The most radical effects of technological innovation are nearly always associated with new business models, yet this is often the part of innovation we understand least well.
Our evidence suggests that smart technology creates new value through novel business models that are capable of unleashing meteoric efficiency improvements and allowing for stronger and more meaningful relationships. Business models in the era of smart are characterised by the following five interrelated key features.
1. Platforms and networks
Because the internet of things and machine-to-machine communication technologies will underpin hyper-connectivity that is the crux of the smart society, business models that harness the power of platforms and networks will be increasingly common.
Platforms create multi-sided networks, where consumers, businesses and government interact in smarter ways to create value.[1] This will have profound implications on the way we live, work and play.
For example, the smart home augmented by the Hub of All Things platform effectively creates smart households. Businesses use the HAT platform to provide more personalised and tailored products and services to households.
Armed with real-time information and being in control of our personal data, households will be able to make better everyday decisions, including spending on food and non-food items, energy usage, choice of diet and amount of exercise to be undertaken. Social media that are already so pervasive in our society today are essentially platform-based business models that enable the creation and spread of networks.
2. Big data
If platforms and networks are the engine of smart applications, big data is the fuel that powers that engine. Business models where platforms are an integral part harness the potential of huge amounts of data to deliver products and services that improve our quality of life.
Autonomous vehicles combine high volumes of real-time structured and unstructured data – 1GB per second, or 2 petabytes a year [2] – and predictive algorithms through Complex Event Processing (CEP) to afford us the convenience of getting around safely without actually driving, [3] an undoubtedly welcome assistance in heavy rush hour traffic.
Similarly, the HAT combines massive amounts of our personal data collected by smart sensors, and layers them with context through triangulation, to help us make better decisions and obtain products and services that better meet our needs.
3. Deep personalisation and mass customisation
Digital technologies enable fresh approaches to the manufacturing, design and delivery of almost everything, hence allowing products and services to embed digital interfaces for personalisation and connectivity.
Smart defies paradox – the emergence of novel business models that allow the masses to custom-purchase by deeply personalising their acquisition means products and services can better fit our lives.24
Deeper personalisation and mass customisation generate new ways for individuals to receive different experiences from a common platform, whether it be the use of 3D printing to create individually tailored shoes, or using an algorithm to tailor the experience of a video-on-demand service such as Netflix. Our smartphones are arguably the most deeply personalised device we own.
High-end hotels similarly offer highly tailored hospitality down to the minute details. But in the era of smart, this trend becomes the norm, and is accessible to the masses, as it will commonly extend to personalised healthcare services, energy tariffs, financial products and even dining and leisure experiences
4. Horizontalisation
Thanks to connected devices and smart platforms, business models of the future are also able to increasingly transcend verticals and provide a previously unimaginable array of services on a single hub. The smartphone is the catalyst of this revolution.
While we previously needed to purchase and carry the camera, alarm clock, calculator, DVD player, laptop, mp3 player, maps, satnav and notepads as separate items, they all now form a neat, and easily obtainable, collection in our smartphone. There is no doubting the convenience and efficiency gains we enjoy from a one-stop shop.
The era of smart living will usher in many more of such hubs. For instance, our smart TVs and tablets, too, can be the 'control centre' of the HAT at home, enabling us to adjust everything from radiator levels and lighting to washing machine and dishwasher timers.
Perhaps even more engaging for the family is the role of the smart TV in further enhancing our omnichannel shopping experience.
Not only can we use the smart TV for online shopping similar to the way we currently do so on the PC or mobile devices, we are also able to identify a dress seen worn by our favourite actress and instantly discover where we can purchase it, place an order and arrange for collection – all these while sharing the joy of discovery, and perhaps even some banter with the family.
Smart TVs with smart sensors, or those connected to other smart devices, can also perform a quick scan of our iris, or read data from a diagnostic patch applied on our wrist, and produce basic diagnoses of our health condition every day, and thereafter provide a range of lifestyle options we can choose from.
5. Co-creation and democratisation of production
Our role within production networks and value chains in a smart society is radically transformed. No longer are we passive buyers of goods and services that firms roll off the production line and market to us. Because of the boundless possibilities enabled by a combination of connected devices, big data, digital technologies and smart platforms, we are able to actively participate in the production process and engage more closely throughout the value chain. The era of smart is the era of co-creation.
Through the HAT, for example, we can co-create products and services that fit our needs and wants almost perfectly by supplying our context-rich personal data to businesses of choice and public services.
The smart society will also experience a democratisation of production as a result of deep personalisation and co-creation that is enabled by 3D printing. Smart additive layer manufacturing technologies have the potential to place production choices much more in the hands of individuals, resulting in disruption to traditional supply chains in similar vein to what happened in the music industry. The individual will enjoy an unprecedented level of autonomy and choice.
- Working on the Towards a Smarter Society report in partnership with Samsung UK, Charles Levy is a Senior Economist at The Work Foundation and David Wong a Researcher at the Big Innovation Centre. Follow the links for Part 1, Part 2, Part 3, Part 4 and Part 5 of the report.
References: [1] These networks are also known as two- or multi-sided markets. See Parker, G.G. and Van Alstyne, M.W. (2005), "Two-sided network effects: a theory of information product design", Management Science, 51(10): 1494-504; and Rysman, M. (2009), "The economics of two-sided markets", Journal of Economic Perspectives, 23(3): pp.125–43. [2] Mearian, L. (2013), "Self-driving cars could create 1GB of data a second", Computerworld, 23 July, http://ift.tt/WpjFMO, accessed on 16 May 2014. [3] Wong, D. (2012), Data is the Next Frontier, Analytics the New Tool: Five Trends in Big Data and Analytics, and Their Implications for Innovation and Organisations, London: Big Innovation Centre. [4] Ng, I.C.L. (2014), Creating New Markets in the Digital Economy: Value and Worth, Cambridge: Cambridge University Press.
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