Generally, all products will become part virtual, part physical. They will be connected, reconfigurable and – hopefully – smart. Also, the business model for their manufacturers will be dramatically different.
As we moved forward through history and as technology evolved, our products and devices got more complex. The supply chain and the number of people and skills involved in production kept growing – as did the number of supporting factors that needed to be in place for the device to work.
It’s hard to see that this trend towards greater complexity and connectivity should not continue.
Large supporting infrastructure
An old-fashioned pencil doesn’t require much in terms of supporting infrastructure. An eraser and a sharpener are useful additions, but most of the time, the pencil works well on its own. It’s simple and robust, but as a communication device it’s abilities are rather limited.
In contrast, an electronic tablet is a very different device. It will not work fully without electricity, software, and an Internet connection. Not only can you write words with, you can record and edit video, and you can send it instantly to someone else – or to everyone.
Increasingly complex supply chain
Even producing a simple pencil requires a complex supply chain of wood, graphite, paint and glue – but that is nothing compared to the number of players involved in delivering the functionality of a tablet.
Try to think through how many companies are feeding in to the process – and which consequently need to be coordinated and must adhere to the same standards and conditions in order to cooperate… The network easily extends to thousands of companies and millions of people. Display and chips, electricity, connectivity, various software, GPS signals – plus a whole Internet’s worth of content. It all comes together (almost) seamlessly – and that’s what it takes to produce the next level of utility for users.
The future production of value will take place in increasingly complex networks coordinating large numbers of contributors. Closer collaboration is a pre-condition. No one can produce this type of utility alone.
Hardware and software allows reconfiguration
You can get red, blue, green, hard or soft pencils – and you can get a certain variety of tablets. But tablets are a different species, because it can be completely reconfigured and customized depending on what software is installed.
The value of the tablet comes from the combination of hardware and software. The physical object can be standardized, we may all be using more or less the same phone or tablet – but my tablet is likely to be set up quite differently than yours.
It’s an advantage to have objects and devices, which are similar, so they can be mass-produced at low cost, but which can run a wide variety of applications. However, it’s difficult to make much money from manufacturing commodity items, which are practically the same as everyone else’s. Instead profits will shift towards software and services that run on top of devices.
Connected to the network
Embedding computing power is hardly news. Over the past decades, we’ve seen chips built into everything from toothbrushes to doorknobs.
What happens next significantly changes the game again: When all of those chips connect to the Internet of Things. They will be in touch with everything else; coordinating, exchanging data, adjusting, learning. An increasing part of the value that the product of the future offers, compared with conventional devices, will come from the connectivity. This is where growth will happen.
Smart, contextualized solutions
The product of the future is not a stand-alone device. Whether is jet engine or food processor it will be working in combination with many other devices to create solutions that fit the users’ needs in a particular context. The defining unit in the economy will not be the individual device, but the solution or process, which solves the customer’s current needs. It’s the difference between selling thermostats and selling comfort in a building.
Such solutions will be based on the vast and detailed streams of data that our sensing and communicating objects will create. Ideally, this will result in ”smart” systems, where all sorts of devices cooperate to deliver optimized solutions at low cost.
And again, this points to the basic condition; that value creation will happen in collaboration.
Both virtual and physical
A much greater part of a product’s value will not reside in the physical object. What the product offers will depend on the many services, processes and data, which are layered on top of the physical object - virtual superstructure. Crucially, the manufacturer of the physical device will not make many of these services. Applications, tutorials, and user forums, support services – these can be created by third parties and users themselves. Never the less, they contribute to the value and competitiveness of the device.
Objects will be individually identified. They will have an address, an increasingly detailed profile, and an Internet presence that others can interact with. The materials that it was made from, and it’s consumption and yield will be tracked throughout the product’s life cycle. In a sense each object will have virtual doppelganger, consisting of all the data associated with it. Increasingly, it will be meaningless to distinguish between the physical and virtual sides of an object’s functionality. And yes, this includes toothbrushes, doorknobs… anything, basically.
Instances, created for the moment
How objects are created may be very different, too. Although, most of our physical objects will still be mass produced and probably more standardized across the globe, many products or parts of products will be made specifically for the user. Flexible robots and 3D printers will make it ever cheaper to customize objects.
Such products exist virtually – basically as a collection of instructions and design, which can be modified or mixed with parts from other companies. It will only be manufactured physically once a particular user has configured it and clicked the “buy” button.
Just like the utility of a product will emerge when it’s combined with a number of other devices and services to create a solution that fits the current context, the physical product itself becomes a solution, assembled for a specific context. It may never be made exactly the same way again. One could call it an instance.
From finished products to tools for collaboration
This will require a change in approach to design and development. 3D printing naturally lends itself to collaboration and participation from many contributors, including the end-users. For companies, this implies that they may be selling blueprints to parts or selling access to systems that allow users to configure individual instances of an object. However, this business model requires a shift in focus. Instead of designing and delivering finished objects, a company must create tools that invite users and other companies to use the company’s designs and participate in co-creation.
No manufacturing, no distribution costs
One consequence could be that companies drop manufacturing their products altogether. Since the final instructions can be sent and printed out on any printer, a company can distribute globally at almost no cost. Factories may function as local, generic centers, which can print and assemble whatever customers upload for manufacturing.
Old categories and roles are mixed up. It’s hard to distinguish one company from another; they collaborate for a solution, and then regroup with others to generate the next instance. It’s like the “Hollywood economy”, where movies are produced by assembling a new team of actors, photographers, director, distributor etc. for each film.
Access rather than ownership
The way we access products will change as well. If the next level of value for users is a matter of how well a number of products can be coordinated to serve the user in a particular situation, then flexibility is crucial.
It becomes less attractive to own a product permanently, and better to have access to combine lots of different products to match changing needs and circumstances. Already products like carpets, cars, apartments and specialized tools are sold as services, which users subscribe to or rent.
As the cost of coordinating resources and needs fall, more products will be accessed temporarily through digital platforms – as we see in so-called sharing economy. Obviously, this will require new business models – similar to the way the music and media industry has been forced to change.
This changes everything…
All of these changes will affect more or less any product. Whether its cars, hospital beds, tennis rackets, lamps, valves, office chairs, their future version will be different in many of the same ways that a tablet is different from a pen.
They will be connected, networked, coordinated and reconfigured for specific contexts. They will be both virtual and physical, and their main value will not be what they can do on their own, but how well they can be integrated into larger solutions.
Obviously, the companies that produce them will also need to organize their business model and value creation in very different ways in order to thrive in the future.