A red pound sign in a silver coloured metal bucket. Water is leaking out of the bucket from a number of holes in the side, demonstrating our companies are losing money be failing to capture the full value of the digital products they create.

Missed opportunity: Failing to predict new uses for digital products may allow competitors to take advantage

There are now twice as many connected devices as there are people on the planet – and the number is predicted to rise from 21 billion to more than 50 billion within the next decade.

Yet the companies that design these products often fail to extract their full value.

By failing to anticipate new uses for their devices, they are missing out on opportunities to exploit new revenue streams and extend the shelf life of their products.

For example, consumers are repurposing old iPhones as baby monitors, using software designed by a third party. If Apple had foreseen this market, it could have created an app to cater for it.

It could also have included a dedicated camera in a later model, designed accessories such as a wall mount for the phone, or worked with third parties to develop these ideas.

Instead, other companies were left to cash in.

How innovators exploit untapped potential

Another example is the Alexa smart speaker. It was designed by Amazon for entertainment and household management, allowing users to control a range of appliances with voice commands.

However, it has been adapted to serve as a care alarm for elderly people who live alone. Third parties such as LifePod recognised the potential and have capitalised on it, benefiting from value that could have been exploited by Amazon if it had only thought of the idea.

Businesses need to be aware of – and, where possible, anticipate – how consumers use their products, often in ways the developers never intended.

If they fail to do so, third parties (and in some cases direct competitors) will continue to capture the value from these ‘emergent uses’.

Alternatively, that value will remain confined to a small number of users, with the benefits lost to the wider population.

Based on our research, we have created a framework to help companies capture value from the connectable products they create, either directly or by partnering with other organisations. Here are five key steps they can take:

1 Identify the product category

Connectable products – often known as ‘the internet of things’ – tend to fall into three categories.

  • Touchpoint items, which have direct contact with consumers
  • Bridge products, which link digital devices and enable the exchange of data
  • Source devices, which act as repositories for data, service and knowledge

By establishing which category a connectable product primarily sits in, you can identify the most likely route to obtain future value.

It will help you to imagine possible use cases and potential partners that you can work with to develop them.

It’s worth noting, though, that some items can perform different roles at different times.

Peleton bikes, for instance, can be used as a touchpoint by consumers wanting a workout. However, they can also function as a bridge by connecting to third-party apps and content or a source that analyses workout data to provide consulting services for content creators and accessory manufactures.

2 Establish opportunities to create value

Once you have established the product category, it’s easier to work out how potential future value could be derived.

For touchpoints, this could be in developing better customer experiences or new functions that change how people use the products.

If it leads people to change their habits, it can result in higher customer retention, which could be monetised through subscription services or loyalty programmes.

It’s important to ensure bridge products integrate effectively with other digital resources and that extensions are enabled, whereas source products require high levels of efficacy and optimisation.

3 Continuously review product potential

Try to see product design as a continuous process, rather than a one-time occurrence. Regularly assess all design choices to ensure they align with strategic objectives and consider future value.

When you identify a new use case, you may need to redesign elements of the product accordingly.

If customers are using a touchpoint product as a bridge, for instance, improving its ability to integrate and co-ordinate with other digital products will enhance adoption.

One example is Tesla’s touchscreen technology. This has evolved from providing drivers with assistance and entertainment features to a source product, which uses behavioural data to predict maintenance requirements and inform insurance prices.

However, new iterations must work effectively and make life better for consumers or they risk doing more harm than good.

4 Monitor emerging uses

Keep an eye on how the product is used with other digital resources.

For example, Apple AirTags were originally designed to help users track lost items but users have since deployed them to monitor the location of luggage or recover stolen items.

Monitor social media posts, product reviews, and videos to track how customers are using products, and consider asking for product reviews if there is not enough information available.

Artificial intelligence can also help monitor social media. Data from the product itself can also help to monitor how it is being used and predict future needs.

Ecolab was able to implement predictive servicing by collecting operational data from its connected commercial dishwashing systems, which helped it to offer subscription services to clients.

If new use cases emerge, evaluate whether the product can adapt to ensure these work effectively and explore opportunities to extract further value from consumers or third parties.

Monitoring the digital landscape can also help to identify the potential for new products, or how existing ones could evolve to meet consumer needs, as well as assessing when products or services are no longer being used and should be withdrawn.

5 Build wider networks

Forging partnerships with third-party developers and other digital organisations is a useful way to explore the potential for future value.

This can help improve the products and services you offer to consumers and ensure third parties do not extract the full value themselves.

This might mean collaborating with other firms to develop ecosystems that encourage innovation.

Adopting open standards and protocols can encourage this, while designing modular products can ensure these can integrate with other devices and services, making it easier to expand networks.

In doing so, businesses can safeguard their own position by making themselves and their products indispensable in a particular role, be that as a touchpoint, bridge, or source.

Further reading:

How to overcome fear of failure and foster innovation

Can diverse workplaces increase innovation?

Four strategies to drive innovation in your organisation

How can established car firms catch up with BYD on electric vehicles?

 

Gongtai Wang is Associate Professor in the Information Systems Management and Analytics Group. He teaches Digital Frontiers on the Executive MBA, Executive MBA (London), Global Online MBA, and Global Online MBA (London).

He also teaches Fintech for Consumer Financial Services on the MSc Business Analytics and Artificial Intelligence and the MSc Financial Technology, Fintech in Practice on the MSc Financial Technology, and Digital Finance, Blockchain and Cryptocurrencies on the MSc Management of Information Systems and Digital Innovation.

Susanne Beck is Assistant Professor in the Information Systems Management and Analytics Group. She teaches Digital Transformation and Digital Frontiers on the Executive MBA, Executive MBA (London), Global Online MBA, and Global Online MBA (London), and Digital Transformation on the Part Time MBA (London Accelerator).

She also teaches Digital Business Services on the MSc Digital and AI Leadership, MSc International Business, MSc Management, MSc Business with Consulting, MSc Business with Marketing, MSc Marketing and Strategy, and MSc Business with Operations Management.

Learn to use AI in your organisation to build new capabilities and create competitive advantage with the two-day Executive Education programme AI for Business Innovation at WBS at The Shard.

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