Understanding the Business Value of Intelligent Products

for Product Development in Manufacturing Industries

Manuel Holler Falk Uebernickel Walter Brenner
Institute of Information Management, Institute of Information Management, Institute of Information Management,
University of St.Gallen University of St.Gallen University of St.Gallen
Unterer Graben 21 Unterer Graben 21 Unterer Graben 21
CH-9000 St.Gallen CH-9000 St.Gallen CH-9000 St.Gallen
[email protected] [email protected] [email protected]

ABSTRACT maintained in the middle-of-life stage. Finally, the product may be

Intelligent products are transforming manufacturing industries and refurbished, recycled, or disposed in the end-of-life stage [6, 7].
offer new opportunities for business innovation. As little is known This transition beyond the point of sale commonly goes in line
about the business value of intelligent products for product with a change in information sovereignty: Once out in the field,
development, this exploratory paper aims to provide guidance. manufacturers have very restricted access to information about the
Empirical data from case studies and focus groups and a real usage and functionality of their products [6,8,9]. Research
structured literature review suggest that a positive impact on every [10,11,12,13] shows that product usage data are highly valuable
product development stage exists. More specifically, findings for the development of future products, yet product developers
propose that intelligent products enable (1) transparency rarely get quantified, reliable feedback on a large scale.
generation on market opportunities, (2) specification of However, within the far reaching digitalization in manufacturing,
requirements, (3) customer- and user-centric product portfolio traditional industrial products and machines get empowered by
planning, (4) design and process planning for usage, (5) digital technologies [14,15]. Augmented with sensors, networks,
shortening and replacing of physical prototyping and field testing, and processors, physical products become “intelligent” and obtain
and (6) superordinate benefits. With the inherent limitations of a “sensing, memory, data processing, reasoning, and
case study approach, we supply scholars and practitioners with communication capabilities” [8:480,16]. These intelligent
first exploratory insights into this emerging research field. products hold the promise for unprecedented growth:
Management consultancy McKinsey [17] forecasts the quantity of
CCS Concepts connected devices from 25 billion to 50 billion in 2025,
• General and reference ➝ Empirical studies • Computing competitor Oliver Wyman [18] predicts this number even to 75
methodologies ➝ Modeling and simulation • Applied computing billion already in 2020.
➝ Engineering. For product developers, intelligent products afford to make the
whole product lifecycle transparent and enable access to in-depth
Keywords product usage data as foundation for the development of future
Business value; technology affordance; intelligent product; products. In this context, several authors [6,8,10,12] note
product development; manufacturing industries. individual, solitary benefits, yet a comprehensive overview on
resulting affordances does not exist. Thus, the overall purpose of
1. INTRODUCTION this study is to explore the business value of intelligent products
Both researchers and practitioners agree that the capability to for product development in manufacturing industries. To fulfill
bring new products in an effective and efficient way to market is this objective, we undertake and analyze case studies and focus
pivotal for today’s manufacturers [1,2,3,4]. Intensified by the groups. Thereby, we are guided by the following research
rising relevance of services in the industrial context (product- question:
service-systems) [5], pure physical products become increasingly [RQ] “What is the value of intelligent products for product
commodities and need to be developed at the best possible rate. development in manufacturing industries?”
Thereby, the generic lifecycle of an industrial product may look The remainder of this paper consists of five sections: In section
like as follows: In the beginning-of-life stage, the product is two, the background with foundational concepts and related work
conceptualized, defined, and realized. After it is sold to the is introduced. Section three outlines the applied research
customer and user, the product is utilized, serviced, and methodology with both case study and literature review approach.
Permission to make digital or hard copies of all or part of this work for In section four, affordances of intelligent products for product
personal or classroom use is granted without fee provided that copies are development are presented and exemplified by the aid of insights
not made or distributed for profit or commercial advantage and that from the case studies. Section five critically assesses these
copies bear this notice and the full citation on the first page. Copyrights findings and establishes a connection to prior literature. Finally,
for components of this work owned by others than ACM must be we close with a summary, implications, limitations, and future
honored. Abstracting with credit is permitted. To copy otherwise, or work.
republish, to post on servers or to redistribute to lists, requires prior
specific permission and/or a fee. Request permissions from
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DOI: http://dx.doi.org/10.1145/3012258.3012266
2. BACKGROUND activities and disciplines that describe the product and its
production, operations, and disposal over the product lifecycle,
2.1 Intelligent Products engineering disciplines, and supply chain with the result of a
Literature offers several notions when it comes to describe comprehensive product definition”. From a process perspective,
products or systems with intelligent properties. Table 1 provides a product development is usually divided into the stages (1)
review on concepts related to intelligent products applied in requirements elicitation, (2) product planning, (3) development
different scientific disciplines. Although most listed concepts are and process planning, and (4) production [27,28]. For the
rooted in the computer science domain, specific constructs are subsequent steps of this paper, we utilize this framework as it
dominant in specific research streams: Intelligent products [8,16] provides a comprehensive, but yet concise structure to organize
are used in the context of product lifecycle management, whereas the business value. From a holistic perspective, product
cyber-physical systems [19,20] prevail in production and development may be viewed as an integral part of product
manufacturing literature (“Industry 4.0”). Information systems lifecycle management – a business strategy of managing a
scholars introduced the term digitized product [14,15], while their company’s products across their lifecycles [6,7] – covering the
colleagues from marketing and management shaped the notion early stages.
smart, connected product [21]. Internet of things [24,25] can be
viewed as an overarching paradigm. Regarding commonalities
and differences, Novales et al. [26] identified (1) hybridity, (2) Table 2. Evolution of product development [3]
connectivity, (3) smartness, (4) digitized product-service bundles, Time of emergence Perspective on product development
and (5) digitized product ecosystems as core building blocks of R&D/engineering management - Product
1960s & early 1970s development as an R&D or innovation
such digitally enriched physical products. As we locate our work
project
in and contribute to the domain of product lifecycle management, Marketing - Product development as a
this paper utilizes the term intelligent product. 1970s & early 1980s
market-driven activity
Organization - Product development as an
Table 1. Review on concepts related to intelligent products 1970s & early 1980s
organizational process
Concept Conceptualization Late 1980s & early Strategy - Product development as an
“(…) contain sensing, memory, data processing, 1990s element of product/firm strategy
Intelligent
reasoning, and communication capabilities (…)” Operations research - Product development
products Late 1980s & early
[8:480,16] as a sequence of development/production
“(…) are integrations of computation with physical 1990s
steps
Cyber- processes. Embedded computers and networks monitor Information technology - Product
physical and control the physical processes, usually with feedback Mid-1990s development as an IT-enabled innovation
systems loops where physical processes affect computations and process
vice versa (…)” [19:1,20]
“(…) digitization makes physical products
Digitized
programmable, addressable, sensible, communicable, 2.3 Related Work
products
memorable, traceable, and associable (…)” [14:725,15] Adjacent studies touching the intersection of intelligent products
“(…) consist of physical components, smart components and product development can be found in various research
Smart,
(sensors, microprocessors, data storage, controls, communities. Principally, the field of product development and
connected
software, and operating system), and connectivity manufacturing, information systems, technology management,
products
components (ports, antenna, and protocols) (…)” [21:67] operations research, and computer science literature may supply
“(…) possess a unique identity, are capable of
an appropriate knowledge base.
Smart communicating effectively with their environment, can
objects retain data about themselves, deploy a language, and are The scientific field of closed-loop product lifecycle management
capable of making decisions (…)” [22:284,23] [8,9] engages in seamless and multi-directional information and
“(…) everyday objects can be equipped with identifying, data flows across all lifecycle phases. Furthermore, the research
sensing, networking, and processing capabilities that will field of product avatars [29,30] addresses capturing, managing,
Internet
allow them to communicate with one another and with and sharing of product-related information along the lifecycle for
of things
other devices and services over the Internet (…)”
design, manufacturing, and service purposes. In addition, big data
[24:261,25]
and analytics in the product lifecycle gains attention. Beside
lifecycle-spanning works [31], articles address distinct issues
2.2 Product Development & Product along the stack from identification, collection, storage, and
Lifecycle Management analysis of product usage data [32]. A correspondent example is
In simplified terms, product development comprises all tasks from the field of feedback-driven software engineering in computer
the detection of a market opportunity to the shipment of the science [33,34], where operational data serve as foundation for
finished product [1,2,3,4]. As focal process in manufacturing future optimizations.
companies of any kind, extant literature on product development To condense the existing body of knowledge: First, in contrast to
is vast. Management [2,3] as well as engineering [27,28] the utilization of product usage data for maintenance purposes, the
disciplines occupy various perspectives. Following Nambisan [3], application for development purposes is only sparsely addressed
Table 2 supplies an overview on the evolution of product [10,11]. Second, extant work is highly specific and context-
development over the last 50 years. Interpreted as R&D or dependent, a comprehensive business benefit perspective has not
innovation project in the 1960s, marketing, organization, strategy, been occupied. Finally, conceptual works are predominant,
and operations research affected product development over the empirical studies have not received a lot of attention. Efforts to
next decades. Since the 1990s, product development can be conceive the business value come from many different places, yet
regarded as an IT-enabled innovation process. it is still challenging to grasp the phenomenon.
In one of the most current conceptualizations, Eigner and
Roubanov [27:7] denote product development as a set of “all
3. RESEARCH METHODOLOGY officer” and “Head of technical IT”. The interviews were
accomplished between 06/2015 and 01/2016. Thereby, the course
3.1 Methodological Foundations of the interviews was steered by a questionnaire [42]:
The goal of this study is to explore the business value of Introduction, informant’s and organizational entity’s background,
intelligent products for product development in manufacturing current product development strategies, processes, and
industries. In order to address our guiding research question, we information systems, scenario identification, and conclusion.
selected an exploratory, qualitative research design and conducted During the scenario identification [40,41], paper-based scenario
several case studies [35,36] and focus groups [37]. In addition, we templates (scenario title, qualitative description, input-processing-
triangulated the empirical data with findings from a structured output-related information, and comments) were utilized to
literature review [38,39]. For the sake of scientific rigor and compile the scenarios in a standardized format. Interviews which
transparency, both streams are outlined hereinafter. had an average duration of 64 minutes were recorded, anonymized,
We decided for a scenario-based procedure as “scenarios are ideal transcribed, and analyzed with computer-assisted qualitative data
for exploring and defining the behavior of systems involving analysis software [43,44] NVIVO.
people in complex business procedures” [40:21]. In accordance In the case organization DELTA (diversified portfolio), focus
with Carroll [41], scenarios can be regarded as qualitative groups [37] within an enterprise-wide digitalization panel on
descriptions of activity sequences. Thus, for our context, we intelligent industrial equipment acted as principal source of
define a scenario as a specific, narrative description how data evidence. In eight workshops with a duration of 90 minutes
from the middle-of-life stage (“product usage”) may be harnessed (introduction, participants’ and organizational entity’s background,
for beginning-of-life objectives (“product development”) to exemplary scenarios presentation, individual ideation, group
enhance future products. discussion, results presentation, and conclusion) with senior staff
3.2 Case Study Research from technology- and management-related functions, further
For the empirical approach, we applied case study research scenarios were explored. The peer-to-peer data collection was
following Yin [35] and Eisenhardt [36], enriched by focus groups underpinned with sources [35] such as management reports.
following Morgan [37]. A case study represents an “empirical
inquiry that investigates a contemporary phenomenon within its 3.3 Literature Review
real-life context, especially when the boundaries between To ground our work in the existing body of knowledge, we
phenomenon and context are not clearly evident” [35:13], which performed a structured literature review. From a methodological
pertains to our phenomenon of interest. Table 3 gives insights viewpoint, we were directed by the well-established approach by
regarding the involved case organizations and sources of evidence vom Brocke et al. [38], including underlying Webster and Watson
[35]. To create this selection, we applied purposeful case and [39]. We strive to concentrate on research outcomes, target the
interviewee sampling until saturation. Special emphasis was identification of central issues, and cover the literature
placed on an industry-overarching approach covering the range representatively. To conceptualize the topic and consider all facets
from engineer-to-order to make-to-stock-planning businesses. All beyond domain-specific terminologies, a concept map with
included case organizations have recognized the potential of relevant terms was developed. With the purpose to include the
intelligent products. most relevant contributions, we searched peer-reviewed journals
and conferences through prime scientific databases. For the key
Table 3. Case organizations and sources of evidence word search we utilized the search string “(“product development”
Case organizations OR “product engineering”) AND (“usage” OR “operational” OR
Involved
ALPHA BETA GAMMA DELTA “middle-of-life” OR “lifecycle” OR “feedback” OR “closed-loop”)
Special Logistics Automotiv Diversified AND (“data” OR “information”)” in the publication title and key
department
machinery trucks e systems portfolio
s
+ +++ ++ +++
words (*publication title search only). With the goal to obtain
Product currency, we went back fifteen years, considering a time frame
3 3 2 from 04/2001 to 04/2016. Table 4 summarizes the performed
developme
interviews interviews interviews literature search and results.
nt
Innovation 8 focus
manageme 1 interview 1 interview 1 interview group Table 4. Literature search and results
nt workshops Database Results Net hits
Informatio AIS Electronic Library 0 0
2
n 1 interview 1 interview EBSCOhost 11 3
interviews
technology Emerald 3 1
+++ Large > 1,500mn EUR revenue PAIS Index 65 13
+++ Medium 500–1,500mn EUR revenue Science Direct* 579 12
+++ Small < 500mn EUR revenue Web of Science* 9 4
Interim results (database search,
In the case organizations ALPHA (special machinery), BETA 667 33
inclusion/exclusion)
(logistics trucks), and GAMMA (automotive systems), 15 semi- Final results (duplicates, inclusion/exclusion,
61
structured interviews [35] represented the main source of evidence. forward/backward, recommendations)
We included informants with strategic and operative orientation
from product development, innovation management, and The initial key word search added up to 667 articles which
information technology. Exemplary responsibilities were for dropped to 61 publications for in-depth investigation, after
product development “Head of engineering design” and “Senior applying specific inclusion and exclusion criteria, removal of
engineer product simulation”, for innovation management “Head duplicates, forward/backward search process, and
of innovation and technology” and “Project lead strategic product recommendations by experienced scholars and professionals.
platforms”, and for information technology “Chief information
Utilizing the standardized templates, existing scenarios were developers and innovation managers to detect white spots, hidden
extracted from the papers. customer needs and ideate new products and services. As no one
Finally, scenarios from both case studies and focus groups and occupied the market for these undiscovered customer needs so far,
literature review were gathered in a case study database. the revenue potential seems vast.
Intersecting and multiple scenarios were eliminated. In sum, the “An important use case, that I see, is to know how the customer
scenario identification resulted in 20 concrete, independent, and usage really looks like. Currently, we cover this through
industry-neutral scenarios. To identify the business value, we selected reference customers and experiences from service
mapped the scenarios onto the presented product development technicians. But there are scarcely data that really show how
framework [27,28]. the customer usage across a broad front really looks like. In the
detection of their needs, new revenue streams are hidden for us.”
4. RESULTS (BETA, Project lead advance development)
In the case studies, focus groups, and literature review, we
explored the business value of intelligent products for product 4.2 Specification of Requirements
development in manufacturing industries. Figure 1 depicts this The second affordance of intelligent products for product
value by the aid of a simplified model. In sum, product usage data development in manufacturing industries is the specification of
can be leveraged for all sub-cycles of the product development requirements. In the early uncertain, but decisive stages of the
process in a value-adding manner. Six main affordances were product development process, product usage data from the field
identified: Intelligent products enable (1) transparency generation hold the potential to enhance requirements management in
on market opportunities, (2) specification of requirements, (3) different ways. On the one hand, through quantitative feedback,
customer- and user-centric product portfolio planning, (4) design assumption- and experience-based individual requirements from
and process planning for usage, (5) shortening and replacing of product engineers can be specified and quantified. On the other
physical prototyping and field testing, and (6) superordinate hand, through quantitative feedback, also qualitative and
benefits. In the following, these affordances are explicated in subjective statements from machine operators, service technicians,
detail and illustrated with insights from the case studies. fleet managers, and customers can be contextualized and

Figure 1. The value of intelligent products for evaluated. The comprehensive collection of product usage data
product development in manufacturing industries. enables a holistic elicitation of market and customer base
requirements, differentiated for example by country, industry, or
4.1 Transparency Generation on Market customer group. Product developers and requirement engineers
appreciated product usage data especially for these early stages as
Opportunities this phase is often afflicted with uncertainty, but entails
The first affordance of intelligent products for product consequences for the whole product lifecycle.
development in manufacturing industries is transparency
generation on market opportunities. As a matter of principle, two “In our department, the machine development is mainly
main approaches to leveraging product usage data became grounded on experiences from engineers and machine operators
apparent during the case studies. On the one hand, the systematic which can be very subjective. When starting new machine
collection and elimination of failures as foundation for the development projects, it is seldom clear what the requirements
development of future products (reactive approach). On the other for the machine are.” (ALPHA, Head of control engineering)
hand, the systematic collection and exploitation of all available
product usage data as basis for the development of future products 4.3 Customer- and User-Centric Product
(proactive approach). Whereas the first working mode is Portfolio Planning
legitimate, the real value seems to reside in the second working The third affordance of intelligent products for product
mode. Exploratory screening through product usage data development in manufacturing industries is customer- and user-
(“generation of visibility”) may act as inspiration for product centric product portfolio planning. The comprehensive collection
of market and customer base requirements opens in the even in the market. In-use data from previous products could
subsequent step of the product development process the support a more targeted development and help optimize testing
possibility to optimize product offerings in a multifaceted manner. conditions of this expensive phase.” (BETA, Project lead
For example, products can be differentiated according to advance development)
preferences in their countries or industries. Beyond this
comprehensive view, the possibility of customization of 4.6 Superordinate Benefits
individual products for selected customer groups arises. With The sixth affordance of intelligent products for product
reference to the temporal progress, new chances for the development in manufacturing industries are superordinate
development and offering of product upgrades – which even benefits. This affordance appeared in two different variants. First,
closer correspond to evolved customer needs – originate. Product in addition to function- and department-specific applications,
portfolio strategists acknowledged these opportunities in view of cross-functional and -departmental affordances addressing
the fact that nowadays innovation shifts from producer-focused to multiple stakeholders are conceivable. For example, product
a more open and collaborative innovation. usage data facilitate internal and external collaboration and
“You can track key dimensioning criteria of the installed vehicle support argumentation for cost controlling. Second, in addition to
base, for example the average vehicle speed or the average product-related applications, service-related affordances are
height of lift. If you recognize some patterns over time, you can imaginable. For example, customers can be supplied with
adapt your truck portfolio according to these developments in customized engineering services and engineering-relevant data for
the correspondent market segments.” (BETA, Project lead own developments or product improvement analyses can be sold
strategic product platforms) to the customers.

4.4 Design and Process Planning for Usage 5. DISCUSSION

The fourth affordance of intelligent products for product Previous literature has appreciated product usage data from
development in manufacturing industries is design and process intelligent products particularly for maintenance and service
planning for usage. During the actual design activities, several purposes (feedback loop from middle-of-life to middle-of-life)
manifestations were detected. For the conceptual development, [10,11]. The obtained insights strengthen the existence of rich
product usage data facilitate the specification of essential design opportunities for product development objectives (feedback loop
criteria. Furthermore, product usage data afford a more precise from middle-of-life to beginning-of-life) as well. Empirical data
dimensioning of product-embedded modules such as pneumatic, from case studies and focus groups suggest that a positive impact
hydraulic, or electric aggregates which can be selected more on every product development stage exists.
purposefully and do not have to be oversized. In addition, “It is smarter to leverage product usage data to design a
simulation models for mechanical and thermo-fluid simulations product without failure than to employ product usage data to
can be refined by replacing assumptions with more grounded predict its failure.” (BETA, Senior engineer advance
input data. Accordingly, calculation results become closer to development)
reality with input data closer to reality, necessary safety factors in
product dimensioning can be reduced. During the process More specifically, it became evident that product developers
planning activities which prepare manufacturing processes, ideated most scenarios for the early stages with a declining
product usage data can be harnessed to support supplier selection tendency for later stages. Product developers seem challenged by
grounded on previous quality behaviors of their components. the “fuzzy front end” when working on new products. Reviewing
quality management literature [28,45], the costs to modify product
“Dimensioning with finite-element-methods or other simulation designs and clear out failures ascend with every passed through
methods is inherently very accurate. Yet, the most accurate lifecycle stage by the factor ten. Merging these both aspects, it
algorithm and high computing performance is useless if the becomes striking that the value of intelligent products particularly
underlying assumptions of the simulation model are wrong or appears in the early stages of product development.
too inaccurate.” (ALPHA, Head of engineering design)
Nevertheless, in the highly rivaling market environment, each
affordance makes an impactful contribution to a relevant
4.5 Shortening and Replacing of Physical challenge: The first affordance (“transparency generation on
Prototyping and Field Testing market opportunities”) empowers manufacturers with ideas and
The fifth affordance of intelligent products for product options to new revenue streams in the mature product business [5].
development in manufacturing industries is shortening and The second affordance (“specification of requirements”) pave the
replacing of physical prototyping and field testing. In this late way to data- and information-driven decision making [31]. The
product development stage, value is generated as prototyping and third affordance (“customer- and user-centric product portfolio
field testing is highly resource-intensive compared to resource- planning”) supports manufacturing businesses to keep pace with
efficient virtual methods. This affordance comprises primary and the paradigm shift from producer-dominant to customer- and user-
secondary effects. First, by the aid of exactly specified dominant innovation [46,47]. The fourth affordance
requirements, customer- and user-centric adjusted product (“development and process planning for usage”) refines current
portfolio, and strict design and process planning for usage, the methods in modeling and simulation [27,28] by integrating real
extent of physical prototyping and field testing can be minimized. data and information from the field towards a closed-loop product
Second, for the residual, necessary physical prototyping and field lifecycle management approach [8,9]. The fifth affordance
testing, product usage data can be harnessed to arrange the test (“shortening and replacing of physical prototyping and field
bed closer to reality. Test environments, test cycles, and test loads testing”) is of relevance within the increasing shift to virtual
can specified more targeted for the subsequent operations. product development methods [27]. The sixth affordance
“Sometimes we do not realize failures before the finished (“superordinate benefits”) contributes to the accelerated and more
product is already in the testing phase or – in the worst case – collaborative design process [1,2,3,4] by reducing inefficiencies.
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