What will the product of the future be like?

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.

This essay was published in Innovation Management magazine

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.

An example: this is not your grandfather's car

More attractive labor platforms

Sangeet Paul Choudhary, in Singapore, is doing some excellent thinking and writing on platform. I can strongly recommend taking a look at his blog about Platform thinking.
In a recent article Choudhary looks at some of the elements of making labor platforms, like Uber and Taskrabbit, more attractive to work through.

Here's a slightly abbreviated quote:

"An increasing number of labor platforms, today, are employing contract laborers to power the supply side. They do not enjoy the benefits of full-time employment. To encourage them to participate on platforms on a sustainable basis, the platform owners need to move beyond acting like matching engines and understand the costs and benefits involved in producers participating on these platforms.

First, every platform player should lay out all costs and benefits involved in producers participating on the platform. These fall into three broad categories:

- Risk management: Platforms need to ensure that producers that are investing in the platform have capped costs of participation. This means that producers need to be insured against transaction risks.

- Learning and Improvement: Platforms need to ensure that producers constantly improve their ability to reap more benefits from the platform. This, in turn, involves community management measures that involve the sharing of best practices, an example being Airbnb’s community management programs with hosts.

- Well-being: Finally, platforms need to ensure that they guarantee well-being for producers in a manner similar to that in traditional organizations".

Instances - the result of processes on a platform

I’m trying out a new word: Instances. Instances are the results of processes that take place on platforms: Unique solutions that fit a particular context. This is how healthcare, mobility, education or even physical stuff like furniture will be offered tomorrow.

Industrial age was about mass production – everyone got the same basic functionality, and that was a great improvement. Then came more choice and customization. To compete in the market place, companies would try to make products and service that matched the individual customer’s life style. The next step to create value for customers is contextualization; offering users the right set of services and products at the right time and place.

This requires a great deal of flexibility. We’re different, we move around, our situations and needs change – and so do the solutions that are right for our context.

As customers we want to choose from the global menu, but we want a configuration that is uniquely customized for this moment.

In principle, the solution we want is an instance – one possible combination of a large number of elements.

This is natural in the digital world. Make a Google search and what comes up on your screen depends on who you are, where you are, what you’ve done previously, the mails you’ve sent etc. Based on this very detailed information you will receive one instance of a search. If you send the same query at other times, from other locations, you may get a different result. Likewise with services like Facebook or Amazon. They have hundreds of millions of users, yet every person sees a different version.

In the physical world we will also see solutions as instances. For mobility our needs change: Are you in a hurry, are you travelling with others, do you have luggage, is it raining, what types of transportation are available… Ideally, we want a combination, which takes all of this into account to offer the best solution at the least cost.

Likewise for healthcare or education. We change, and the companies that can adapt along with us, can deliver more value, and will be the most attractive.

Physical objects will become instances too. 3D printing and other flexible manufacturing will make it cost-efficient to modify every object to fit the user’s context and wishes. Objects that are based on a digital description are fluid. They can be remixed and reconfigured, and in a sense, the object is really a set of potential designs – one of which the user chooses to instantiate by printing it.

In a circular economy, where all resources are re-used, all objects would basically be instances of raw materials, assembled momentarily for a particular purpose. It’s natural.

Instances will typically not be created by one company. Rather, they will be co-created by a much wider set of stakeholders than most of the solutions we use today. In many cases, a significant part of the value may be contributed by communities or users them selves.

Instances are the results of processes that take place on platforms. The hardware, the service, the data, knowledge and content which is combined in an instance will shift, but the platform, where all of the components are assembled, is likely to be constant. The individual parts may be commodities, but the added value for users emerges as the platform matches providers and needs, orchestrating the interactions and qualifying them with increasingly detailed data.

This makes the platform a central and powerful player in a more connected and collaboratory economy.

Overview of available jobs in the collaborative economy

The american organization Peers has a good overview of the different types of jobs that you can seek in the collaborative economy - including an estimate of how much you are likely to make. 

How to thrive in the we-economy

Thriving in a we-economy

The products that drove the industrial economy are becoming commodities: They have matured to the point where it’s hard and expensive to squeeze additional value from them. Instead, new value and growth now comes from connecting and combining technologies to create broader solutions, starting from the customer’s perspective.

Industrial products were mass-produced, one-size-fits-all. Now, value is increasingly created for specific customers in a specific context, here and now.

Rather than thinking in terms of standalone products, customers will buy devices and services that fit together with all the other stuff they are using – and the value they derive emerges from the interaction between large numbers of companies, often from very different sectors. Just consider how many providers are involved and coordinated to enable the services that are available on a smartphone.  

In the global market place, pressure to deliver more for less is as high as ever, and as we go forward, the demand for efficiency will only increase because of growing concerns about the environment and the tightening supplies of natural resources and energy.

Computers and connectivity are making it cheaper to coordinate and orchestrate transactions widely, with great precision and efficiency.

In all industries, products are digitized, networked, and equipped with sensors. They are exchanging data and coordinating, to compose solutions that are adapted to individual and local demands – but drawing on global networks and a wide variety of resources – including input from users themselves.

A new approach to meet new conditions

To thrive under these new conditions, companies need a new approach to business and value creation.

The main characteristic is a shift from a ME perspective towards a WE perspective.

This means seeing yourself as part of a much wider set of stakeholders, and understanding that your success depends on the success of all others involved in creating a common solution.

Taking a we-perspective means realizing that you cannot create complex solutions alone, and that opening to co-creation with other stakeholders, including users, will give you access to greater insight at a lower cost.

Thus, the we-approach is one of interaction, collaboration and interdependence.

This in turns implies that businesses need to rethink the way they organize value creation.         

- Focus shifts towards processes and applications, rather than providing finished products. Design is largely about creating and contributing to tools, services, platforms and systems that make it easy for a wide range of participants to join and contribute to creating the results they each want.

- It’s a participatory economy, based on a much deeper interaction action between producers and consumers. The traditional, industrial-era division of roles and responsibilities between suppliers, manufacturers, users, and customers are blurred. 

- Openness and sharing is a prerequisite for developing and operating a We- economy business concept. However, when knowledge and resources are shared, the ownership, rights and profits from activities are not so straightforward.

- The motivation to contribute knowledge, effort and other resources is not purely economic. Participants may equally be driven by the desire for recognition, by professional interest, social interaction or a wish to help others. Concerns about sustainability, minimizing the waste of resources and the environment in general are also important as motivation.

- Leadership and decision-making happens across organizational boundaries in networks, that can include not only the individual company's own employees, but also workers from other enterprises, volunteers, public servants, users, suppliers and customers.

- With less central authority or ownership, control of the process is replaced by influence.

- The connection between efforts and pay-off is less direct, and investments must be seen in a wider and longer-term perspective when you are contributing to make the ecosystem, which you are ultimately dependent on, thrive.

- A different set of skills is required. The traditional, rather passive and reproducing role of workers and consumers in the industrial age, need to change towards more personal initiative, assuming responsibility, sharing, communicating and creating. 

Elements of a new normal.

Interestingly, these characteristics are very visible in a number of new and often overlapping approaches to business, which have had considerable success and attention recently.

The sharing economy matches idle resources with needs. Access to use is more important the individual ownership Instead.

The maker movement is democratizing innovation and making it possible for virtually anyone to develop, manufacture and sell products.

Co-creation and broader participation in the development and production of solutions is possible in digital networks

The circular economy sees business as an ecosystem where everything and everyone are ultimately interrelated and interdependent.

Social enterprises work to make services and goods accessible to as many people as possible – rather than maximizing profits.

A lot of experimentation is going on, and not all companies and business models will have staying power. However, looking at the big picture, it’s hard to imagine that elements of these approaches will not become part of the new normal way of doing business.