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Smart Products: New Rules for the Industry

Physical Components

These are the mechanical or electronic elements of the product.

Intelligent Components

Hardware and software provide the core for the product’s virtual identity. This includes, for example, sensors/ actuators, microprocessors and data storage devices. The software is generally integrated into the operating system. Access is made possible via a user interface like a dashboard or app.

by Hans-Georg Scheibe, Managing Partner, ROI Management Consulting AG


In the not too distant future there is likely to be a global or national competition for the title of “The Most Intelligent Product”. And here is a prediction about the winner – it will not be a smartphone, a car and definitely not a refrigerator. In all likelihood it will be an industrial product like an agricultural machine, a transport robot or a truck that can interact thanks to swarm intelligence. There are two simple reasons for this. First, “intelligence” is not simply created by embedding microprocessors and sensors with software, connectivity and a link to cloud-based management systems. These are just the prerequisites. A product or device only becomes really smart when it interacts autonomously with its environment. Thanks to sensor technology, many industrial applications can already do this better than smartphones or wearables, which only respond to their user’s input.

Second, the market for intelligent products is already growing most strongly in the industry. More than 1 in 2 IoT pioneers polled in a Cognizant/EIU study (1) indicated that they are developing smart products in an industrial context. Indeed, a smart factory provides the ideal environment for intelligent products as almost all its components can be interconnected. It is not only machinery,transport vehicles and robots that can be smart products here, but also complete production lines and buildings, which, for example, use sensors to record which workplaces are occupied and regulate lighting, heating and security systems accordingly. However, the most successful use of smart products does not just depend on an optimum technological infrastructure. Manufacturing companies wishing to sustainably change their value creation process through the use of smart products and transform them successfully into digital, platform-based business models should consider three fundamental principles:


1. Be open to change. What are the chances of survival for core products if they are offered without intelligence or smart components and utilization scenarios? Might customers already have requirements that could be met with a corresponding enhancement? Bestpractice companies use smart products to design monitoring, management, optimization and automation on a continuous basis. In the optimum case, a product will fulfill several functions, or improve other working processes through information. One good example from the smart factory is condition monitoring, i.e. the constant monitoring of the status of plant or machinery using sensors and IT applications. Shift leaders or mechanics can receive status messages in real time about performance, or warnings when an outage is about to occur, on a tablet PC. This not only makes preventive and efficient maintenance possible, but also allows continuous improvement in resource scheduling, machinery and even in the design of the factory based on an analysis of the data collected.

2. Start with small steps. A smart product like a shift-planning app (see interview on page 6) may only change a small part of the production process, but it is ideally suited as a test bed for larger projects. If a concrete product like a machine is involved as the starting point, it should always be assigned to its own virtual identity, for example in a cloud application, that contains the interaction details of the product. This information can in turn be gradually integrated into open systems architectures and shared with third-party providers, customers or partners for further product enhancements and variants.

3. Extend your product ecosystem. Billions of objects and services will be integrated into the IoT/IIoT in the coming years. It is therefore highly likely that customers, partners and suppliers are already working on smart products, or even already have them. It is essential for businesses to be a part of this network. The central challenge in networking beyond the boundaries of a factory/company consists in creating additional synergetic customer benefit using new models of cooperation and application scenarios and, at the same time, optimizing internal processes and cost structures. It is thus possible to reduce e.g. development costs and time to market when shared “data labs” are established with customers and partners as experimental fields for enhancing products and business models.

In particular, manufacturing companies should not put off the development of smart products to the near or far future, but instead start the process today in order to transform rigid production lines into modular and efficient manufacturing systems. It is worth entering the global competition for the most intelligent product for this purpose alone.


(1) Cognizant/EIU: The Rise of the Smart Product Economy, 2015

Product Cloud

The functions of a smart product can be integrated in the product or the associated cloud. This makes e.g. software for intelligent applications or information from big data product database systems available.

Networking Components

Interfaces, antennas and software protocols allow a fixed or wireless connection to the product during installation, during the work process or when it is with the customer.


Anna Reitinger

Anna Reitinger

Head of Marketing, ROI-EFESO
Tel.: +49 89 1215 90-0

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