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Internet of Things and Product Design

In their article “Now That Your Products Can Talk, What Will They Tell You?” in the Spring 2016 issue of MIT Sloan Management Review, Suketu Gandhi (A.T. Kearney) and Eric Gervet (A.T. Kearney) write that companies traditionally have relied on surveys and focus groups to understand what customers liked and didn’t like about their products. Social media and online ratings have added to the information mix in recent years, giving businesses additional ways to learn about customers’ opinions about their products.

Today’s new frontier, though, is even more sophisticated. “Some of the products themselves — at least those devices that are part of the connected world of the Internet of Things — are starting to provide unprecedented levels of information that can be used to improve both the products and the customer experience,” they write. “In particular, information from connected devices offers companies three tremendously important core pieces of contextual information that were previously unavailable: where the products are being used, how they are being used, and which customers are using them at any given time.”

On April 15, 2016, MIT Sloan Management Review hosted a webinar, made possible with sponsorship support from Xively, with Gandhi and Gervet as guest speakers. Gandhi and Gervet are both partners in the global digital transformation practice at the management consulting firm A.T. Kearney.

During the session, Gandhi and Gervet discussed what it means to focus on “practical digital,” what it means to have products that talk, and what it takes to really listen to them. The webinar was moderated by Martha E. Mangelsdorf, editorial director of MIT SMR, and highlighted on Twitter at the hashtag #MITSMRevent. Among Gandhi and Gervet’s key points:

“We still live in a world where products are dumb.”

Gandhi said that this has begun to change: Products that used to be considered mundane devices, such as home washers, dryers, and refrigerators, have begun to be designed to collect information. Still, he added, the knowledge they gather is incomplete. “Most of the information that’s being collected is of a very technical nature that tells you what happened with the product. It ignores the fact that there’s actually a user at the end of it — a customer at the end of it.”

Direct feedback has traditionally been the only way to know what customers want.

To find out how customers used products, or what they were happy with or unhappy with, companies have long relied on surveys, focus groups, and customer feedback. Those sources, Gandhi noted, can be biased, unreliable, slow, and costly.

Social media and analytics have opened the door to new ways of seeing how people are using products and services.

Gandhi said that he and Gervet focus on what he called “practical digital” — looking at all of the interesting technologies that people have access to and honing in on how those technologies are affecting people. As an example, he noted that with the simultaneous rise in mobile, social, and analytical tools, someone can post a photo of his or her sandwich on social media, and companies can then use that post to analyze the customer, the timing of the post, the reaction of friends, and more. Similarly, online reviews have provided a new source of direct feedback that allows companies to dive a little deeper into what people like and don’t like.

With the Cloud, the Internet of Things (IoT), and large-scale data analytics, “we have a world now that is slowly evolving into a place where products are talking,” Gandhi said.

Products are evolving to the point where they can send information back to a company without a consumer having to be an intermediary. As Gandhi and Gervet put it in their MIT SMR article, “a company does not have to wait until a customer calls with a complaint to know that a product connected to the Internet of Things is not working correctly; the product has already communicated the information. With this advance knowledge, the company can report an issue to a customer and seek to address it before it becomes a bigger problem.” They note that a service call could turn into a sales call if new features are available to give the product additional capabilities.

Because of the Internet of Things, a product design shift is underway from being product-centric to experience-centric.

“Experience is now the product,” said Gervet. Experience, he added, is cocreated between the product and the user. “You create your own experience, which is why it matters so much to you,” he said. And good or bad memories are all about the experience.

As an example, consider the kitchen of the future.

Gervet painted a picture of a world where kitchen appliances will work to make a family’s life easier. A kitchen equipped with products that are connected to the IoT will, he said, be able to suggest recipes based on the food you have at hand, take into account preparation time and family schedule, and activate a “smart sink” that will detect dishes left in the sink and clean them when you have left the room. Other smart products that will enhance experiences at home include smart security systems, smart energy and lighting, and smart entertainment.

There is a loyalty opportunity in providing proactive service to customers.

Products that talk to the companies that made them — in turn opening up the opportunity for the companies to reach out to customers — can turn the customer experience on its head. Companies that understand a customer’s usage patterns and detect product problems before the customer does can serve customers in entirely new ways. As Gandhi and Gervet note, “a company can start to prevent product failures before they happen — and, in the process, create more loyal customers.”

There is also a financial opportunity in providing proactive service.

Gandhi and Gervet put the monetization opportunities this way in their MIT SMR article: “Typically today, revenues rise during a new product’s introduction and then flatten. By listening to their products and modifying them when customers start to use them differently (or not at all), a company can introduce upgrades that generate mini-revenue boosts and further extend the life of the product.”

The big cultural challenge: becoming an organization that listens.

To embrace the possibilities that the Internet of Things provides, companies have to commit, culturally, to really hearing what their products are telling them. “Individuals themselves have a hard time listening,” Gandhi said. “And organizations collectively have an even harder time listening.” Part of the challenge is overcoming a confirmation bias, where an organization says, essentially, “We built this product for a particular use.” Acknowledging that products might be used in a different ways, embracing that, and looking for that, are cultural challenges. “Developing those skills has become a critical element,” Gandhi said.

Another critical challenge for companies: filtering out the right data for good customer service and product development.

The volume of big data available for companies to sift through is about to explode now that the Internet of Things is set to provide even more information. “The key is to filter out the context in which the data is being providing and how to use it to provide a better service,” said Gandhi.

Product design work and ways of thinking about product design need to evolve.

Gandhi said that where pricing today is based on initial cost, pricing of the future will be based on calculating the lifetime value of the product. Where design today focuses on physical products, design of the future will be about data-driven products and experience. Where innovation today is about creating new products, innovation of the future will be focused around designing adaptive products that are constantly delighting the customer. And where technology today might be core to a company but an afterthought to the product, technology in the future will be a core part of design. “If you put these four things together, that does represent a structural change,” said Gandhi.

“Human beings hate change, but enterprises hate structural change even more,” Gandhi noted.

He explained that to embrace the potentials, for instance, of the lifetime value of a product means putting less focus on the guaranteed revenue streams that come from new product sales.

A new kind of team will architect the future.

Gervet highlighted three important job titles for the product design process of the future: A product officer, who will focus on designing innovative products, an experience officer, who will focus on designing innovative user experiences, and a data equity officer, who will focus on monetizing data.

To get started, take a cue from “The Sound of Music.”

How should companies begin down the path toward embracing responsive products? “The classic song from ‘The Sound of Music’ says that the place to start is at the beginning,” said Gandhi, “which is how we have tended to look at this. We’ve said, ‘if IoT is not going to die a painful death, similar to some other technologies like RFID [radio-frequency identification], which has gone through some really wonderful highs and horrible lows, you have to really think about where does the information value really bring business benefit.’ You have to look at it from the whole end-to-end value chain perspective to start.”

Internet of Things and Product Design

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With the emergence of smart, connected products, however, this classic model breaks down. On June 9, 2016 James Heppelmann, president and CEO of PTC and co-author of the Harvard Business Review article “How Smart, Connected Products Are Transforming Companies,” discussed the new need for companies to coordinate across product design, cloud operation, service improvement, and customer engagement.

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