Step one in your roadmap for attracting the connected customer is to evaluate how smartphones and cloud computing will affect your product portfolio. Are they friend or foe? That is, will they disrupt your company’s value proposition, or strengthen it? To make the most of the connected customer, you must first know your product.
For some industries, smartphones and cloud computing have been downright destructive. The smartphone is a profoundly powerful computer with multiple sensors, a flexible and intuitive user interface, and an always-on Internet connection. Point-and-shoot cameras, portable GPS devices, pedometers, flashlights, even the carpenter’s level; all have been replaced by $2 apps that can be downloaded anywhere, anytime. Meanwhile, cloud computing has enabled early movers to offer superior services with higher profit margins, all the while drastically undercutting competitors. At first glance, Netflix looks like a simple pointcaster, delivering video on demand directly to households. Yet its much more than that. Netflix has built powerful prediction algorithms to assist their customers in finding content that appeals to them, making consumption frictionless. Companies that are honest with themselves in recognizing the disruptive potentials of smartphones and cloud computing will be the best prepared to take advantage of future opportunities, or at the very least, handle disruptions gracefully. Ask yourself: “can smartphones and/or cloud computing disrupt our product value proposition? If so, how?”
For most industries, though, smartphones and cloud computing will be less of a threat and more of an opportunity. For example, many consumer products today are crippled by weak human interfaces. The lack of a clean interface may save product cost, but usually ends up costing companies more in higher customer support calls and product returns. Leveraging the smartphone screen and interface is an obvious opportunity for solving this problem. Take the programmable thermostat, which is the poster child for crummy user interfaces. The idea of a programmable thermostat is simple enough: create an automated schedule for heating and cooling your home when you are present, and for conserving energy when you are away. But in practice, according to Lawrence Berkeley Labs 50% of programmable thermostats in 2011 were not using a schedule because of complicated push button interfaces, and 20% did not read the correct time. Now, a number of companies have abstracted the user interface away from the physical thermostat, pushing control to smartphone apps. Nest Labs is the most popular example. A lesser known company from Germany named Tado has ditched the physical interface altogether, shipping their thermostat as a white box with no display and no buttons. Not only does pushing the interface to a smartphone improve user experience, it is also a sound business decision, as the most expensive component of thermostats is by far the display. It won’t be long before other classic products with poor interfaces (such as sprinkler controllers, home security systems, perhaps even microwave ovens) attach themselves themselves to a smartphone app.
An even more profound opportunity to save costs and improve user experience lies in abstracting hardware and software out of physical devices and into the cloud. For example, the most expensive part of a modern security system is the control panel, which typically ranges from $200 to $400. Thanks to the unlimited storage and computational resources available from cloud computing, there is no reason why a security company could not remove the physical control panel altogether, replacing it with a “virtualized” security panel in the cloud which communicates with the in-home wireless security sensors. Removing $200 to $400 from the cost of product installation has huge profitability implications for security companies, and would enable them to break even on a customer in much less time than the industry norm of ten to twelve months today.
In short, to evaluate what kind of impact smartphone apps and cloud computing can have on your product, start by asking yourself these three questions:
By Kayce Basques