How Company name creates value during the next 5 years
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Business is not the same as it used to be. Changes that have disrupted the music and media industries now challenge actors across all industries. The companies of today will have to be able to reshape their businesses or they will perish. Thus, Demos Helsinki has created this interactive report for Company name to understand the new phase of digitalization and to examine Company name’s position in a changing world.
This report has three parts:
First, we introduce the changing competitive environment.
Second, we present the six value creation models of a hyperconnected business and ask a few questions regarding each of them. By answering the questions, you will learn in which direction Company name should go for.
Third, we provide Company name with a way forward by presenting a downloadable report about new value creation models.
The report is based on The Naked Approach – a strategic research initiative funded by Tekes and Technology Industries of Finland Centennial Foundation, which focuses on the next phases of digitalization, including the joint effects of sensor technologies, artificial intelligence, robotics, and printable electronics. The research consortium includes VTT, Aalto University, Tampere University of Technology, University of Oulu, University of Lapland and Demos Helsinki.
Hyperconnectivity is changing Company name’s business environment
To understand the current world and its future changes, it is important to consider megatrends. They are global forces that shape and define the future business environment.
Digitalization is the clear driving force of change. Digitalization is based on the rapid technological development driven by sensors, software and processors, and their connections in products and data management systems and applications (Porter & Heppelmann 2014). Digitalization drives productivity gains not only through improvements in product performance and functionality, but also through operational efficiency in the value chain, where the old ways of doing product design, marketing, manufacturing, after-sale service, data analytics and security will be disrupted.
The next phase of digitalization leads into the Hyperconnected World. It means “the increasing digital interconnection of people – and things – anytime and anywhere.” It can be defined as the Hyperconnectivity of Everything - the Internet of networks, people, things, machines, and computers enabling intelligent operations using advanced data analytics for transformational outcomes, to redefine the landscape for individuals and organizations alike (combined WEForum 2015 & IIC 2015). This new level of connectivity will affect the whole of society at different levels. If Company name wishes to exist in the future, understanding this change is more important than ever.
Digitalization is not the only trend shaping our world. Four other major trends shape the business environment: Global Economy, Scarce Resources, Changing population, Community-oriented individuals. These are well explained for example in our report on Consumer Cleantech.
In 5 years, the way Company name makes money will be radically different
Digitalization and overall change in the competitive environment do not necessarily change the basic tenets of strategy: to gain competitive advantage, a company has to be able to differentiate itself to command a price premium, operate at a lower cost than its rivals, or both (Porter & Heppelmann 2014). Yet the opportunities and ways to create value will change, or in many cases transform with the new technologies. Hyperconnected Business and smart solutions bring forth new opportunities to create value in organisations that create this differentiation and/or efficiency. Read more on our blog: 5 ways the Internet of Things will change your business.
There are at least six distinguished ways to create value in the Hyperconnected World, which are supported by a range of technological solutions in a wide variety of fields. The underlying technology, the “technology stack”, provides the technical features for the Hyperconnected Business, which are the main drivers of the new business models. If you want to know more about the technology of Hyperconnected Business, read Harvard Business Review’s article on smart, connected products.
The six key value creation models identified are smarter products and services, real-time directed resources, resource efficiency, data commercialization, x-as-a-service models, and platforms. These categories have certain differences and definitions, but synergies also exist between them, because they arise from the same technological development and often discuss the same development from different angles.
In the next part of the report, each of the six identified value creation models are explained in depth in separate sections. In each section, there is a short questionnaire on how Company name plans on proceeding with these value creation models over the next five years.
New radical value creation models for Company name
Smarter Products and Services
Increasing the value of current products by integrating smartness to existing products and services is an easy way to understand the possibilities that smart solutions offer. Implementing smartness to products can be used as a tool to add features to existing products, add connectivity, increase customizations for the customers, enhance user-experience in better service, and increase the experienced value product received by the customer (WEF 2015, Ailisto et al. 2015). This results in increased turnover and sales prices through providing better customer value in more efficient and effective products and services (Ailisto et al. 2015, Juhanko et al. 2015).
Products and services can be smart on three levels:
- Being able to sense its own operation is a quality already embedded into many products today. A product could “develop its own consciousness” by having its own feedback loop and be able to communicate information regarding maintenance, for example. A typical example of this are the warning lights in a car’s control panel, which light up to inform you when something goes wrong.
- Being aware of its environment means that the product can interact with information from its surroundings and respond accordingly. For example, a smart radiator could detect the weather outside and adjust the internal temperature depending on this input.
- Being aware of context is a more sophisticated understanding. To continue with the thermostat example, the thermostat would be able to adjust its temperature in anticipation of the personal preferences of individuals entering the room. For example, when a tired guest ready for sleep is about to arrive, the room would be set slightly cooler in anticipation.
Company name and smarter products and services models
In five years, Company name’s Business offering product is not a smart product. Should it be?
On the one hand, implementing smartness to products can be used as a tool to add features to existing products, add connectivity, increase customizations for the customers, enhance user-experience in better service, and increase the experienced value product received by the customer. By selling affordable, smart products that connect via the Cloud, many manufacturers are providing customers simple and affordable solutions to their immediate problems, plus a product that can work seamlessly with other connected products. For example, OSRAM lamps work with the same smartphone app that controls NEST thermostats, making it easy for the user to decide to buy just that lamp.
On the other hand, not all products have to be smart, of course. Unsmart products guarantee calm interactions and they often have fewer failures due to less complexity. They cannot be hacked and might be easier to fix. They are easier to produce and are likely to be cheaper, if comparing only their individual characteristics and purchase price.
Nevertheless, many companies have found surprising ways to compete via smartness. Browse through the other alternatives to see how some leading companies use smarter products to gain competitive advantage. It might also be worthwhile to read this Harvard Business Review article on the transformation of companies through digitalization.
Information about itself
In five years Company name’s Business offering product or service is smart enough to be able to sense its own operation and provide information about itself. Why?
Information about the product itself is useful in many ways. Although it is the most basic information a smart product can have, this alone can yield significant opportunities when attached to new business models. For example, retrofitting sensors to old elevators could significantly reduce the need for yearly maintenance and enable predictive maintenance, producing remarkable cost reductions. Other possible gains of the product status and condition information include opportunities to increase customizations for the customers and enhance user-experience in better service, for example in maintenance information and timing.
Nowadays, most cars provide this kind of self-aware maintenance information, but if needed, smartness can also often be retrofitted to products and industrial machinery. Good examples of this kind of added smartness in products are Trelab and Kone.
TreLab has developed a wireless smart measurement solution (SmartTags, Smart Data Mill). TreLab’s solution improves the real-time operational view on critical Legacy Industrial equipment and facilities. Fast, simple, and cost-efficient.
As a global leader in the elevator and escalator industry, KONE provides elevators, escalators and automatic building doors, as well as solutions for modernization and maintenance to add value to buildings throughout their life cycle. Headquartered in Finland, KONE has a long-term interest in smart solutions and has been heavily focusing on the development of digital operations. In February 2016, Kone announced that it will be making a strategic decision to include sensors and smartness to all its elevators, automatic doors, and escalators so that it can gather data and optimize operations more efficiently (Kauppalehti 2016).
Information about the environment
In five years, Company name’s Business offering has information about its environment. How can this information make Company name more competitive?
Information about the environment can help the smart product to adjust its operations accordingly. Smart products that perceive their physical environment and act accordingly are called robots. A simple example of a smart product is the automated sliding door. With connectivity, even sliding doors could provide radically new business opportunities, like being able to optimize their usage better and gather data on their environment.
A good example of the brilliant use of connected proximity sensors is provided by Enevo, which makes trash bins smart in order to optimize collection routes for garbage trucks. In the case of smart products, of course, perception is not limited to one place. These “robots” can use any kind of data as their sense, including weather information, traffic congestion, or security camera imagery. Weather information can be used to monitor energy and heating in buildings (see Fourdeg and ThereCorporation).
ENEVO® is a forward-thinking company with a vision to transform the financial, environmental and social impact of waste. Headquartered in Espoo, Finland, ENEVO integrates sensors that are able to collect information about their environment to waste disposals, and collects data about them to monitor and optimize waste collection logistics.
Founded in 2013, Fourdeg was created by three former Nokia employees to provide an automated solution for buildings heated by water radiators, which can be controlled in the palm of one’s hand. Fourdeg’s patented solution allows to optimize heat energy consumption in small or large properties and in wide areas. All of the buildings can be controlled all the way down to room level. The smart learning predictive genetic algorithms automatically find the best temperature profiles. This drives the cost down while keeping comfort at the top level.
Holistic home energy management solutions. Smart energy control systems that are adapted to existing systems to achieve better energy management and price optimization.
Information about context
In five years, Business offering is going to be context aware, so understand this: contextual information is currently the big IoT battleground. While Apple Siri and other slightly contextual smart services in mobile phones are emerging, the contextually aware smart products are emerging in the background. One of the first such products, which is also able to interact with its context is Amazon Echo, but some of the same features also exist in Nest thermostats and related products.
Nevertheless, understanding the context of use is more than just environmental awareness. It can be knowledge about the user’s role or status, understanding about user authorization in social contexts, or contextual information about the status of other products. By increasing context awareness, companies can compete to offer better services as needed. Eventually this development might lead to “surroundings as a service” world, where most needs are fulfilled from surrounding context-aware products.
Amazon Echo is a device that is capable of voice interaction, music playback, making to-do lists, setting alarms, streaming podcasts, playing audiobooks, and providing weather, traffic and other real time information. It can also control several smart devices.
Real-time directed resources
Real-time directed resources, predictive maintenance, the optimization of asset utilization, remote asset management, production guidance, supervision of industrial installations, increased worker safety through automation and robotics, and mobile maintenance are ways that are listed by various sources as common applications of smart solutions, especially in industrial settings (WEF 2015, Ailisto et al. 2015, Juhanko et al. 2015, Vermesan & Friess 2013). According to the World Economic Forum (2015), the most widely used application of the Industrial Internet is predictive maintenance and remote asset management. Through the use of sensors, data analytics and real-time data, equipment failures and maintenance periods can be predicted and reduced. This results in reduced unexpected downtime maintenance, which of course results in clear savings and certainly provides the companies with direct, incremental efficiency gains.
The way real-time directed resources can be understood is through three levels, based on the usage of information:
Using historical information can offer an advantage by investigating hidden correlations in a company’s past data, for example.
Using instant information in operations helps in finding failures and responding to critical situations faster, for example.
Using predictive information is becoming more and more obtainable and offers big gains in healthcare, for example.
Company name and real-time directed resources
Company name is not gathering any information about the most important assets after five years. Why would Company name collect real-time data about Company name’s Business offering?
Through the process of trying and learning, we change our perceptions of the world. By collecting real-time information, Company name could shorten the feedback delay, react faster and understand the changing environment, user needs, or market situations better, as well as making all of Company name’s efforts produce actionable knowledge.
Real-time information is also a direct competitive advantage (in addition to the learning loop). It is typically useful data for the end-user or Company name’s client. It helps Company name predict problematic situations, improve worker safety, and identify new opportunities in how processes operate by recognizing bottlenecks and untapped resources.
The key in using information is neither the data, nor its collection. The key is to have analytics in place that help Company name identify the crucial pieces of information collected from Company name’s Business offering. It is easy to fall into the trap of vanity metrics. Thus, proper planning of analytics is the most important part of data usage.
In five years, Company name is able to use historical data. What is the big gain?
The supermarket chain Tesco collected 70 million refrigerator-related data points coming from its units and stored them in a data warehouse. Data points were analyzed to better understand the performance, maintenance periods and energy costs of the refrigerators. The results were extremely helpful for Tesco.
Not all data needs to be instantly actionable, if the gathered data can produce actionable knowledge later on. For example, many manufacturers taking advantage of advanced analytics can reduce process flaws by investigating hidden correlations in their past data. Analyzing big data and new advanced analytics tools can provide a competitive edge for manufacturers. Concrete examples can be found in McKinsey’s report on How Big Data Can Improve Manufacturing.
Tesco is a multinational grocery and general merchandise retailer. It is the third largest retailer in the world measured by profits, and the second-largest retailer in the world measured by revenues.
In five years, Company name is able to use predictive information to improve its offering.
When streams of data increase, predictive information becomes easier and easier to obtain. Big gains are expected especially in healthcare. Patients will become better informed and will decide to assume more responsibility for their own care. Physicians will likely change to become more like consultants than decision makers, and will advise, warn and help individual patients.
This is also true for the manufacturing companies. Finnish steel manufacturer Outokumpu (IBM 2016) decided to move from reactive to proactive maintenance of its production lines. This required adding features to gather data and optimize maintenance management as well as analyzing it in real-time. This was made possible through the use of IBM analytical tools and cloud-services – resulting in maintaining quality, better delivery efficiency, cutting maintenance costs, as well as increasing safety for the workers at Outokumpu’s steel mill.
Outokumpu is a group of companies headquartered in Espoo, Finland, which produce stainless steel and employ about 11,500 employees in more than 30 countries.
In five years, Company name is able to use instant information. What should Company name understand to make the transformation as beneficial as possible?
The ability to use instant information and act upon it is transforming many industries, including security and well-being. Fitbit provides some knowledge on the health status of an individual, and this data alone changes behaviours. Acting upon instant information also creates large opportunities for manufacturing and infrastructure companies. Some well-known companies already using real-time directed resources on a large scale include Caterpillar, ThyssenKrupp and ThamesWater. ThamesWater, for example, the largest provider of drinking and wastewater services in UK, uses analytics, sensors and real-time data to find out about equipment failures and to be able to respond to critical situations faster (WEF 2015).
Fitbit is known for its products of the same name, which are activity trackers – wireless-enabled wearable technology devices that measure such data as the number of steps taken, heart rate, quality of sleep, steps climbed, and other personal metrics. The first of these was the Fitbit Tracker.
Caterpillar designs, manufactures, markets and sells machinery, engines, financial products and insurance. They are the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
ThyssenKrupp AG is one of the world's largest steel producers. The company also provides components and systems for the automotive industry, elevators, escalators, as well as material trading and industrial services.
Thames Water Utilities Ltd, known as ThamesWater, is the private utility company responsible for the public water supply and wastewater treatment. Thames Water is the UK's largest water and wastewater services company, supplying 2.6 gigalitres of drinking water and treating 4.4 gigalitres of wastewater per day. Thames Water's 15 million customers comprise 27% of the UK population.
Continue to the next segment.
Resource efficiency means smarter use of natural resources and energy savings through optimization and monitoring, track-and-trace logistics, automation and control, operational efficiency of product development, and manufacturing that aims to reduce operational costs. Incremental benefits can often be achieved and provide clear strategic incentives that companies can target. (WEF 2015, Ailisto et al. 2015, Juhanko et al. 2015, Vermesan & Friess 2013).
Resource efficiency can be categorized into four models (Ritola et al. 2015):
Sharing simply means increasing the utilization rate of physical resources by dividing and allocating their use more efficiently. This is a very typical and most commonly used model to improve resource smartness.
Optimization refers to improving energy efficiency through, for example, new data management, smart energy management and metering applications, as well as track-and-trace logistics.
Refurbishment refers to improving the efficiency of physical assets by implementing sensors to existing things, in order to create energy efficiency in the existing value chain, product development and manufacturing.
Dematerialization and smart substitution means replacing resource intensive practices with new solutions. Examples include teleconferencing, virtual reality applications, and companies replacing energy intensive animal proteins from the food system with something that takes fewer resources to produce.
Company name and resource and operational efficiency
Sharing is a very basic approach for increasing resource efficiency and operational efficiency. In basic terms, it can mean that two nearby hospital departments use the same specialized equipment, or that the price of a lawn mover per user is reduced by a collaborative ownership structure.
Examples of sharing are different marketplace platforms, cooperative farming, sharing goods, lending, ridesharing, carsharing, grocery delivery, swapping P2P task sharing and task outsourcing, crowdfunding, urban farming, co-creation platforms, and optimizing space utilization. Sharing can directly increase efficiency in the company’s own processes, both in upstream and downstream. For example, in upstream services Piggybaggy, Xiaojukeji and Verybite are firms that optimize deliveries through ride- and logistics sharing services.
Piggybaggy was designed to act as a means for drivers to reach each other for ridesharing when transporting goods. The service matches consumer transport demands with other consumers going in the same direction. People can transport each other’s packages and get small monetary compensation in return. PiggyBaggy partners with e-commerce and delivery management companies to make room for an ecological, economical and socially sustainable effect.
Didi is the largest one-stop consumer transportation platform in the world. They offer taxi hailing services in 360 cities, peer-to-peer private car services in 80 cities and hitch services in more than 300 cities. The taxi hailing platform provides 3 million rides per day and with a 99% mobile hailing market share. The peer-to-peer private car services have also reached 3 million rides per day and accounted for 86% of the market, according to Analysys International. Mobility as a smart service connects people with the same routes and helps them share mobility costs. Partnered up with WeChat ecosystem.
Developed in Hong Kong, verybite serves as a P2P marketplace for homemade food and delivery services. It combines local people and resources as well as different aspects of cleantech by sharing resources, increasing social connections, optimizing deliveries, and supporting users to cook larger batches at a time to generate income and plan the use of ingredients better. The main revenue stream for Verybite comes from delivery services.
Company with similarities in their business model: Feastly (USA)
Optimization means using existing tools, resources and platforms better. As you can imagine, optimization offers various ways to create resource efficiency. Examples of optimization methods include the use of software, smart products and systems, data collection and analysis, smart homes and smart cities, gamification, smart vehicles and smart routing, energy management, and home automation.
As an example, Ferroamp is a company that can help to optimize home energy operations using smart solar power, a solution that the Tesla powerwall also taps into. Ferroamp is a startup that improves the utilization of a three-phase supply, using ”Current Equalizing Technology”.
Tesla Motors is an automotive and energy storage company. Since 2014, it has allowed its technology patents to be used by anyone. By opening the patents, Tesla attracts and motivates talented employees and accelerates the advancement of electric cars for sustainable transport. This optimizes research and development for the companies that do it best.
Refurbishment means increasing resource efficiency by repairing and improving old products and services. When things need to be repaired, they can often be upgraded at the same time, saving costs and making them smarter. Therecorporation upgrades homes to smart homes.
Born in Vaasa, Therecorporation is a Finnish company providing holistic home energy management solutions. Smart energy control systems are adapted to existing systems to achieve better energy management and price optimization. Their home energy management platform introduces the internet-of-things to existing heating and cooling systems. They create a new market for utilities and make the consumer an active part of the market by enabling residential demand response.
Dematerialization is the most powerful approach to creating resource gains. When you replace something, it ceases to exist as a form of operating and thus results in drastic resource efficiency. A good example would be using teleconferencing, instead of having to fly to meetings around the world. Dematerialization usually operates via platforms and sharing. Tuup is a company that optimizes daily travel by gathering all the transportation options together under one platform. Gold & Green replaces expensive animal proteins with vegetable proteins.
Tuup is a mobile application that optimizes daily travel by gathering all the transportation options under one platform. A pilot program will be launched in Turku where users can purchase Föli tickets on Tuup to continue building mobile transportation solutions in the city.
Gold & Green
Replaces animal proteins with vegetable sources by creating new, delicious foods and ingredients based on vegetable proteins.
How data can be used offers new possibilities for Company name. All companies collect some form of data, and using it for purposes other than what it is currently used for offers a new way to develop businesses. This can mean selling or giving the data to a third party provider, or analysing the data to gain knowledge that can benefited from or sold. More and more companies are looking into using their data in better ways, and the possibilities of being able to handle massive amounts of data (or simply referred as Big Data) will provide business opportunities across industries (Ailisto et al. 2015, Juhanko et al. 2015).
New ways of using data can be processed on three different levels:
Giving, using or selling data internally within the company’s own value chain, which a lot of companies are already doing.
Selling or giving data to companies in the same value chain could improve the competitiveness of the business ecosystem due to new information links.
Selling or giving data externally to selected value networks or to anyone, which offers possibilities to create value within a larger business ecosystem.
Company name and data commercialization
Selling / Companies in the same value chain
In five years, Company name is potentially selling data to companies in the same value chain. Providing data through a sales agreement within the value chain typically improves the competitiveness of the business ecosystem due to new information links. Data can be valuable, especially if it is about consumer behaviour, consumer identification, transaction identification, or it is unique and/or accessible. Data can be raw data, processed data, or insights, depending on the company’s capabilities and the value chain’s ability to use and act upon different kinds of data streams.
Data value can be analyzed by estimating the asset cost, comparing existing offerings in the market, or estimating future cash flows from the data asset. However, there is no precise approach to data valuation.
When looking at data selling opportunities in the same value chain, it is good to evaluate the opportunities of selling manufacturing data to downstream companies, so that they gain instant knowledge of production levels and disruptions. Besides that, it is possible to sell data that helps to focus on marketing and sales to trigger after-sales services when needed (by embedding sensors in products, for example), as well as selling data to enable product lifecycle management in downstream company systems. Lastly, considering selling data to improve value in R&D via customer understanding, and selling data to larger players to enable open innovation in the value chain can provide new business opportunities.
Companies that operate in such a data selling value chain include e.g. Starbucks and Apple, which provide Starbucks customer knowledge through Apple’s iBeacon system.
iBeacon is a protocol developed by Apple. Various vendors have since made iBeacon-compatible hardware transmitters, which are devices that broadcast their identifier to nearby portable electronic devices. The technology enables smartphones, tablets and other devices to perform actions when in close proximity to an iBeacon.
Selling / External value network
In five years, Company name is planning to sell their data to external value networks. How can Company name do this?
Data can be valuable to the external value network, especially if it is about consumer behaviour, consumer identification, transaction identification, or it is unique and/or accessible. For example, insurance companies have been interested in tapping into the vast data streams about car usage (see Metromile, Snapshot by Progressive, and Allstate’s DriveWise). These examples illustrate how monetizing data from a company product, e.g. a car, is difficult for the maker: they do not have a monopoly on this data. In another case, Finnish post office Posti is selling postman driving data to road maintenance companies.
Data can be raw data, processed data, or insights, depending on the company’s capabilities and the external network’s abilities to use and act upon different kinds of data streams.
Data value can be analyzed by estimating the asset cost, comparing existing offerings in the market, or estimating future cash flows from the data asset. However, there is no precise approach to data valuation.
Metromile is a San Francisco-based car insurance startup that offers pay-per-mile insurance and a driving app. It is currently the only company offering pay-per-mile insurance in the United States.
Selling / Anybody
Company name is planning to make their data assets available for purchase to anybody in five years.
It can be difficult to know who might gain external business opportunities from Company name’s data, so in case there is a wide dataset, it might make sense to enable (paid for) access to it. This model of selling data to anybody is usually based on an API. A great example of using data is provided by the global weather data focused company Vaisala, based in Finland, which has turned its weather data to be beneficial for renewable energy, aviation and road customers. They also develop, manufacture and market products and services for environmental and industrial measurement.
Data that is accessible via an API is typically raw data, but it can be also processed data or insights. Estimating the value of such data is impossible. The typical data value can be analyzed by estimating the asset cost, comparing existing offerings in the market, or estimating future cash flows from the data asset, but these approaches can only help companies to a limited extent.
A Finnish data company that originally focused on weather data, but has grown into an operator and provider of data to various sectors.
Giving / Companies in the same value chain
In five years, Company name is planning to give their data to companies in the same value chain. Why would Company name do this?
According to a Deloitte report leading companies such as Google and Asos allow the emergence of new business models that are based on free access to their data, because these models are able to stimulate good returns on investment. These kinds of models also positively disrupt the market. Sharing data within the value chain offers easily accessible opportunities to avoid bullwhip effects in logistics, which mean increasing swings in inventory responses to shifts in customer demand as one moves further up the supply chain.
Giving data to partners in the same value chain also helps in building open innovation platforms and improves trust between the business partners.
Giving / External value network
In five years, Company name is planning to give their data to companies in the external value network. Why would Company name do this?
According to a Deloitte report leading companies such as Google and Asos allow the emergence of new business models based on free access to their data, because these models are able to stimulate good returns on investment. These kinds of models also positively disrupt the market.
The Climate Corporation, acquired by the Monsanto Company, leverages open soil and weather data to create crop insurance policies for underserved farmers. And unlike the typical policy, farmers do not have to file claims.
The Climate Corporation
The Climate Corporation is a San Francisco-based company that examines weather data to provide insurance to farmers who can lock in profits even in the case of drought, heavy rains or other adverse weather conditions.
Giving / Anybody
In five years, Company name is planning to give at least some of their company data to outsiders. What are the benefits of doing this?
Data is often provided for free to cultivate an ecosystem of operators around the company’s core business. Furthermore, providing data to the ecosystem helps facilitate open innovation and outsource R&D outside the company’s borders. Lastly, opening up the data streams might provide a competitive edge, and in fact prevent competitors and newcomers from invading the market by providing a solid position in a certain market through open data offering.
There are many examples of companies benefiting from open data, such as Arup and FoodTrade. Many companies benefit from these kinds of ecosystems. According to a Deloitte report, leading companies such as Google and Asos allow the emergence of new business models based on free access to their data, because these models are able to stimulate good returns on investment. These kinds of models also positively disrupt the market.
Arup, a UK-based global engineering consultancy, uses open data as a vital part of its work with smart cities and the technology that supports them. They use public data on traffic, planning, natural hazards and other topics to deliver more efficient services and help mitigate the effect of natural disasters.
Taking a different perspective, FoodTrade is an online platform that brings together over 1,600 local food producers and consumers to map supply chains and promote transparency in the food sector. The Bristol-based startup recently launched FoodTrade.Menu, an automatic allergen labeller that uses the Food Standards Agency’s data to help restaurants ensure their menus comply with allergy regulations.
Many companies provide open data unintentionally, but it still might be helpful for them. Starbucks gives away the store locations in a simple scrapable format
Arup is a professional services firm headquartered in London, UK, which provides engineering, design, planning, project management and consulting services for all aspects of the built environment. The firm has over 11,000 employees around the world.
FoodTrade is mapping the food system from farm to fork to build a better, fairer food system.
Using data only in Internal operations
In five years, Company name is not planning to use data outside internal operations. Many times it does not make sense to sell or give away data, but it is almost always useful internally anyway. Using data in internal operations means accessing datasets across departments within the company, or inventing new ways to use customer or employer data. For example, the NFL (American football) team Atlanta Falcons uses GPS location services to improve the efficiency of their plays. Netflix uses their extensive user behaviour data to identify market gaps and make better series, such as House of Cards. Sears reduced the time required to launch a marketing campaign from eight weeks to one week, simply by tapping into their existing data streams.
Company name’s Business offering is not going to sell or give away data in five years. Why should Company name give away their data? Obviously Company name should not do it without a second thought. Data is a core business asset, and while it can help maintain business relationships, create trust, enable open innovation, improve value chain performance and provide many other positives to one’s business, it might be more valuable to Company name to use data only internally.
Oftentimes, however, the benefits of opening data to others outweigh its pitfalls. Read the following two articles that show just that:
Netflix is a global provider of streaming movies and TV series. Netflix started as an American DVD-by-mail service in 1998, and began streaming in 2007. Netflix expanded with streaming to Canada in 2010 and now serves over 190 countries. Netflix uses data for recommendations, for understanding which of its content is most popular, and how it should develop its offering based on the usage data.
Sears is mainly known for its appliances, hardware, and clothing. The company was founded in 1886. It began as a mail order catalogue company, and began opening retail locations in 1925. Sears uses data internally to set prices and to give loyalty shoppers customized coupons - to be able to offer more personalized pricing at the right time for the right customer.
One of the largest potential opportunities in the business models of today’s world is the change from product sales to X-as-a-service models, often referred to as the Outcome Economy or Servitization. X-as-a-service business models mean that companies compete in their ability to provide results and services rather than selling products. One aspect of X-as-a-service business models is the transferral of risk from the customers to the sellers, after the providing companies are in charge of the assets used to produce the service. This naturally requires new ways to deal with the asset management of the firm, which is made easier by the new ways to control connected assets through the smart solutions more efficiently. (WEF 2015, Ailisto et al. 2015)
Hyperconnected business allows the use of X-as-a-service models in many different domains. These service models are aimed at differentiation and/or cost leadership, often providing both. Servitization is usually easily understood as differentiating from competition by offering abilities and applications for something that is traditionally offered as a simple product. As hyperconnected business models are expanding throughout different industries, it is important to recognize the development and what it can mean for Company name’s competitive environment. The survey provides examples of companies applying the models related to their industry.
Read our blog posts on how technology and multiplying computer power will revolutionize the ways of ownership and how services are rapidly and increasingly entering different domains in the future
Company name and X-as-a-Service models
Housing & Construction -as-a-service
Offering Housing and Construction -as-a-service is a way to offer one of the key aspects of life to people through services. What Hyperconnected business allows in this field is the usage of new digital platforms to operate new kinds of service models. In housing, many digital platforms are already used in designing and developing houses, for example. With the current and future technologies these types of services will reach the consumers in an easier manner. On the other hand, companies like Venuu and AirBnB that create access to underused or unavailable spaces without digitalization and related technology, are also optimizing our use of space.
The Finnish company Venuu offers a way to find a place for a party or office use for one day, or a few. Venuu operates as a link between different venues and people looking for them. This type of optimization of the use of space is becoming more common.
Similar to Venuu, AirBnB brings together apartment owners and anyone looking for an inexpensive room or apartment, short- and long-term alike. The company lists various types of accommodation in more than 34 000 cities, making the price for overnight stays lower than that of traditional accommodation providers.
Transportation-as-a-service might not sound like a huge breakthrough idea, but with the current technological development, it just might be. Traditional public transport systems, taxis, airlines and trains are obviously offering transport-as-a-service already. The real change is coming to the transport sector in the form of self-driving cars and mobility-as-a-service applications. Self-driving cars are deemed to be the biggest thing to change transportation since the invention of the car itself, and many things will in fact disappear in the self-driving car era (read a post on what will change and what will disappear in the self-driving car era). Companies like Google, Apple, Tesla and Uber among all the big automobile manufacturers are looking into this development and how they can get their share of it. In the future, the need to own vehicles will most likely decrease and most transportation, especially in cities, will be done through different mobility-as-a-service providers.
A Finnish mobility-as-a-service platform that combines various transportation services into one.
Traditional restaurants and food delivery services are in the business of food-as-a-service. Hyperconnected Business forms new variations of these in more agile food delivery platforms, such as Wolt and Foodora, and leftover food platforms such as ResQ. There are more ways to distribute and reduce the food waste through the use of these platforms, as well as growing sales.
A Food delivery smartphone application that brings all the restaurants in a city under one platform, and creates distribution efficiency by having drivers deliver for multiple restaurants.
Leftover food sold on a smartphone application from restaurants in portion sizes. Decreases the food waste produced by restaurants and offers a new source of income from resources that were previously wasted.
The energy market is typically a service based pricing market. The big energy producers are in an energy-as-a-service business, per se. Yet, in addition to providing new ways for the big players to offer novel energy related services, Hyperconnected Business also offers ways for new startups and smaller companies to create new businesses in the field. Good examples are companies that offer energy management and control systems for both consumers and companies, such as ThereCorporation. Other examples are companies offering energy management services especially for savings, such as Leasegreen, which offers energy-savings-as-a-service for manufacturers and owners of larger production facilities.
Leasegreen specialises in turnkey solutions for energy efficiency projects - offering energy savings as a service. Leasegreen offers automation, monitoring and control, as well as more efficient lighting and heat capture. For example, one of their clients, furniture company Isku’s production factory reduced energy costs by 50%, from over a million euros a year to about half a million euros with Leasegreen’s solutions.
Holistic home energy management solutions. Smart energy control systems that are adapted to existing systems to achieve better energy management and price optimization. For consumers, ThereCorporation offers the possibility to track, monitor and control their home energy usage, and for utility companies they offer a platform that connects homes to demand response, thus offering tools to avoid the most expensive and polluting electricity creation during peak hours.
Health & well-being -as-a-service
Health and well-being industries are one of the key sectors looking to benefit from the ability to collect and analyze data. Different service models are emerging from better communication tools, for example remote care and virtual doctors are becoming commonplace in the future.
Read our blog post on how healthcare-sharing services can transform the industry.
Provide occupational healthcare and well-being services by leveraging digital tools and new ways of working. Up to 80% of their customers’ health issues are handled online or via phone. Their business model is based on fixed monthly fees, which encourages focusing on preventive healthcare services, in addition to traditional occupational healthcare. Saving time and money in healthcare makes this a beneficial setup both for customers and the firm itself.
Provide dental services with a fixed monthly fee (15€ per month with a three year commitment). Digital services for making reservations and collecting health data.
Education is also moving towards more web-based applications. Even if more traditional schools and universities might keep their position as the main sources and organizers of education, much of the education sector is using digital tools. Digital tools can be used in many cases, such as in language learning and programming, or even to replace physical education at certain places.
A language learning application that creates revenue for itself from monetizing the data from its users. Makes language learning easy and fun by the gamification of the whole process.
Programming teaching for kids. Uses online tools for spreading programming knowledge to beginners.
Makes world-class education available universally by providing online courses for free, or at a fraction of the cost charged by traditional educational institutions.
Most traditional finance houses like banks and investment funds already operate as-a-service models. Digitalization is not only allowing the move of most financial services to be available on the Internet, but also the number of different services is growing rapidly. For example, different peer-to-peer microloans are one interesting way of providing finance services through a differentiated market, and crowdfunding and crowdfinancing platforms have been growing rapidly in recent years. At the same time, technologies like blockchain and virtual currencies might yet disrupt the field in the future in unprecedented ways.
Offers peer-to-peer money transfers across country and currency boundaries at a very competitive rate compared to traditional banks and agencies.
An investment platform for startups to access investors from all over the world.
Kickstarter is the world's largest funding platform for creative projects. A home for film, music, art, theatre, games, comics, design, photography, and more.
In retail, the service models often focus on the development of different delivery systems and software platforms to manage the actual retailing business. Large online marketplaces serve as the retail point for many retailers and products across a variety of product categories. Amazon and Alibaba do this, for example.
Serves as a low-cost online channel for retailers to sell their products across a huge variety of product categories.
Provides C2C, B2C, and B2B sales services and electronic payment services via several web portals. Alibaba has developed an entire e-commerce ecosystem around local, Chinese needs.
Leshi Internet Information & Technology, also know as LeEco Group, is China's first company to head the concept of 'ecosystem' products. It is building "Le Ecosystem", an online platform with content, devices and applications. LeEco’s businesses span from Internet TV, smart gadgets, e-commerce, eco-agriculture and Internet-linked electric cars to film production. It has one of the largest content libraries including movies, shows, concerts, and sports games, which could be viewed on Letv's terminals such as phones, TVs and electric vehicles, and these terminals could interact through Letv's eco-network.
Manufacturing and logistics can be offered as-a-service through the use of Hyperconnected Business models. Logistics applications and management systems are often better controlled by their owners than by their users, leading to different as-a-service models such as Cargotec’s port management services.
Cargotec offers "port management services” to its industrial customers. It is currently the main function of the business, but it did not signal the end for its manufacturing business. Rather it is used as an additional way of selling their products by increasing their intelligence and developing a digital platform capable of managing and integrating the various types of port equipment they offer.
X-as-a-service models are in one way or another a part of all industries in different domains. The examples provided in each section give an idea of what kind of methods are used in each industry and what could be applied to Company name’s industry sector as well. In general, new X-as-a-service models use platforms to their benefit in order to create more agile services, which are connected to or replace old ways of services or using products. Looking at each section and other industries, Company name can find examples that could be used in their industry in the future.
By definition, platforms refer to “information technology systems upon which different actors – that is, users, service providers and other stakeholders across organizational boundaries – can carry out value-adding activities in a multi-sided market environment governed by agreed boundary resources” (Seppälä et al. 2015). Platforms create their value from the power of network effects, allowing more things and networks to connect with each other by creating value on the synergy of these networks (Vermesan & Friess 2014, Gawer & Cusumano 2014, Harvard Business Review 2016).
Platforms can be divided into three categories.
- Internal platforms focus on the companies’ own operations, services and products. Internal platforms are assets organized in a common structure, which helps a company produce efficient and innovative operations, products and services. Platforms extended to a value chain network are somewhat strictly controlled external platforms, where only the actors sharing the same direct value chain operate in.
- External platforms are extended to include partners and collaborators into a platform that is specific to some general purpose of the host company. External platforms create an innovative business ecosystem, where external innovators can develop their complementary products, technologies or services. (Seppälä et al. 2015, Gawer & Cusumano 2014).
- Providers or platform owners open up platforms to any third parties, and parties can often collaborate in the platform without the need to necessarily interact with the platform owner (Seppälä et al. 2015). In general, Hyperconnected Business allows more advanced and open platforms, where operational efficiencies, value creation among actors, as well as research and innovations can be created at a faster pace than before. For more on operating as a platform provider, check out our blog on 3 guidelines for Corporations Wishing to Grasp Collaborative Platforms.
Company name and platforms
Why should Company name think about platforms during the next five years? There are many reasons why Company name should at least be concerned about platforms. Platforms enable a fast transition to lower marginal cost worlds, where the cost of single objects can be more easily divided by multiple ad-hoc users based on their needs. It is possible that the emerging platform economy is the total servicification of everything, causing much headache especially to product-focused companies.
As mentioned by Michael Cusumano, “A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform. The effect is much greater potential for innovation and growth than a single product-oriented firm can generate alone.”
And as pointed out in this Accenture report, “tech companies and digital-born organizations like Amazon, Google, and Alibaba have long understood the power of digital technologies. But look a little closer. Many of their most ground-breaking products and services are based on platforms.” The success of these companies rests on two key elements: the technological platforms they have built to support their businesses, and the business models these platforms enable. These platform-based business models fundamentally change how companies operate.
The approach taken at Company name is to focus on creating an internal platform. Platforms vary greatly as they are comprised of such a high range of actors, and their purpose can vary from being an ecosystem of actors to more specific uses. Most companies use digital platforms, a good example being Vaisala. These companies use platforms for their specific business purposes or for a limited number of actors – referred to as internal platforms.
A great example of using data is Vaisala, originally a weather data focused company that has turned its weather data to be beneficial for various uses in renewable energy, aviation and road customers. Vaisala is a global company based in Finland that develops, manufactures and markets products and services for environmental and industrial measurement.
In five years, Company name could operate as an external platform provider.
Larger ecosystem builders who offer their services to other companies are the biggest users of platform economy. Internationally, companies like IBM and GE’s Predix are a few examples leading the global development of external Industrial Internet platforms. In Finland, both Tieto and Elisa are developing their own Industrial Internet ecosystems, which aim to serve as platforms for companies to create efficiencies through using them. For example, Tieto’s Industrial Internet services take care of data collection, analysis and governance for their customers, and with the software added to the platform, machines can be optimized, controlled and even maintained automatically to create efficiencies across business operations. Also, Finnish companies such as Kone and Kemppi are developing external platforms themselves, where their partners and collaborators can access their data sources and operations, and in doing so create efficiencies through faster development.
Predix as a cloud-based PaaS (platform as a service) claims to enable industrial-scale analytics for asset performance management (APM) and operations optimization by providing a standardized way to connect machines, data, and people.
In five years, Company name could be a platform provider. Facilitating a platform is a difficult task, because the company often has to satisfy multiple market needs by connecting them together.
Platform providers are the owners and operators of specific platforms, which allow others to connect via the platform to create value for each other. For example, Slack, CarbonCulture, Uber and AirBnb are platform providers that in principle only offer the platform and let others connect through it. For platform providers, the most attractive quality is being able to gather data and collect revenue based on how well the platforms are able to scale their operations. In the cases mentioned above, being the platform that most people turn to in a certain area grows the business exponentially.
Slack is a fast-growing messaging software, which allows teams within an organisation and across organisations to chat with each other and share information. The skyrocketing popularity of Slack is to a large extent due to its platform nature: Slack allows all sorts of other applications and bots to be integrated to it smoothly, making it the indispensable work companion of a digital era employee.
CarbonCulture is an open platform designed to help people and businesses use resources more efficiently. The UK startup monitors workplace carbon use and suggests ways to improve efficiency and save money. CarbonCulture works with the Cabinet office, 10 Downing Street, Tate Modern, University College London and Cardiff Council (to name a few).
Next steps towards Company name’s success
Hyperconnectivity enables a new framework of value creation, demonstrated in the six value creation models. Company name identified what its desired positions for the next five years are in this framework. Additionally, to create successful value creation models in the changing competitive environment, Company name needs to understand the following conclusions of the Hyperconnected business environment at large:
- From Company name’s point of view, digitalization and other megatrends require more resource efficient ways of operating. Companies in all industries are affected by this change.
- Nevertheless, digitalization and the new environment do not necessarily change the basic tenets of strategy: to gain competitive advantage, Company name has to be able to differentiate itself to command a price premium, operate at a lower cost than its rivals, or both.
- The New Competitive Environment is defined by the opportunities allowed by Hyperconnectivity - the Internet of networks, people, things, machines, and computers enabling intelligent operations using advanced data analytics for transformational outcomes, that redefines the landscape for individuals and organizations alike.
- The new opportunities are defined by six identified value creation models: smarter products and services, real-time directed resources, resource efficiency, data commercialization, x-as-a-service models, and platforms.
- These six new value creation models can be used by Company name either separately or in combination with each other to create significantly more value. Applying any of them in a resource efficient way provides Company name with a real win-win situation.
To be successful in the hyperconnected business environment, Company name needs to take following steps:
- Design a new business model based on chosen hyperconnected value creation models.
- Append resource efficiency into the other value creation models.
Company name’s value creation models have synergies. They should not only use one model, but rather try to combine many of them into their business model. The value creation models are also context specific: they can be applied to certain parts of business. Businesses are complex systems that rarely derive value from one only source. The image below explains how the megatrends shape the competitive environment, how this change in the competitive environment offers new ways to create value, how six identified value creation models are dependent on the technology stack, how there can be other possible ways of value creation to arise and how companies need to make strategic choices regarding their business development.
As the challenges related to issues such as climate change, resource scarcity and population growth in the context of increasing interdependency are understood, the organizations that shape and operate our everyday lives must change too. The organisations need to account for solving these problems at the same time as they fulfil our daily needs. If an organization understands development in a longer timeframe, the best option for organizations is to apply any kind of value creation, strategy or business model in a resource efficient way.
If you want to read more about the Hyperconnected World, check out the scenario report “The Garden and the Streets”, which discusses how hyperconnectivity impacts on Company name and society at large. You may also want to read a summary of the 5 most notable tensions researched in the scenario report on our blog.
More information on the research project can be found on nakedapproach.fi.
You can also contact the writers of this report directly:
Risto Lätti, firstname.lastname@example.org, +358 40 932 9520
Johannes Koponen, email@example.com, +358 41 540 3608
Johannes Mikkonen, firstname.lastname@example.org, +358 40 569 4948
Roope Mokka, email@example.com, +358 44 040 0413
Juha Leppänen, firstname.lastname@example.org, +358 40 700 6585
Johanna Lampinen, email@example.com, +358 50 480 0284
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