Smart Products

Since digital technologies made their way into our lives, products have been changed as well. For a long time, consumers have been offered new types of products enhanced with several technologies like connectivity and artificial intelligence (AI) incorporated. These new sorts of products are often named after their capabilities: “smart product”, “digitized product” or in regards to the technology used: “IoT Product”, “connected product” or “smart connected product”. (1, 2) Well-known examples of smart products are Amazon’s Alexa, the digital voice assistant and (near future’s) fully autonomous smart automobiles.

The conflation of terms as well as the variety of technologies incorporated, differing capabilities and features offered across a diverse set of products addressing several needs in distinct verticals, can be confusing. While there is no restriction to use any term and they might be used interchangeably, it can also make a difference in the context they are used.

It is such a huge and diverse market that some components are addressed as smart products (or namely IoT products), even though they are building blocks of an end-to-end solution that cannot provide value on their own and are just components of a smart product. In fact, a smart product is a system with all of its components as an end-to-end offering. Moreover, these systems interact and connect with their surroundings, users and other smart product systems to offer ongoing (smart) services. There is a duality of tangible products and services in a smart context. One cannot be without the other and (smart) services have become an integral part of products. (3)

Another outstanding characteristic of these smart products is the prolonged and evolved product lifetimes as a result of new business models, use and operational needs from a seller's point of view due to their connected nature. (4,5) A characteristic not often mentioned in terms of development but experienced as continuous enhancement, subscriptions, updates, and 7/24 availability of services from a user point of view.

The global market size of smart products is often expressed in terms of vertical markets. A collective global market size is often found under the term “global IoT market”. Statista’s latest update as of September 2023 models the growth in terms of revenues across the global IoT market around 2,23 billion USD. (6)

Since, the market size is so huge, smart products get much attention but are accompanied by lots of confusion in defining and modeling smart products. The confusion in some cases leads to confusion on the company and product’s strategy, positioning, innovation and marketing activities, too. To address this problem, there are already some models proposed to define a smart product and its capabilities that can be used as a guide for companies.

Why such models are needed and useful? The answer is hidden in the variety and diversity of available smart products and components on the markets as explained above. Smart product cases can include a diverse array of technologies. They can be hyper-complex offerings based on each component's complexity level, too. Besides, the services aspect also needs attention.

Among the models proposed, I personally like, the three outstanding models: The first one is from 2014 by prominent authors and is accessible in a well-known management journal; e.g., HBR in this link. This article explains the architecture and proposes a technology stack useful in several contexts, especially from a company’s point of view. The services surrounding the product are defined as new capabilities and used as a way to explore exciting new business models.The second and third ones are from academia and for the ones who like reading scientific articles, can be found in the following links from prominent peer-reviewed journals: “Smart Products: Conceptual Review, Synthesis, and Research Directions*” and “Are products striking back? The rise of smart products in business markets”. They both propose more updated and significantly useful models that can be used as a foundation in a business context, especially during product innovation and development phases. No need to mention assessing the capabilities required by a company to develop smart products.

While it is worth delving into these models individually to have a deep understanding of smart products, I personally believe in keeping a more comprehensive and conceptual view of a smart product, shown below, as composed of several layers embedded in terms of the available technologies involved, the surrounding services, and the environment in which the smart product operates.

Figure I: Conceptual Smart Product Model

Aligned with this model, defining “smart product“ as an end-to-end offering comprised of enabling technologies and surrounding services with continuous operational needs addresses many issues from a product management perspective. Visualizing smart products in their entirety using this model, can facilitate many activities for companies and product management professionals. What each layer refers to, the essentiality and more information on each layer is coming in the next articles.

References:

1) Pardo, C., Ivens, B.S. and Pagani, M. (2020): Are products striking back? The rise of smart products in business markets. Industrial Marketing Management, 90, pp.205-220.

2) Raff, S., Wentzel, D. and Obwegeser, N. (2020): Smart products: conceptual review, synthesis, and research directions. Journal of Product Innovation Management, 37(5), pp.379-404.

3) Raddats, C., Baines, T., Burton, J., Story, V.M. and Zolkiewski, J. (2016): Motivations for servitization: the impact of product complexity. International Journal of Operations & Production Management, 36(5), pp.572-591.

4) Beverungen, D., Müller, O., Matzner, M., Mendling, J. and Vom Brocke, J. (2019): Conceptualizing smart service systems. Electronic Markets, 29, pp.7-18.

5) Dreyer, S., Olivotti, D., Lebek, B. and Breitner, M.H. (2019): Focusing the customer through smart services: a literature review. Electronic Markets, 29, pp.55-78.

6) Statista, 2023: https://www.statista.com/outlook/tmo/internet-of-things/worldwide#revenue