Getting to full enterprise automation requires new technology, but it also requires a sound and creative business case that anticipates the revolutionary benefits of device networking.

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Technology Is No Longer the Problem
As your car mechanic will tell you, we have been embedding computer intelligence in everyday, non-IT products for a long time now. What we have not been doing is networking those smart products to deliver continual streams of status and usage information to their creators. When your mechanic wants to talk to your car’s onboard computers, you have to bring him the car so he can connect it to his diagnostic machine with a cable. What’s wrong with that picture? Such service arrangements require your time and human attention, and they won’t keep you from breaking down on the highway someday.

Until recently, inadequate technology was part of the problem. But recent developments in wireless communications and automated data management make it possible for your mechanic to access your car’s computers without the car being there. And continuing miniaturization means that products much smaller than your car can now have sensors, computers, and communications hardware built into them.

On the road to the “real-time enterprise” of the 21st century, technology is no longer the obstacle. The obstacle is business culture. And yet some trailblazers have already shown the way.

M2M Business Models Exist Today
A number of today’s most innovative growth companies, in some very mature businesses, are now developing the skills required to add a whole new kind of value to their products, and to develop new customer intimacy throughout the lifecycle of those products. These companies include KONE Elevator, Johnson Controls, Heidelberg, Air Liquide, Eaton, and John Deere, among others. They compete in widely divergent industries, and the specific business strategies they practice vary greatly. But they all have one thing in common: they saw early on that the networking of products and devices would open up whole new realms of opportunity. These companies are now well on the way to leveraging pervasive computing and M2M to sustain new business models and to accomplish new growth.

Thanks to them, there’s ample evidence that M2M and the Pervasive Internet are not futuristic fantasies but real-world business phenomena with tangible benefits. The benefits were so obvious and attractive that some of these foresighted companies—Air Liquide is one notable example—started remotely monitoring their products as much as a decade ago, even though they had to cobble together homemade solutions to do so.

But most manufacturers are not like these thought-leading early adopters. In fact, most product companies and OEMs have yet to realize that they, too, are about to be hurtled into a new era of smart products and smart services. This era will force them to make radical changes in the way they do business, or cease to be competitive. And if they don’t wake up soon, they’ll have to play a hard—and quite possibly futile—game of catch-up.

Most successful product companies today had their growth in an era that is now fading away. As the tide goes out, many manufacturers find themselves increasingly out of touch and fog-bound, and they don’t know what to do because they learned all their lessons in the previous era, and many of those lessons just don’t work well anymore. The great irony is that embracing the next era of the “real-time enterprise” would ease much of the distress they are now experiencing.

Lifecycle Profit is Much Bigger than Purchase Profit
Many OEMs now face saturated markets in which meaningful differentiation at the product level is hard to achieve and almost impossible to sustain. Significant growth will not be achieved by merely selling more product. Most manufacturers are concerned primarily with sales and, to a lesser extent, with installation and initial support. These are all steps that occur early in a product’s lifecycle. Most manufacturers miss the opportunities of the later stages of product lifecycle and user experience. Ongoing streams of “field intelligence” from networked products would instantly create an entirely new kind of customer intimacy, and therefore entirely new service opportunities. Such real-world feedback would also lead to mcuh smarter R & D and marketing.

Disaggregation of value chains has been accelerating in many industries, including telecom, computing, automotive, and energy. Today, it is rare for a single company to be responsible for the entire production and sale of a product line. Instead, the product OEM’s role has increasingly been focused on driving demand through marketing programs, incentive financing deals, or strategic relationships, and not on traditional vertically integrated manufacturing, services, or sales. The classic role of producing and marketing products has become less and less attractive as demand has stagnated and competition increased.

This specialization of tasks has been a necessary evolution. It has enabled companies to focus on core skills and to drive innovation within their niches. But the process has also caused manufacturers to become “disintermediated” from their customers, losing service and marketing opportunities to channel partners. If a manufacturer gave its products an electronic “heartbeat,” the manufacturer would own all the real-world information about the product’s status and usage—which means owning the customer relationship.

Technology Plus a Lifecycle Plan
But that product “heartbeat” is less than half the story. There’s no point in building sensors and networking into your product if you have no plan for the information that will result from it. The existence of ongoing product-generated information implies a connection to the customer that doesn’t end with the sale or the expiration of a warranty. Ideally, the connection never ends. Creative companies are now developing a wide array of strategies to become the direct facilitators of the customer experience. They’re combining networking technology with creative, lifecycle-oriented business models to drive extraordinary results. It’s not about smart products alone. It’s about smart products enabling smart services.

The companies mentioned above were early adopters of device networking because it was the doorway into new growth. Those companies manufacture things like elevators, building controls, printing/imaging systems, and industrial gases. Their customers typically spend five to twenty-five times the product’s purchase value on support, maintenance, consumables, upgrades, etc. during the life of the product. Capturing that revenue is often called expanding the after-market opportunity, or moving “downstream.”

With recent developments in low-cost wireless sensors, intelligent device networking, and wide area communications, the advent of machine-to-machine is truly upon us, bringing with it opportunities to enhance the customer experience like never before, reduce the cost and inefficiencies of support, and ultimately create new modes of optimization.

Redefining your role in the value chain also means redefining the way you measure success. A “real-time enterprise” will not measure success by product margin realization alone. The margin potential of a product/services model is vastly better than a product model alone. When you factor in the impact of device networking and automated field intelligence, that potential takes a quantum leap. Our research indicates that the gross margin for network-enabled services can reach 50-60% in many cases.

The Haves and the Have-Nots
In the end, this will be a story of haves and have-nots. By the end of this decade it will be fairly easy to point to the companies that “got it” and those that didn’t. The ones that got it will have realized much greater performance and, in turn, much more significant value creation. The first companies to recognize the importance of smart products and smart services will create significant barriers to entry. We believe this will once again set into motion new measures of value in the equity markets that will drive new advantages for the few who see this end-state now.

The early innovators and facilitators of the new, enduring customer relationships will architect alliance networks that will attend to the most important needs of an end customer—e.g., offering a complete solution for financing, servicing, aftermarket, disposal services, and so on. By building a lifecycle approach to customers and products, companies will be better able to facilitate demand for their products and services, while providing additional content and customer service that enhances the consumer-company relationship. Networked devices will enable a more informed and precise lifecycle approach that will ultimately enhance all interactions.

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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.

Harbor’s new online platform for research services offers continually updated intelligence and stunning data-visualization.

Static, printed reports can’t track the complex ecosystems and warp-speed pace of high tech. SmartSphere® projects can.

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.

See SmartSphere® and find out more right now:

1. Visit our free, live SmartSphere® demonstration. They say pictures are worth a thousand words. So what are they worth if they’re pictures of your whole world, and you can fly around inside the pictures with your mouse?
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).

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.

Projects, projects, projects. Ours, and yours.
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.

SmartSphere® projects are laser-focused on their subjects. No waste, no fluff, no irrelevance. A SmartSphere® project delivers continually updated information on whatever the project has been defined to track. Some of that information is created in the good old-fashioned way, by experienced researchers and analysts. And some of it is created with 21^st century tools like automated news feeds and Web-based info services. Every time you log in to a project, there’s new information—freshly tracked events, new company alliances, new company and market comparisons, enhanced company, market, and technology profiles, and insightful Harbor commentary and analysis.

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.

Custom SmartSphere® projects. Your secret weapon has arrived.
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.

Any collection of companies, markets, or technologies can become the backbone of a SmartSphere® project. You define who or what they are. You define what you want to track about them, and how you’d like to rank or score or weight them. You define the types of cross-company or cross-market comparisons you’d like to see.

Take action and take control.
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).