Consumer Durables – ‘Brace’ for the IoT Storm…or ‘EmBrace’ it

No business can afford to not evaluate the impact of new technology, proactively. While for some businesses, technology will make people more productive, for many others, it is completely changing the way the business will run.

"We have all heard about the disruption that the photography space saw. Most other Consumer Durables might see their Polaroid-Kodak moment pretty soon." 

Let’s take the example of Room Air Conditioners (RACs). As the Internet of Things (IoT) becomes more pervasive, consumers will demand a lower Total Cost of Ownership (TCO), superior maintenance & service levels and greater control on the device itself. The need to control the RAC characteristics will increase dramatically – temperature/humidity, switch on/off times, programmed energy consumption, to name a few.

As a result, RAC makers (the Original Equipment Manufacturers – OEMs) will have to prepare for 5 significant changes:

• A fundamental shift in the Bill of Materials: In cars, Tesla did away with the engine of the car and substituted it with batteries and a supercomputer. Similarly, ACs could do away with thermostat and remotes in favor of mobile applications and even the coils might become lower cost to make heat exchanging more efficient.
• Completely redesigned service network: Consumers will demand lower TCOs and product + service + replacement might be get integrated. OEMs (and maybe ODMs) will need to add sensors to the RAC but more importantly, think of servicing and predictive maintenance analytics as core to the business. As the focus on TCO grows, servicing will no longer just be the consumer’s problem.
• Integrated and lean Supply chain and parts management: Supply chains from component sourcing to end-product fulfillment to after-sales service are getting integrated. This would be even more possible as RACs become ‘connected’ and OEMs dig their heels deeper in the serving network.
• Value-oriented marketing and branding: It is but natural that the RAC marketers will also need to tune their marketing messages from ‘season discounts’ and ‘fancy front grill’ to ‘lower cost per hour of cooling’ and ‘99%+ uptime’.
• A new set of disruptive competitors: Tesla did not come from Ford. The Touch-screen smartphone did not come from Nokia. The digital camera did not come from Kodak. RAC of the future might not come from an incumbent if the incumbents live in denial or don’t bring the change themselves.