Companies across a wide range of industries are about to make networking a commonplace feature of the objects and devices we use every day. Internet connectivity for electronic devices—smart phones, PCs, book readers—is becoming a standard feature. But the next generation of solutions and devices promises to connect almost anything to global networks. Imagine cars that communicate with websites, energy systems that link to sensor networks, refrigerators that talk to microwaves, toys that interact across media devices and even digital pills that transmit data as they navigate the human body. In other words, here comes everything.
Accenture recently conducted 30 in-depth interviews with thought leaders across a broad spectrum of industries that will be major players in this new "network of everything": automotive, entertainment, energy, health care, appliance and toys and games companies. We have termed these organizations "next movers." They follow in the footsteps of the “first movers”—the telephony companies, handset makers and Internet services firms that laid the groundwork for a networking superhighway that already supports billions of devices.
Nearly all of the executives interviewed expressed a strong commitment to networking and anticipate that most of their major products will be networked within the next three to five years. However, respondents also highlighted a number of challenges that must be overcome: a lack of skills, evolving business models and collaborative relationships, and the need for development platforms that make possible the interconnectivity of billions or even trillions of objects.
Networking and business transformation
One of the things that distinguishes the next movers is their awareness that adding networking to a device is more than a "nice to have" feature. Rather, it is a transformational act that goes to the heart of the device’s value proposition. With ordinary consumer products, opportunities for interaction with the buyer occur only if something is wrong with the product, or if the person buys another or similar product in the future.
But a networked device establishes an ongoing relationship between the device maker and the device owner—something known as "persistence." The ability to have persistent relationships fundamentally alters how devices are marketed, priced, supported and used. Persistence creates an ongoing relationship with the consumer, the value of which is capable of surpassing the profitability of the devices and products themselves.
Persistence in nascent form is already a feature of the communications and high-tech marketplace. Microsoft, for example, relies on persistence to maintain its huge installed base of operating systems by downloading patches over the network on a regular basis. Mobile operators have successfully exploited persistence by up-selling data services to handset users—offerings which now account for about 20 percent of the typical carrier's revenues.
The next movers are following a similar path of discovery. One next mover told us: “Hardware is now a commodity. The differentiation is in the data.” We heard a similar sentiment expressed by product developers across a number of traditional industries. For example, an automaker said, “We won’t see much change in mechanical systems and in the chassis and other traditional technologies, but we will see more and more innovation in networked devices that assist the driver.”
The need for collaboration
One obstacle faced by many next movers is that networking is not a core competency, and thus few organizations have the skills in-house to lead the networking revolution. To cope with this capability shortfall, companies are taking collaborative approaches: by working with consultants, outsourcing providers, software companies, Internet companies, chip makers or PC manufacturers, next movers can obtain both technical capabilities and marketing advantage.
For example, one appliance maker that is preparing for the networking of kitchen devices is partnering with a PC manufacturer to develop a Wi-Fi-equipped appliance that links to the home computer and to the Internet.
Or take the recently announced example of a group of television manufacturers planning to introduce a new type of product: TVs that will give consumers the ability to view video websites along with more traditional programming. The sets will be based on Intel circuitry and Yahoo’s widget channel framework: an engine that will allow viewers to interact with and enjoy a rich set of TV widgets—small Internet applications designed, in this case, to complement and enhance the traditional TV experience.
One executive whose company has been involved with this project told us: “This type of partnership is going to drive [the growth of] home networking because it is not just us or Yahoo or Intel, but numerous manufacturers that are building on the same widget platform. It's out there. Anyone can license it. And any manufacturer’s device will work with it.”
The need for interconnectivity
One thing that's compelling about a network of everything is that it presents consumers with the possibility of controlling all their devices simply and easily. Imagine a time when, as your car reaches a certain proximity to your home as you return from a trip, it could alert central controls in your house to turn on the air conditioner, unlock the doors and put your favorite music on the home audio system.
Behind such a vision, however, is a difficult technological feat: a common platform that can facilitate networking across different devices and services. Many of the networked products now coming to market are end-to-end solutions in which a single company manages the entire value chain—like Apple did when it developed the original iPod as a proprietary, end-to-end ecosystem.
Most next movers believe, however, that a proprietary platform is problematic because most companies have neither the resources nor the clout to dominate a market. Executives expect to see the emergence of value chains that allow individual companies to specialize in what they do best and to participate in an ecosystem that allows both developers and consumers to orchestrate functionality across many devices and services.
What kind of company is best positioned to provide that common platform? Network providers and mobile operators are likely candidates, though such companies should pay heed to several concerns expressed by the next movers with whom we spoke.
Many executives view the operators as insufficiently responsive. In the words of a medical device maker: “It might take six months to a year just to get through the negotiations with a large mobile operator to the point where they say ‘yes.’ But then a year or two could go by without anything happening."
To turn things around, operators should first make it clear that they want the business. They must open their networks to next movers, develop more flexible pricing models and develop a set of offerings that accommodate the diversity of devices on the horizon.
The need for new business models
A final challenge concerns the new business and pricing models necessary to profit from the network of everything. Part of what makes the addition of networking capabilities to a device transformational is how persistence facilitates—and often demands—new kinds of models for branding, pricing and distribution.
One-to-many platforms and models are one compelling way to monetize the network of everything. For example, Accenture Mobility Operated Services is a technology platform that permits device makers to reach a global market with a single deployment—a one-stop service that eliminates the need to negotiate certification, technology and business issues with individual telecommunications carriers.
The platform, based on open-source software, features an extensive set of interfaces to enable transactions across multiple organizations. It provides a common point of contact for identity management, billing, analytics, diagnostics and other services that exploit the persistence that comes with networked devices. With direct links to customer and billing systems, this kind of platform facilitates the new business models that next movers are interested in pursuing.
Figuring it out
Next movers are still exploring the ins and outs of the collaboration models, platforms and pricing strategies facilitated by networking. Because embracing the "network of everything" will be essential to achieving high performance in the future, the marketplace is certain to see multiple waves of innovation in the coming years.
Many approaches will coexist, and the market is unlikely to be dominated by a single model or clear winner. As one next mover put it, "You need to come in with a deck of cards instead of just one card. You have to figure out what the customer wants because that is ultimately who you are trying to satisfy."
Accenture
Andy Zimmerman is the global managing director of the Accenture New Business Group.
July 2009
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