Michael E. Porter is a University Professor at Harvard, based at Harvard Business School in Boston. He is a co-author, with Robert S. Kaplan, of How to Solve the Cost Crisis in Health Care. In this recent interview with HBR Ascend, Michael Porter spoke about his work on smart connected products and how companies and individuals will need to change how they work and what skills they need to train in to work with these products. He also discussed what young professionals in India will need to learn to cope with these changes.
Your latest work is on smart, connected products and how companies will need to change to create them. What skills and expertise are companies going to need most as more products become dependent on software, data, and cloud computing?
A typical first reaction someone has when thinking about how smart, connected products will impact companies is that the nature of IT and R&D is shifting. However, the impact is much broader. Smart, connected products will impact every industry, including service industries, as well as every part of the value chain.
To understand how smart, connected products will impact companies, it’s critical to understand some key aspects of this phenomenon. Products components and technology are fundamentally changing, which does significantly affect the manufacturing process and strategy choices for manufacturers. Products now need an entirely new technology stack, including things like sensors, computer processors, a mobile network, and an applications platform, that many companies have no experience in. So companies will need to find the right suppliers and partners, hire and train people with these skills, and even adapt their organizational structure.
What is ultimately the biggest change driver across the value chain is the real-time data that smart, connected products generate and their new capabilities. It used to be that we sold a product and we didn’t know what happened after it left the sales floor. But now, with this data and increasingly sophisticated analytics, we know everything about the product—when it’s in operation, how well it’s operating, why it malfunctions. You can actually control, repair, update, or modify products, remotely and continuously. That changes the way companies can design, market, sell, and service products. Pretty much every activity in the value chain can be reconceived in some way.
Everyone needs to understand this. You can read more about how industry competition is changing and the implications for companies in the two foundational articles on this topic that I wrote with my co-author Jim Heppelmann (How Smart, Connected Products are Transforming Competition, and How Smart, Connected Products are Transforming Companies), but there is also much other good work being done on this topic. So much of being a good leader is being a good student of management and business and technology, and building yourself so that you have a holistic awareness of what’s happening around you.
You mentioned that this will impact how companies organize. This means that there will be a need for increased collaboration between various departments, people, and various functions.
Right. Traditionally companies have been relatively siloed—by function, business unit, and geography. There is collaboration across silos, but it’s idiosyncratic. In a smart, connected world, there is a need for continuous collaboration and coordination across multiple functions.
New kinds of organizational units are being created in many cases. For example, a “customer success management" unit includes marketing, sales, service, and support teams that monitor product data to understand how it is functioning and being used out in the field, and collectively take responsibility for making sure the customers are getting the value of the product. This function has become more and more critical, especially as more products are being sold as a service.
Companies are still learning how to do this, but overall, I do think we’re seeing a historic shift in the basic core organizational model of a manufacturing company, in particular.
Any young professional who wants to play in this space needs to be a student of these changing models, to read articles, and talk to other business people about their company. Ask “what are you doing about this"? This is an area where there isn’t any established tool kit. Everyone is learning.
What do young professionals in need to understand about these changes?
You don’t have to be the engineer, you don’t have to write the software, but you need to develop an understanding of what this set of technologies is, and what they mean for your industry, for your company, and for your chosen function.
There was a time when everyone had to learn how to use Excel. I think now everybody must understand what sensors are all about, what data analytics is all about, what a smart connected product looks like, and what it can do. Any good manager has to have a certain threshold of knowledge, even if you’re currently in a job or an industry where it is not yet a big deal. There’s not a single industry in which digital transformation won’t be relevant.
For Indian professionals, in many ways you are in a good position, for it (India) has a good foundation in IT, which is one of the potential competitive advantages of the country. This is an opportunity for to race ahead of a lot of other countries that have less capability in the IT space.
Any suggestions on how individuals can prepare themselves to take advantage of those opportunities?
Well, this is not my field, so I don’t have any revolutionary ideas here. But I would say that the job of a leader (potential, young, or old), is just to keep learning. Your job isn’t just to do the job. Your job is also to actually learn how you might want to do your job differently, and to maintain a basic curiosity.
We’re in a phase now where younger people can have a very important influence in their organization by being the hungry ones, by soaking up everything they can learn about this.
Younger professionals have grown up with digital, you’ve grown up with smartphones, so you have a better intuition of how this stuff works.
They have a set of skills which can be hard for people who have been in the business world for twenty-five years to really grasp and feel comfortable with. So, this has the potential to be a golden time for younger professionals to advance faster within a company than they otherwise would.
This article was first published on www.hbrascend.in. HBR Ascend is a digital learning companion for graduating students and millennials in India.