Gartner forecasted that there will be 6.4 billion electronic devices connected to the internet by the end of 2016, and expects that number to approach 20.8 billion by 2020.
The industry is bracing itself for some major changes. A large number, if not all, of electronics manufacturers are about to find themselves submerged in brand new waters. That's because the Internet of Things (IoT) is set to make huge waves. In fact, Gartner forecasted that there will be 6.4 billion electronic devices connected to the internet by the end of 2016, and expects that number to approach 20.8 billion by 2020. Other analysts are making even sunnier estimates for the market. In order to bring this forecast to fruition, connectivity needs to be seen in previously “unconnected” devices.
The majority of these items are going to come from new connected devices that have no real history of digital communication. Refrigerators that text you when you're out of milk, light bulbs that know when to turn on and off, and a bunch of stuff that we can't even imagine yet, there will probably be a toilet seat that can send an instant nag message when it's left up. No matter what the device does, connected devices all share one thing in common: They hold data.
Figure 1: There will be 6.4 billion electronic devices connected to the internet by the end of 2016, and expects that number to approach 20.8 billion by 2020.
Traditionally, manufacturers of consumer products are used to the customer relationship ending at the point of sale. In the new world of connected devices, that relationship will extend much further into a long-term consumer lifecycle. As products become populated with rich user data, they will need to be ethically addressed throughout their product lifecycles.
Here's the good news: The groundwork has been established. Cell phone manufacturers faced a similar issue with the advent of smartphones and have made adjustments to their business models that I described last month. So what did the cell phone industry learn that can benefit other electronics manufacturers that are currently at the same precipice?
Shorter product lifecycles: Replacing outdated devices
Not only do manufacturers have to plan to deal with a coming assault of products loaded with user data coming back through supply chains, the velocity is going to be much higher than before. The more connected and technologically advanced new offerings become, the shorter their lifecycles. Think about your current refrigerator. When do you replace it? Probably not until it breaks, or until you can finally afford that kitchen remodel and get the one that matches your trendy new countertops.
If you owned a connected refrigerator, a new technology lifecycle is introduced that can shorten it's time with each owner. Maybe it's cool today that it sends you a message when you are running low on milk, but in four or five years, a new model that has even more impressive features comes out (technology moves so fast, I won't even try to guess what that new tech will be). Customers will begin to dump devices not because they are broken, but because they are outdated.
Most connected products come back to manufacturers, and they do so at a rate equivalent to their lifecycles. That's the double whammy: More products will come back, and they will do so more often. Smartphone manufacturers use their vast networks of retailers as collection points for used phones, and that is a model that more manufacturers can benefit from exploring.
Evaluate secondary markets
Most products which are about to become connected lack forethought to end of life; the cell phone industry had a similar issue. As of the last few years, recovery value of smartphones created a significant secondary markets to offer trade-in value for used devices, leading to new "second lives" where they are refreshed and resold. Will this same idea apply to a refrigerator? Maybe so. Even though the exact model for optimising product lifecycle will vary widely between manufacturers, success may come from shifting thinking away from the sale being the end game to treating each connected device as a "product as a service."
Given the higher expectation of reuse, manufacturers will need to investigate the secondary market relative to their abilities to ensure proper information handling and destruction. They will also need to assure that secondary markets can easily and effectively provide confidence to customers to "wipe" information from history. Most will find they have to do it themselves or rely on a network of authorized third parties.
Sustainability is the wolf at the door
In the past, sustainability has been a nice perk to have, but tough to justify if it didn't result in some sort of profitability. Pressure for sustainability is increasing from two primary sources: consumers and legislators. A better long-term strategy is to assume sustainability now and figure out how to make it profitable because someday soon, there is likely to be no choice. The coming circular economy demands that manufacturers assume responsibility for keeping their products out of waste streams.
Smartphone manufacturers are eking every bit of value out of returned products. Every rare earth metal, every screw and every screen that can be reused, is. This is best achieved by employing the same assembly lines that construct products to deconstruct them. Using knowledge of the coming availability of these components can be used to formulate smart strategies for future designs. It is also important for manufacturers to begin establishing relationships with partners who can use or recycle the parts that they can't now.
As more and more devices become connected in expected and unexpected ways, manufacturers must prepare for what amounts to a completely different way of managing supply chains. The cell phone industry has blazed a trail, but each product category will see its own model that is unique and optimised singularly.