From Product to Experience: The Emergence of High -Tech Manufacturing
By Sedar LaBarre, VP, Booz Allen Hamilton
Apple is selling a brand experience. Customers are welcomed into the Apple community, which makes them feel connected, innovative, and like they’re living a better life. Apple didn't decide to compete with phone developers or watchmakers; they understood phones and watches as another platform—another opportunity—for the evolving Apple experience. The company remains focused on protecting and honing that brand, and they are rewarded by customer loyalty that has made them the most valuable business in the world.
It isn't just consumer electronics. The pace and scale of change across high-tech manufacturing is a once-in-a-century transformation. The resulting convergence and disruption— affecting every corner of the manufacturing sector—is profoundly, permanently altering the industrial landscape.
Evolution is not new to business leaders. We know that those who remain loyal to the status quo are left behind. But this is different.
The boundaries that once separated industries are not simply blurring; they are gone.
CONVERGENCE AND DISRUPTION
Industries once neatly segmented as automotive, industrial manufacturing, and consumer electronics are converging. No longer can any one of these industries function in isolation: They and their products are inextricably interdependent—changing both customer expectations and the competitive landscape.
Twenty years ago, phones looked nothing like car dashboards. Now, the interface and functionality are nearly identical. Ten years ago, computers didn't have Wi-Fi. Today, even thermostats are connected. "Wearable" technology was previously limited to a wrist watch and a pedometer, but cutting-edge athletic wear now has embedded sensors to track movement and health. Factories once required periodic floor inspections. Now, plant managers can replace clipboards with tablets and smartphones to view real-time production data from anywhere.
High-tech manufacturing has evolved into an interconnected super-industry. And what the industry provides to customers— both individual consumers and businesses—has changed.
Although manufacturing is still about building products, the interaction with users through those products is different and requires new ways of thinking about business. Customers are no longer buying a widget; they're looking for experiences delivered through product-based services.
Success will come to those who capture customer imaginations and become integrated into their daily lives
Products that were once standalone and mechanical are now enhanced with connectivity and embedded software, which redefines their function—and their potential. Today’s products don't simply respond to inputs; they anticipate customer needs.
This radical shift unlocks the full potential of products. High-tech manufacturing products may perform the same function as their traditional counterparts, but they now also provide a conduit for revenue-generating services that completely changes the competitive landscape. That means manufacturers are now competing in the data marketplace. Finding opportunities to benefit from data is the easy part. Companies like Google, Amazon, and AT&T dream up applications to benefit from data— selling to advertisers, selling to the energy sector, selling new paid services and subscriptions. Gaining access to this data, however, requires a trusted relationship with customers who are willing to give up their data in exchange for a customized experience, discounted product, or other benefit.
To compete in this new landscape, manufacturers must embrace that their business is no longer about products: It’s about people. And success in this converging world requires a purposeful, deliberate—even obsessive—focus on the customer experience.
MANUFACTURING A BRAND EXPERIENCE
High-tech manufacturing must now be about much more than designing, sourcing, and selling products. It must start with a fundamental definition of a brand and the value it brings to customers. That’s why Ford's CEO now refers to his organization as a mobility company, not an auto manufacturer. Setting this vision, internally and externally, sends a message to customers about the relationship companies intend to have—a relationship centered on authenticity and trust. This change will involve a fundamental paradigm shift for many, but the challenges manufacturers face as part of the change can be met with equal or greater opportunity in three key areas:
Customer expectations will be greater and so will their loyalty
Customer relationships are now more intimate, creating partnerships inside of homes and businesses. In tandem, scrutiny has increased. Quality demands now include expectations of privacy and security. But this also creates an opportunity for deeper trust and, with it, brand loyalty. Customers who can fully integrate “safe” products and services into their lives will provide an evergreen revenue stream for high-tech manufacturers.
Competition for talent will increase and the right people will drive differentiation
The availability of creative thinkers with technical acumen is scarce. But forward-looking leaders realize that people who understand the product, the brand, and the customer are extremely valuable. So the race is on among high-tech manufacturers to compete for this small set of available talent. Companies that cultivate employees' imaginations and demonstrate an unwavering commitment to development will be rewarded by attracting and retaining the right minds to win in the market.
A new level of collaboration will be required and will open a new type of growth
Today’s products are most valuable when they integrate with other products, delivering a seamless customer experience— regardless of physical platform. This integration ¬requires a new type of partnership among manufacturers and software developers, telecommunications providers—even competitors. Manufacturers that form unexpected alliances across old industrial boundaries to deliver exciting new experiences for customers can reap the full benefits of the connected society.
In time, this new competitive landscape will lead to consolidation—of companies and whole industries. It’s happening already with acquisitions, like Google’s recent purchase of Nest, as well as new partnerships, such as Nokia’s relationship with Microsoft. Not every organization will thrive as high-tech manufacturing evolves. Success will come to those who capture customer imaginations and become integrated into their daily lives. Those that adapt and proactively shape demand have the opportunity to design the future course— not only for their enterprise but for entire segments of the market.