By: Randy Littleson
I recently read an article published by McKinsey & Company, “Tackling IT complexity in product design”, and in the article, McKinsey stated, “The growing demand for electronics-based product enhancements finds companies across industries struggling to keep costs in line amid fast-changing technologies and the constant pressure for product upgrades.” Be sure to check out the article...it discusses how as more products are loaded with technology, tangled IT designs can undermine product strategies...it is a good article on the impact of embedded technology and product design.
What was interesting was that article reinforced what we hear constantly from companies that we talk to... more and more high-tech manufacturers are making the decision to move away from manufacturing multiple (sometimes 100s) unique physical devices and instead are choosing to build a single device (or a significantly reduced number of devices) and then use embedded software licensing to differentiate their devices with feature segmentation.
Consistently we are finding that many of today’s high-tech manufacturers are grappling to understand the potentially higher initial cost per unit due to more computing power and memory versus the advantages of purchasing more of the same which creates potential for higher volume discounts from the vendors. In addition, because of device commoditization, they are looking for ways to grow recurring revenue streams rather than selling a static device once.
We have also found that those high-tech manufacturers who offer more dynamic feature segmentation in the device via embedded software licensing are able to significantly reduce manufacturing and operations costs. And if they are able to electronically update/upgrade devices in the field—and only those devices that are entitled to receive updates/upgrades— they can save considerable time (no longer does the user have to return the device to the manufacturer for the upgrade) as well as protect their revenue by ensuring only those devices that are entitled...are receiving the updates/upgrades.
Case in point, Siemens Building Technologies was able to reduce the manufacturing complexity of a very sophisticated product line down to just a few models.
What steps are you taking to reign in skyrocketing manufacturing and operations costs?