The Internet of Things and smart, connected products are revolutionizing the way manufacturers create, operate and service products. In this first installment of a four-part interview, Jim Heppelmann, CEO of Boston-based software company PTC, looks at how the IoT is redefining traditional concepts Product Lifecycle Management.
PTC has long been known as a leader in CAD and PLM (Computer Aided Design and Product Lifecycle Management). However, most recently you seem to focus a lot on IoT?
We see IoT as a disruptive force that will transform existing industries, especially in our core markets like manufacturing and engineering. PTC responded early to the growth of software intensive products and service oriented business models. Adding connectivity to the product and service lifecycle solutions we already provide enables our customer to close the loop and transform the way they create, operate, and service their products.
We have seen many M2M applications in the last couple of years that were focused on retrofitting RCM-like applications (Remote Condition Monitoring) onto existing assets. Your vision for IoT-enabled products seems to go much further.
Such retrofitting approaches are important and will continue to play an important role for many established long-lived assets and products, however, we also see a new breed of products emerging that have been specifically designed to leverage the IoT. For these products, connectivity is not an optional add-on; rather it is designed into the product. Many of the core features of these new products will rely on this built-in connectivity. Physical products and related cloud services are forming new ecosystems, like Apple devices and iTunes cloud services. We call this new breed of products “smart, connected products”.
So I assume that we need to re-think PLM for these smart, connected products?
Yes. Traditional PLM tools, in truth, really focus on the early stages of the product’s lifecycle—product design and development. We need to look at the entire product and service lifecycle, including product design, manufacturing, sales/marketing, customer operations, and after-sales services.
You recently co-authored the HBR article How Smart, Connected Products are Transforming Competition. In this article, you identified 10 strategic choices derived from the push towards smart, connected products.
The transformation ahead of many companies requires a clear definition of the goals and strategy in this area. A strategy requires trade-offs that create a unique competitive position, which has to be defined at the executive level and communicated to all relevant stakeholders. There is no right or wrong answer, only choices that must reinforce one another and define a coherent and distinctive overall strategic position for the company.
Our framework of 10 strategic choices can help to define that company-specific strategy. The first set of questions is around the product and service strategy, starting with: Which capabilities should the company pursue? A smart, connected product drastically expand the number of potential product and service capabilities, but just because a company can offer many new capabilities doesn’t ensure there is sufficient value for customers above incurred costs to the company.
Next is how to best deliver those new product and service capabilities by determining how much functionality should be embedded in the product vs. the cloud. Factors like required response time, expected network availability, complexity of the user interface, and frequency of service events or product upgrades will impact those decisions.
The next set of questions is around the technology infrastructure required to enable smart, connected products. Developing the technology stack for smart, connected products requires significant investment in specialized skills, technologies, and infrastructure that have not been typically present in manufacturing companies.
Some of the early pioneers like General Electric and Bosch have invested heavily via a largely in-house route to capture first-mover advantages and retain greater control over features, functionality, and product data. However, just as Intel has specialized in microprocessors and Oracle in databases, new firms that specialize in components of the smart, connected products technology stack are already emerging, and some in-house efforts may overestimate the ability to stay ahead, turning an early lead into a long-term disadvantage.
A related question is whether the system architecture should be open or closed, where key interfaces are proprietary and only chosen parties gain access. While this has clear benefits for the company to control and optimize the systems, over time we expect closed approaches to become more challenging as technology spreads, ecosystems develop, and customers resist limits on choice.