Smart, connected products are revolutionising competition across industries. These are products imbued with sensors, processors, software and connectivity capabilities, enabling data collection, analysis and sharing. They’re transforming competition by shifting the sources of value creation and differentiation, altering industry structure and forcing firms to rethink their strategies.

Three powerful capabilities are driving this shift: monitoring, control, and optimisation. Monitoring allows companies to track products’ condition, internal processes, or external environments. Control involves programming product operations and adjusting to changing circumstances. Optimisation involves using data to improve product performance and even redesign the product itself.

These capabilities are not only transforming product value and competition but also business structures. Traditional product manufacturers are becoming service providers, and new ‘system orchestrators’ are emerging, who bring together diverse product systems.

This transformation raises significant strategic choices for firms. They must decide where to play in the new value chain and how to capture value. They must also consider the implications for their business model and organisational structure. Dealing with these challenges requires a deep understanding of how smart, connected products are changing the nature of competition and the basis of competitive advantage.

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