The Internet of Things

December 8, 2013

The customer of the industrial age was seen as a recipient of value, a consumer of value. Enterprises also viewed customers through the lens of a fairly uniform set of features, leading to customers being seen as having relatively uniform needs. But even commodity products are always a bundle of use contexts, buying patterns, complementary goods and delivery options. Just because a product is a commodity doesn’t mean that customers can’t be diverse in the ways they use the product.

Different customers use products that are manufactured in the same way, with the same product features, differently. This is why customers are today understood to be active contributors to value creation. Without their part, the value of the product could not exist. “Consumption” really means value creation, not value destruction. You could even claim that the word consumer is misleading. It should not be used any more!

The parties “help each other to help each other” in active interaction. Value creation is a process of interaction. As the goal is to create more value together, a critically important new element is the digital code that is attached to the “thing”, the offering, the product or the service.

The Internet of Things is about creating new software code. It is about two new digital layers for all products: (1) an algorithmic, pedagogical layer and (2) a network layer.

The pedagogical layer teaches the customer to create more value, and accordingly teaches the company to develop. As the customer’s need set is expanded beyond the pre-set features of the offering, the definition of the product changes and becomes more complex. The more complex the product, the more opportunities there are for the company to learn something that will later make a difference.

LaituriWhen a customer teaches a firm what she wants or how she wants it, the customer and the firm are also cooperating on the sale of a product, changing the industrial approach to sales and marketing. The marketing and sales departments used to be the customer’s proxy, with the exclusive role of interpreting changing customer needs. Internet-based business necessarily transforms the marketing function and sales specialists by formally integrating the customer into every part of the organization. The customer of tomorrow interacts with, and should influence, every process.

In the age of the Internet of Things, all products are software products. The value of the code may determine the value potential of a product more than the physical product itself. The effectiveness of an offering is related to how well it packages the learning from past activities and how it increases the users options for value creation through network connections in the present. The offering transfers information via pre-packaged content and through live, emergent presence in the Internet.

A product or a service should be pictured as a node in a network with links to other use cases, supplementary services and complementary features surrounding the product. The more relevant the links are considered to be, the richer the product will become. The task today is to visualize the product in the broadest sense possible.

The second task is to visualize connections, the networks of things. The study of isolated parts offers little help in understanding how connected parts work in combination and what emerges as the result of network connections. Every link and relationship serves as a model for what is possible. What new relational technologies are making possible for manufacturing industries is a much, much richer repertoire than what we were used to in a traditional firm.

The ability to create value in a remarkably more efficient and resource-wise way corresponds to possibilities for interaction with other relevant parts and actors. If interdependent links are few, poor, or constraining, the activity and value potential will be limited.

Amyarta Sen has written that wealth should not be measured by what we have but what we can do. New links and new relationships create new potentials for action. Technology creates new opportunity spaces for more efficient and more sustainable practices.

The Internet of Things creates totally new openings for digitally native, resource-wise practices.

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Thank you Rafael Ramirez

More on the subject: Ford’s OpenXC. Bosch. Kari A. Hintikka (In Finnish)

2 Responses to “The Internet of Things”

  1. Kim Hurtta Says:

    Learning layer is very fundamental part of digitalizing business. I would even extend it with an additional aspect. You mention that customers learn to create more value and provider learn to develop, but also the product itself learns from the use. Also the networking aspect is well presented and it definitely is more than just a remote connection from provider.


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