Products are becoming increasingly intelligent and networked, i.e. combining AI and IoT in the form of “AIoT”. They become Smart Connected Products. This development is driven by the markets and opens up attractive prospects for the companies offering it. But: The change to a successful IoT company is by no means trivial. Smart Connected Products are highly complex and present new organizational challenges. How can companies adapt to this and successfully master the change?
Artificial intelligence and the Internet of Things are two technological approaches that have become indispensable in our lives. The combination of these two approaches – AIoT – can be observed in the form of intelligent networked products and solutions. This is referred to as “Smart Connected Products”: Networked trains whose tachographs provide data on driving behavior and fuel consumption so that train drivers receive tips for energy-saving driving styles. Positioning aids in the networked CNC milling machine that uses AI technology to ensure that workers on the device do not have to reposition components laboriously. Networked electricity meters combine with data from other sources (weather data, event data, etc.)
AI and IoT are also on the rise in cities in the so called Smart Cities. For example, the city of Vienna is pursuing three significant goals: resources, innovation and quality of life. Networked sensor technology is used to make buildings more energy-efficient. Intelligent traffic lights make it possible to recognize approaching pedestrians early and thus increase safety. A digital twin of the city that is created by surveying the public space should allow events to be approved more quickly and “street furniture” from bicycle racks to kiosks. With the spread of radio standards such as Lo-Ra-WAN, NB-IoT and 5G, the vision of the intelligent village is now also moving within reach. Not far from Vienna, IoT applications in agriculture, infrastructure and tourism are being tested in Lower Austria as part of the Data-skop research project.
External drivers and incredible potential are leading companies to implement IoT in Smart Connected Products
What motivates companies to launch products based on AIoT? Why are these companies changing their business model? The basic answer to this is: To secure and expand your competitiveness. A more precise justification for this can be answered using three exogenous drivers that can be observed on the market: Increasing competitive pressure, changing customer needs and ongoing technological development.
Increasing Competitive Pressure: Due to globalization, which has been growing for a long time, new competitors (e.g. from Asia) are increasingly opening up existing markets, which results in increasing price pressure and decreasing margins. This can be observed above all in the material goods business. On the other hand, in the service business, growing margins can be seen, which means that service-based business models/offers are becoming increasingly attractive for all types of companies.
Changing Customer Needs: Customers no longer buy off the shelf . About the solution expected by the customer, the demand is becoming increasingly customer-specific and comprehensive. Figuratively speaking, customers want the clean, correctly placed drill hole and not the drill bit. This requires more complex products/solutions, ensuring overall integration into the respective system. In addition, the customer no longer wants to make advance payments and make large one-off payments in advance. As a result, there is an increasing demand for flexible and predictable/service-based payment models (cf. Spotify, Netflix, etc., in the B2C market).
Technological Development: What used to be time-consuming and complex or could only be anchored in the product architecture with unique internal know-how is now much more accessible: components for networking, sensors, actuators or computing components. Today, these things are much cheaper to obtain, easier to integrate into existing systems and can be mastered by a growing number of available experts. Applications in analytics and AI are also available on the market in a scalable form (e.g. on cloud-based platforms) and can be used at short notice.
With Smart Connected Products, on the other hand, there is the challenge that the value chain and the product architecture components required for it change as a result of the combination of AI and IoT: In addition to the hardware components, there are also connectivity components, messaging/bus systems, and IoT platforms, analytics/AI components, user applications and additional service and integration services are required.