Using Data by Design: Digital Reinvention in Electronics
Excerpted from IBM Executive Report: Electronics
It’s well known that electronics have transformed the way humans interact, make and buy things, deliver medical care, bank and entertain themselves. A vast majority of today’s communications and interactions leverage electronics. Increasingly, most of these interactions are digital, enabling virtually every industry to create new, engaging approaches to customer and user experience.
Miniaturization and mobility dramatically changed the world’s perception of what a single handheld device could do. Then, hardware devices became software centric, allowing more capabilities to be digitally accessible. Finally, software-as-a-service brought even greater potential, delivered at the touch of a button and rapidly executed in the cloud. Across industries, companies big and small had the potential for interactions that were at once digital, data rich and dialogue driven.
While electronics manufacturers pursue relentless reinvention for the marketplace, they must
do the same for their organizations or risk the same marginalization as cameras and desktop
computers: The digital camera market fell from 148 million units sold in 2011 to 49 million units
in 2016. In 2017, PC sales fell below 63 million for the first time in a decade.
A pervasive and exponential growth in network and computing power has contributed to a dramatic decrease in the cost of storing data. And today cloud computing delivers increased
processing speed and functionality. These technology forces enable next-generation approaches such as IoT and artificial intelligence (AI) to put powerful insights in consumers’ hands, on countertops and in plant machinery. Intelligent machines – small and large – are reshaping the world and its capabilities.
Powering next-gen electronics companies
The global electronics industry is the cornerstone of the digital economy and the Internet of Things (IoT). Electronic devices act as conduits for users’ digital experiences, which are now seamlessly enabled and updated in the cloud. The industry’s digital device success has also introduced its latest challenge: going beyond the device. Leveraging data to drive insights is key to delivering greater value. Doing so requires electronics firms to flawlessly integrate hardware, software, services and data while learning from and adapting to users….
However, the sheer volume of data has made it hard to separate signal from noise, hindering the discovery of insights and innovation. Complicating matters, extracting the optimum value from data needs to occur in “real time” as data is increasingly perishable. Indeed, some data has a freshness date: Knowing customers’ purchase intent while they’re shopping or detecting a faulty part before something goes wrong enables timely decisions and action. So, technology provides the opportunity for organizations to derive more value from data, but electronics executives report that their ability to capitalize on it remains elusive. It’s time for electronics firms to go beyond devices, software or technology and reinvent themselves.
The impact of convergence: Fuzzy boundaries
Innovative products that enable new experiences provide opportunities for new business models. With some electronics firms realizing massive growth over the past 40 years, the innovators have successfully entered multiple adjacent or even distant industries, building new relationships and ecosystems. For example, many semiconductor and microprocessor companies have venture capital arms watching the market and assisting fledgling entrants. Qualcomm Ventures has investments in more than 120 portfolio companies along the electronics continuum, with particularly strong focus in virtual reality, IoT, drones, automotive, cloud and mobile health.
And with Samsung Bioepis, Samsung has entered pharmaceuticals, advancing an extensive pipeline of biosimilar candidates through process innovation. Simultaneously, the last two decades have seen extraordinary growth of media industry super-platform providers with data-rich beachheads in advertising or commerce. During this decade, they began providing new services and offerings. By providing consumers free content-rich connected platforms, these providers can amass more customer data in days than some electronics firms could collect in a year. They also put it to novel uses, answering questions and solving problems across their companies. Then, they decided to go further.
Multiple digital platform and software players have become electronics manufacturers and content providers. Amazon, Google, Facebook and Microsoft have all joined Apple in producing devices and offering content. What’s more, they’re continuing to push the boundaries of interactions, with voice and gesture recognition, and augmented reality/virtual reality features. These companies are extending their brand ethos, with electronics powering their interactions. They have never taken their eyes off the data and business models that drive their knowledge and fund their operations. In fact, they’ve continuously pushed forward in designing superlative experiences.
Electronics industry executives are acutely aware of these changes. We recently surveyed more than 400 global electronics executives about changing economic conditions and found that approximately three-quarters of them believe external market factors as well as technology will dramatically influence their businesses in the next 24 to 36 months. Additionally, 72 percent told us that the boundaries between electronics and other industries are blurring. Similarly, 73 percent believe that the industry is experiencing the impact of incumbents delivering new forms of innovation. So, it’s not a surprise that 41 percent are innovating or launching new business models to respond – up from just 17 percent in the prior two to three years.
While threats and new entrants are reshaping existing markets, new services and business models offer opportunities for expansion. Digital innovators are identifying these opportunities in traditional and emerging electronics markets, where they successfully blend equipment, software, services and content into powerful packages.
In addition, some industry executives are embracing new categories and routes to market. For example, Panasonic spent the last decade moving away from consumer electronics and closer to B2B and B2B2C markets, becoming the exclusive battery cell supplier for Tesla’s Model 3 and reinventing itself as a provider of advanced auto parts.10 The company is also creating next-generation LCD displays – not for use in television sets but for medical and business display applications. Without the pressure on lower-margin consumer products, the company can pursue longer-term goals around its autonomous driving system launch in 2022.The Panasonic story is indicative of a new operating environment that is becoming essential to electronics leaders’ long-term success.