regulatory environment we operate in makes it easy to develop and sell smart products

Our smart products strategy makes it harder for us to comply with data protection and privacy regulation

Building customers’ trust in our ability to protect their privacy is a key success factor for our smart products strategy

1

1

95337

4163346

23194629

21164437

(% respondents)To what extent do you agree with the following statements regarding regulation?


While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report.

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