IT Drives Next Wave of Products and Manufacturing

New research, published today in Harvard Business Review online, shows how IT and smart, connected products will transform the manufacturing sector.

The study, a collaboration between Jim Heppelmann, CEO of Boston-based tech company PTC, and Michael Porter of the Harvard Business School, takes a deep dive into what its authors term “the third wave of IT-driven transformation” and uncovers the myriad ways in which manufacturers will benefit.

The research looks at smart, connected products through the lens of Porter’s seminal strategy frameworks—the value chain and five forces analysis. Porter is also a PTC board member.

Finding business value in the IoT

The Internet of Things (IoT) has become a buzz term for anything—cars, refrigerators, tractors, pacemakers—being connected to the Internet. But the phrase has been unhelpful in understanding the phenomenon or its implications from a business perspective.

The Internet, whether involving people, computers or things, is simply a mechanism for transmitting information. What makes this wave of transformation significant for manufacturers and fundamentally different is not the Internet, but the changing nature of the “things” themselves, the study says.

It is the expanded capabilities of products and the data they generate that is ushering in a new era of competition for manufacturers and other businesses. But capturing these new opportunities requires a detailed understanding of how smart, connected products work, the capabilities they enable, the infrastructure they require, and their impact on strategy and competitive advantage.

The IT revolution

In the past 50 years, IT has radically reshaped competition and strategy. In the 1960s and 70s IT within the enterprise automated information collection and processing activities (payroll services, order processing, and computer aided design).

Then in the 1980s and 90s the Internet enabled efficient coordination and integration of the value chain across myriad functions, stakeholders and geographies (enterprise resource planning, customer relationship management, and application service).

Now we stand at the brink of a third transformation.

As IT and connectivity are being embedded into products and new value is created for manufacturers and their customers, activities across the value chain—from product design and marketing through sales and service—will be heavily impacted.

In the Harvard Business Review article Heppelmann and Porter identify ten strategic choices; critical trade-offs that manufacturers will need to make to position themselves for success in this new era.

How Smart, Connected Products Are Transforming Competition will also be published in the November 2014 hard-copy issue of Harvard Business Review.

This work contains material first published in “How Smart, Connected Products Are Transforming Competition”, Harvard Business Review, October 2014 (online), November 2014 (hardcopy edition).

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