Product of the future: This is not your grandfather’s car

An example to illustrate the points I make in my essay on the product of the future: 

The car of the future will still have wheels and be designed to bring passengers from A to B - but almost everything else about it will be different.

Cars are the classic industrial product. Ford’s enormous factories took in steel and rubber at one end, and spit out millions of identical cars at the other end of the production line.

The car of the future can be individually configured in great detail. Already, many car companies provide online tools that enable the customer to specify exactly what color, engine and trim the car shall be equipped with. The next generations of cars will be electronic and controlled by computers so they can re-programmed through apps and updates to the operating systems – it could be for changing the car’s sound, the interior lighting or its driving characteristics. Tesla, for example, recently released a new OS that makes the car able to automatically park and to stay within highway lanes.

The cost of developing and producing the car will increasingly be linked to electronics and software. Navigation, surveillance, coordinating with other cars and traffic systems, entertainment and information to passengers ... No longer are steel and rubber the main expenditure.

The electronic part of the car’s functionality is also where development moves fast - if not exponentially – along with more powerful computers, big data and artificial intelligence.

The car of the future will be constantly connected to the surrounding traffic. It will exchange observations about its position and the traffic conditions. Initially, this will make it easier to manage traffic, avoid traffic jams and find parking spaces, but as the car becomes increasingly automated and self-driving it will need to tightly coordinate with the cars around it.

Today, most cars are personally owned, but a growing number of people use car- or ride-sharing services, or they lease the car. When vehicles become autonomous, it will be a relief for many not to own a car. You will be able to book a car to pick you up, get you to your destination – and then take off to help other passengers. When the car is part of a pool of cars, the business model changes significantly. As does the relationship and attachment that many owners today have towards their car.

Finally, the car is increasingly just one of a number of elements that can be combined to provide a mobility solution. The exact combination of car, train, bicycle or busses, which best solves a person's needs in a specific situation can be composed for the occasion. It is the mobility solution, not the car, which the user pays for.

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

How Google Works... Like a platform

How Google Works gives a very interesting, and actually quite inspiring, look at the philosophy of management behind Google. It’s written by former CEO Eric Schmidt and another top Google executive Jonathan Rosenberg.

It’s an easy read and contrary to a lot of other management books it doesn’t have a lot of very LOUD and flashy models of how to handle everything. But it does convey an attitude of thinking very big, hiring the best possible people, trusting them and supporting them in pursuing their ideas.

A very interesting slogan is “Default to open”, and this attitude applies in many areas – like keeping employees informed, creating partnerships, or not trying to tie costumers to your service.

It’s a bet, but they take that bet by default: “With open, you trade control for scale and innovation”.

There are also a few good observations about platforms that are worth quoting:

Airbnb, Uber, Square, Kickstarter, Netflix, Spotify… “These companies assembled existing technology components in new ways to re-imagine existing business. They set up platforms for customers and partners to interact, and use those platforms to create highly differentiated products and services. This model can apply just about anywhere: Travel, automobiles, apparel, restaurants, food, retail …”

“Whereas the twentieth century was dominated by monolithic, closed networks, the twenty-first will be driven by global, open ones”.
(p. 83)

“A corporation’s relationship with consumers is one-way. GM decides how to design, manufacture and market a new product to its consumers, and sells it through a network of dealerships. In contrast, a platform has a back-and-forth relationship with consumers and suppliers. There’s a lot more give and take”.
(p. 245)

Indlæg om mobile banking og nøjsomme løsninger i DR2 Dagen

DR2 Dagen havde igår en sektion om brugen af mobile banking, og jeg var en tur inde og fortælle om brugen af mobiler i U-lande, og om forskellen på almindelig vestlig innovation og nøjsomme løsninger ala MPESA.
Indslaget starter 38:35 minutter inde i udsendelsen med et interview med direktøren for centralbanken i BanglaDesh, så kommer jeg på ved 45:20.

Datsun is too cheap for India

It seems that Nissan's attempt to create a low cost car for emerging markets under the Datsun brand name is not succeeding. According to Business week, Nissan is making the same mistake that Tata motors did with the Nano; marketing a car as cheap, without realizing that most aspiring people don't want to be seen as driving cheap. 
The point seems to be that affordability is not enough, the product needs to be attractive, too. 

Business week reports: 
"In India, where the Datsun Go went on sale on March 19, deliveries through August totaled 9,557, according to the Society of Indian Automobile Manufacturers. By comparison, Maruti Suzuki India (MSIL:IN), the country’s top-selling carmaker, sells just as many of its similarly priced Alto hatchbacks every couple of weeks. Only 607 Datsuns were sold in July, falling 77 percent from their peak in April and dipping below sales of Tata’s Nano, though they rebounded and exceeded Nano sales in August, according to SIAM data."

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.

Waves innovation exhibition opens in Paris - 5 currents of the new economy

The Waves innovation exhibition has opened in La Villette in Paris. It presents 5 currents, which are changing the economy and opening up new types of value creation: Sharing, co-creation, the maker movement, Social enterprise and the circular economy – in my opinion, a set of approaches, which are hard NOT to see as parts of the normal future economy. It's exactly the topic of the We-economy project here in Denmark.

The main content are 20 case-stories from around the world, illustrated with wonderful photographic artwork. The exhibition is housed in an elegant and organic purpose-built 500 square meter pavilion.

For me it has been a great pleasure to work with the team at BNP, to contribute ideas, research and texts – and the result is fabulous, IMHO!

The exhibition will stay in Paris till October 5, and will then travel on around the world, and in France. There is a comprehensive website for the exhibition as well. 

Airbnb co-founder discusses the nuts and bolts of the company on Econ-talk

Nathan Blecharczyk, the CTO and co-founder of Airbnb is interviewed by Russ Roberts of Econtalk. It’s a great interview with lots of insight into the nuts and bolts of Airbnb.

Also, there are some amazing recent facts: There are now 800.000 properties on the platform, and recently 375.000 rooms were rented out in one night. It’s big.

You can download the podcast or read the full transcript at the econ-talk website.

I’ve picked a sequence, where Blecharczyk talks about the turning point of the company, when the founders, at the suggestion from their Y-combinator mentor Paul Graham, went to New York and visited the people who were using Airbnb to rent their flats:

“So, we went to New York, and before we showed up, we called every single user, every single host.

Russ: How many were there?

Guest: About 30.

Russ: Okay. That's 30.

Guest: It was not a monumental task by any means. And we said, How would you like a professional photographer to come by your home and take some pictures? And I think that question was a little bit out of the blue, but people were curious and they said, It's free? Yes. And they said, Okay, sure, why not. And, you have to remember, at this time camera phones weren't that great. They were lower resolution, poorly lit. So we noticed the photos could be better. So we offered to take them, have a professional take them, for free. What ended up happening was that Joe and Brian would go to the camera store, rent the camera for the weekend, and show up themselves, knocking on the door. So the host would open the door expecting the professional photographer, and it was Joe and Brian, the founders of the company. But they let them in anyways, and Joe and Brian took the photos. And while they are in there, sat with them at the computer, showed them how to use the website, got product feedback, as well as invited them to share beers later on. And so we'd get together anywhere from 5-8 people in the evening, have a beer, tell them our story over the last year. And once people had heard the story and gotten to meet us, they became our advantage list. They wanted us to succeed at that point. So much so that even once we came back to San Francisco, we could call them up and give them advice, such as: you really have a beautiful apartment but you've only written a paragraph describing it; could we add a few more paragraphs? Could we perhaps start with your price being lower, and then raise it if you are getting too many inquiries? And so once we had great pictures, lower prices, more complete profiles, and cooperative hosts, that was the special combination. It was then that those properties started getting booked by travelers coming from all around the world. The travelers had great experiences and then would go home to their home cities--Paris, Berlin, Hong Kong--and the guests would oftentimes say, Hey, I want to do this, too. And the guests would become hosts. And so, within months there was a global cross-pollination of the idea in a way that might not be true of other businesses”.

Another quote:

”So events are a great catalyst for Airbnb. And just recently during the World Cup down in Brazil, we hosted about 150,000 guests in Brazil. It was actually about 20% of all international visitors, stayed on an Airbnb property. We now have 20,000 properties in the city of Rio. So, Airbnb is a great solution when there's an event that brings an influx of people and there's a lack of the existing hotel capacity to kind of flux and accompany all that”.