The
evolution of products into intelligent, connected devices is revolutionizing
business. In a November 2014 article, “How Smart, Connected Products Are
Transforming Competition,” Harvard Business School professor Michael Porter and
PTC president and CEO James Heppelmann looked at how this shift is changing the
structure of industries and forcing firms to rethink their strategies. In this
companion article, the authors look at the effects inside firms, examining the
impact that smart, connected products have on operations and organizational
structure. The new capabilities and vast quantities of data that smart,
connected products offer are redefining the activities of the core functions of
companies—sometimes radically. As software and cloud-based operating systems
become integral to products, new product-development principles emerge,
manufacturing components and processes change, and IT security becomes the job
of every function. Companies need different skills and expertise, which creates
new imperatives for HR. In the marketing function, the ability to track a
product’s condition and use shifts the focus to maximizing the product’s value
to the customer over time. Customer relationships become continuous and
open-ended, service becomes more efficient and proactive, and new business
models are enabled. The rich data on location and environment that products
provide take logistics to a whole new level. Smart, connected products also
alter interactions between functions, in ways that hold major implications for
organizational structure. Intense, ongoing coordination becomes necessary
across multiple functions, including design, operations, sales, service, and
IT. Functional roles overlap and blur. Entirely new functions—unified data
organizations, dev-ops, and customer success management—begin to emerge. What
is under way is the most substantial change in the manufacturing firm since the
Second Industrial Revolution, and the effects are spreading to other
industries, like services, as well. [ABSTRACT FROM AUTHOR]