M2M success for product/device OEMs will depend upon counterintuitive behavior.

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This essay draws upon Harbor’s landmark new study of M2M adoption, available in July 2004. The study details a wide variety of adopter cases, and fully portrays the new adopter business models and alliance opportunities that grow out of Internet-enabled device networking. For information on the study, write to info@harborresearch.com.

Bending the Linear Value Chain into a “Feedback Loop”
Networked “embedded intelligence” is what pervasive computing and M2M are all about. Device connectivity puts the “smart” in smart services, and it will bend the traditional linear value chain into a “feedback loop” through which the heartbeats of manufactured objects will continually flow back through the complex business alliances that create, distribute, and service those objects.

Human beings cannot do this, nor should they; this incessant stream of ongoing business information should be “invisible” to people. At the same time, all this invisible machine activity makes the state of (i.e., the information about) a business’s assets, costs, and liabilities vastly more visible to managers and to the decision-making process—when decision-makers need or want to know.

Unfortunately, while most “product-centric” businesses are now embracing the concept of growth-creating services, many are not yet embracing the changes driven by pervasive and M2M. These businesses are thinking services, but they’re not thinking “smart services.” Thus they are in serious danger of moving aggressively to implement—by about 2010—a 1990s “dumb services” strategy in which the blind continue to lead the blindsided. In so doing, they will destroy value rather than create it.

Manufacturers Need to Think About Their Customers, Not Just Their Products
New, M2M-enabled services must be a wholly different animal than the service offerings of the past, and the customer must perceive them as having entirely new value. For product manufacturers and device OEMs, adopting M2M is counterintuitive because these companies are traditionally much more product-centric than they are customer-centric. Manufacturers often fail to understand the new benefits of networking their products because they don’t have a good understanding of what their customers are trying to achieve and how they want to achieve it. Product-centric businesses that don’t achieve serious customer empathy will make many mistakes and miss many opportunities in the course of adopting M2M technologies.

A Preview of the Findings of a Major New Harbor Study
In the process of completing a major new study on M2M adoption, we have spoken to many manufacturers and device OEMs about their challenges and the impact M2M is having on their businesses. We have concluded that manufacturers will need to understand the following key success factors:

• Understand the Entire Customer Experience. A traditional manufacturer’s view of the value chain is often quite limiting, and goes something like this: “We design, manufacture, sell, and install the product, and then we supply some level of after-market support (e.g. spare parts, consumables, etc.).” From the customers’ vantage point, this manufacturer perspective covers only a small portion of the whole “life cycle” story. Customer behavior is complex, but a supplier can increase its chances of success by understanding the “customer lifecycle experience”: discovery, purchase, first-use, ongoing-use, management, and disposal. By looking at the customer experience through the customer’s eyes, suppliers can gain a deeper appreciation for the viability of new services offerings they have in mind, and quite possibly discover new opportunity areas as well.


• Target The Highest Value Customer Segments. Many great ideas fail because companies focus on the wrong customer segments. Marketers often get distracted by the sheer size of a particular market segment, or by the marketers’ familiarity with it. In the process, they miss the target segments where they could deliver the most value. Our research indicates that focusing on the largest core customers may be a big mistake. Often, the place to “hatch” new ideas is with more empathetic “fringe” customers who are more willing to experiment.


• Quantify Customer Value. Customers and channel partners are more likely to adopt a new offering if they know exactly what it is worth to them. Marketers should use value models which precisely measure an offering’s economic benefits to identify opportunities for each customer and channel partner. This process should also help to define the most profit-rich and accepting market segments.


• Align Channel Partner Behaviors. Seemingly superior offerings can also fail because a supplier’s channel partners have no incentive to appropriately support them. The customer is buying an experience with a desired result, and the supplier and channel partners must work in concert to create a superior experience. The key is to convince channel partners that the best choice is to not only support the offering, but also to market it in a way that is consistent with the overall strategy. In some cases, that may mean not mentioning the networked capabilities of a device at all.


• Release Your Past. Many companies are unable to make big moves into new areas because they are too comfortable with what they currently know. M2M departs from the traditional manufacturer’s “comfort zone”—that is, it is not about features and functions per se, but rather it is about optimization of the customer’s processes and knowledge. The information coming from a device can be just as valuable, if not more valuable, than the device itself: for example, current location, part number, where it was purchased, when it was installed and by whom, critical specifications, diagnostics, availability of spares, replacement alternatives, repair instructions, usage patterns, and more.

Manufacturing companies that come to understand the unfamiliar and often counterintuitive potential of device networking will unleash a wave of productivity and efficiencies previously unseen. When manufactured objects are continually sending “field intelligence” back to their creators, OEMs will be able to shed costs, explore new revenue opportunities, and solve customer problems as never before.

Download this essay in printable PDF format (92 KB).
(See our terms of use.)

This essay draws upon Harbor’s landmark new study of M2M adoption, available in July 2004. The study details a wide variety of adopter cases, and fully portrays the new adopter business models and alliance opportunities that grow out of Internet-enabled device networking. For information on the study, write to info@harborresearch.com.

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Who We Are and What We Offer.
Harbor Research Inc. has been providing strategic consulting and research services to leaders in communications, computing, control, and content since 1983. The firm has built relationships with larger multi-line companies including AT&T, ABB, General Electric, Danaher, Eaton, Emerson, Hewlett Packard, Honeywell, Hughes, IBM, Intel, Invensys, Lucent, Motorola, Rockwell, Siemens, and Texas Instruments, as well as focused growth companies such as EMC, Cadence Design, Conexant, Qualcomm, and SAP.

We also continue to work for a broad array of emergent start-ups and pre-IPO technology ventures. We have built relationships with a number of significant M2M / Pervasive Internet players, including Cimetrics, DataSweep, eDevice, Ember, emWare, Questra, Wireless Innovation, and Xsilogy, to name a few.

Harbor is organized around emergent and disruptive opportunities in high technology, with a unique focus on the impact of the Pervasive Internet—the use of the Internet to accomplish global device networking that will revolutionize business by unleashing entirely new modes of system optimization, customer relationships, and service delivery.

We provide studies, workshops, briefings, research retainers, and consulting engagements of uniquely high value to both technology suppliers and adopters. For more information, please contact us.

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The brains of the Web. The brawn of server databases. The beauty of a CD-ROM.
For nearly ten years, we’ve been waiting for Web media to get good enough to let us do this. It’s finally here. Harbor SmartSphere® re-invents the whole concept of delivering research value. It’s to business research what the Pervasive Internet will be to business itself: a huge injection of dynamic intelligence and sheer voltage. SmartSphere® is online, interactive, dynamic, and visualized. There’s nothing static, rigid, or dead about it. Eventually, we at Harbor will do everything in SmartSphere® that we used to do on paper, and we’ll do it better. And you can, too. in a custom-configured project of your own, SmartSphere® can be anything you want it to be.

And yes, you can get printed reports. We’ve re-invented those, too. Not fixed, one-size-fits-all printed reports, but custom printed reports that you configure and SmartSphere® creates for you on the fly in PDF format.

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3. Download a brochure about our SmartSphere® “living research” projects on the M2M/Pervasive Internet phenomenon (PDF, 240 KB).

A small portion of an interactive Harbor SphereMap™. This one portrays a company’s world. You “fly around” the map by dragging it with your mouse, bringing into focus any area you want to explore. You see a company’s peers, investors, products, and alliance-structure at a glance. Clicking nodes fetches additional information from the database. Shift-clicking nodes creates new maps of other companies—and maps of markets, too.

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SmartSphere® is an online platform that Harbor uses to deliver Web-based services. You don’t buy SmartSphere® the way you buy a program for your computer. You buy access to one or more SmartSphere® projects. We define projects of our own on important high-tech subjects, and clients can subscribe to those projects. Clients can also define their own custom (and completely private) projects.

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When you visit our SmartSphere® demonstration, you’ll see a limited version of our own “Pervasive Internet Suppliers” project. Bear in mind that the free demo offers limited information and functionality. The full “Pervasive Internet Suppliers” project, for example, was created to replace and improve our own earlier online publication, Pervasive Internet Report.

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You’ve heard about some of our SmartSphere® projects. Now let’s talk about yours. Does your company have business development, M&A, R&D, or sales and marketing goals? We hope the answer is yes. How would you like “living business intelligence”™ on the companies that interest or worry you? Or on the markets and technologies that are defining your future? A custom SmartSphere® project is the perfect way to do that. “Living business intelligence”™ means research that is laser-focused on your targets, and continually updated for as long as you need it.

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If you’ve read this much about SmartSphere® without clicking something, it’s time to click. Here are those links once again.

1. Visit our free, live SmartSphere® demonstration.
2. Download a brochure on the SmartSphere® research platform and services (PDF, 970 KB).
3. Download a brochure about our SmartSphere® “living research” projects on the M2M/Pervasive Internet phenomenon (PDF, 240 KB).