Three Waves Of IT, Smart Devices and The New Basis for Competition

Change is all around us, that is for sure. Smart devices, smart homes, smart cars and more are all topics on the lips of nearly everyone I speak with nowadays, even at home. Just the other day one of my kids (she’s 10) said “Daddy, I can’t wait until the Apple watch arrives. I want to use it to listen to music, text my friends and buy hot chocolate at Starbucks.”

The aggregate of all these connected devices is referred to as “connected living.” As we all increasingly become more and more connected we’ll start seeing the shape and trajectory of our lives and our society transform. Every individual, from digital immigrants, digital natives to the digital dependents shall be impacted.

I recently came across an article from Michael Porter and James Heppelmann “How Smart, Connected Products Are Transforming Competition.” The article helped me understand the impact of what is happening around us. It also provided me with background detail on how we got here and insight as to where we’re going. Porter and Heppelmann suggest that we’ve now experiencing the third wave of information technology’s (IT) evolution.

According to the authors the first wave of IT’s evolution began in the 1960s and 1970s. During this time IT increased individual productivity by helping people automate and streamline their tasks. The authors then explain how the second wave of IT’s evolution, the introduction of the Internet beginning in the 1990s, shepherd in an era of unprecedented global coordination and integration, which yet again ratcheted up global productivity, not just at the individual level but at a global-systems and supply chain level. Finally, in the  2000s the third wave of IT’s evolution has washed ashore. In this wave IT has embedded itself in to our products. I’d like to add we’re also seeing it embed itself into our bodies too with implants, including implants like smart teeth.

The authors suggest that as a consequence of our products now being “smart” and their improved performance and new functionality the world’s economies are experiencing an “unleashing” of new productivity gains. 

Many agree with Porter and Heppelmann’s assessment. In fact, Cisco has put a number to the productivity gains that lay ahead. Cisco has predicted that the Internet of Everything, i.e. the collection integrated IT-enabled products, will generate over $19 Trillion in net economic value for the world’s economies over the next 10 years. Also, Forester Research has a prospective on IT’s impact.  It has noted that IT-empowered products are changing the basis of competition, which is important to understand if you want to grab a share of the $19 Trillion. Back in 2011 Forester Research proposed that  IT-enabled products will bring the dawn of a new 20 year business cycle. It refers to this business cycle as the The Age of the Customer. In The Age of the Customer, according to Forester Research, individual customers, armed with their IT-enabled products, have the power to influence competition far beyond what was possible before and that the mastery over data, rather than manufacturing, distribution and information as in prior decades, will be the new basis for a firm obtaining a competitive advantage.  

It is difficult to predict exactly how all of this will unfold over the coming years but no matter what happens it is going to be exciting. Good luck!