The Future of Competitive Strategy

Introduction

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©2022 MIT. This excerpt is from The Future of Competitive Strategy by Mohan Subramaniam, published by The MIT Press.

robots, or production and assembly units communicate to streamline workflows. With sensors in their products, production ecosystems help unlock new value by channeling product-generated data to drive new product performance–related features and services. This is possible when prod- ucts adapt their attributes to individual customers’ usage data. In addi- tion, the outcomes of such services can be tracked, improved on, and displayed in the form of tangible metrics. GE introduced “outcome-­ based” services for its aircraft engines based on assurances of reduced fuel costs as pilots followed the engines’ guidance when flying. GE’s revenues from these services are in addition to those derived from its traditional jet engine sales. Other firms can take a similar tack through offering smart products that adapt to customer usage data and improve product outcomes. For example, Oral-B’s smart toothbrushes improve users’ brushing habits by tracking and displaying brushing outcomes on smartphone apps. Caterpillar reduces the downtimes of its machines on construction sites based on sensors that monitor real-time usage and wear and tear. These are examples of how firms can unlock new value from their production ecosystems. R&D, product development, marketing, sales, and after-­ sales service units—when they are digitally connected to receive, ana- lyze, generate, share, and react to sensor data—can deliver such value. The more widespread and intricate a firm’s sensory network is across such units, the larger its production ecosystems. Consumption Ecosystems Consumption ecosystems differ from production ecosystems by focus- ing on connections external to their value chains. Consumption eco- systems stem from a network of external entities that complement a product’s sensor-derived data. A retailer like Starbucks that offers coffee services to a driver based on data transmitted from sensors in a car is an example of a complement. A parking spot that digitally signals a car that it is empty and available is another example. Unlike the units and entities in its value chain, a firm does not directly control this network.