Top 5 Smart, Connected Product Strategy Mistakes

In the November cover story of Harvard Business Review, How Smart, Connected Products Are Transforming Competition, authors Jim Heppelmann, president and CEO of PTC, and Professor Michael Porter of the Harvard Business School, examine how the changing nature of products is altering industry structure and the nature of competition.

According to the research, smart, connected products are enabling breakthroughs in operational effectiveness and differentiation, and redefining value chains and industry structure. These changes create valuable new opportunities for competitive advantage, and also raise a new set of 10 strategic choices for executives to consider.

Heppelmann and Porter emphasize that in a smart, connected world each choice will involve trade-offs, and together must reinforce one another to define a coherent and distinctive overall position for the company.

But the efforts by executives to seize these new opportunities do come with new and unique challenges. Some of the greatest strategic risks include:

  • Adding functionality that customers don’t want to pay for. The ability to include a new feature in a product doesn’t mean that you should. There could be no clear value proposition for the customer, and adding enhanced capabilities and options can reach the point of diminishing returns due to the cost and complexity of use.
  • Underestimating security and privacy risks. Smart, connected products open major new gateways to corporate systems and data. This requires companies to step-up their security and take responsibly for being the stewards for customer product usage data.
  • Failing to anticipate new competitive threats. New competitors offering products with smart, connected capabilities (such as connectivity and embedded software) or performance/service-based business models can emerge quickly and reshape competition and industry boundaries.
  • Waiting too long to get started. Competitors and new entrants can gain a foothold, begin capturing and analyzing data, and move up the learning curve if you move tentatively or take too long to develop and deploy a smart, connected product strategy.
  • Overestimating internal capabilities. The shift to smart, connected products will demand new technologies, skills, and processes throughout the value chain (e.g., data analytics, systems engineering, and software application development). It is crucial to have a realistic assessment about which capabilities should be developed in-house and which should be developed by new partners.


To learn more, download the full report from, How Smart, Connected Products Are Transforming Competition.

This work contains material first published in “How Smart, Connected Products Are Transforming Competition”, Harvard Business Review, November 2014.