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Thursday, February 17, 2005

Digitisation, Services & Changing Business Models

we recently covered in our blog a NYTimes article on how technological advances in automobiles with increased digitsation is forcing automobile manufacturers and users to change habits and revise expectations. I came across this from redherring outlining compulsion to reinvent and leverage changing technology landscape and leverage business services model better irrespective of the industry. The Drivers identified (with my edits and comments):

- One will be the shifting of functionality from hardware to software. As more and more digital assets get integrated to products, it becomes intrinsically more and more easy to add new additional functionality to products. The mobile phone and personal computer industries are at the forefront of this trend: no two digital systems procured at different times – say computers, mobiles, even automobiles are really identical. Some of the difference is a matter of the product's physical history; some of it comes from programming; and a lot of it is user-created content.
- The next driver is pressure on companies to make electronics greener. This no longer means just bringing down energy consumption. The epicenter of green design involves two things: eliminating toxic materials like lead and benzene from electronics and packaging, and designing products to be easier to recycle or reuse. The Seattle Times recently reported that Panasonic designers now "conduct a 40-step review that, among other things, looks at the ability to recycle materials used in their prototypes, and how quickly products can be taken apart for recycling." As a result, a Panasonic TV used to have 13 types of plastic, and require over two minutes to disassemble; now they have two kinds of plastic, and can be taken apart in half the time.
- A third driver is the shift many companies are trying to make from being manufacturers and purveyors of physical goods, to being service providers. The mobile phone industry is following this strategy, giving away phones in exchange for service contracts. An even more interesting example is… carpets. A few years ago, Armstrong carpets made a determined effort to make their carpets more environmentally friendly (many industrial fibers are tiny hazardous waste sites); they also put a phone number on the underside of the carpet, to schedule pickup of an old carpet. (This also made sense because, once they had changed the chemistry of their textiles, Armstrong could recycle a larger proportion of their old carpets.) Finally, they realized that they had backed into a new business model: customers were no longer buying carpet, they were buying the use of the carpet.While this example may look little far fetched, the underlying message is definitely true - utility computing, apps on taps - on demand, elance economy are all broad signs of the emerging world with digital footprints therein.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
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