The story will be similar in other industries. For example:
• Retail stores. Physical stores will face increased price and quality pressure because of apps like Red Laser, which displays reviews for a product, and the prices it’s selling for at neighboring stores and online, when the customer uses a smart phone to scan the bar code. Malls and physical retailers have long clung to the notion that once customers are in the store, they will want the immediate gratification of buying a product and taking it home. Yet with unlimited information about alternatives at their fingertips, more in-store shoppers might choose savings and free shipping from a cheaper supplier. It might not be long before location-based capabilities yield another level of price competition. For instance, Amazon could offer an additional 5 percent off to shoppers browsing its site from inside a Walmart store.
• Cars. There’s a saying that car companies make cars while everyone else makes money (on financing, warranties, repairs, insurance, and so on). But car companies could move in on these money-making opportunities by capturing usage and diagnostic data in real time. GM, for example, is already offering discounted insurance to customers of its OnStar remote security system.
• Medicine. Health-care providers will have to switch from seeing patients episodically to seeing them, in essence, every moment of the day. Even now, implantable sensors for people with heart problems can send a steady stream of data through a wireless device to a doctor’s office for evaluation. Over time, as sensors and wireless devices spread, doctors (or, more accurately, their computers) will start monitoring many patients for a whole array of health issues. The data will find its way into the public domain in some form, making it possible for patients to know which doctors are especially effective and creating new types of competition.
• Utilities. Utilities, which have barely innovated for decades, are now adding sensors throughout the electric grid and putting “smart” meters in homes and businesses to manage the grid more efficiently and get a better sense of demand. They will have to be able to vary the retail price of electricity in real time and relay that information to consumers and businesses instantly, so they can adjust their usage to limit demand when prices are high. Some utilities will handle the transition well, but many will not.
• Toys. Kids are migrating to higher-technology content earlier. That may be bad news for companies that sell dolls and blocks, but it’s good for those that provide entertainment on smart phones and tablets. Already, the social aspects of such devices are creating opportunities for innovators to reinvent toys and games. For example, many people now use phones to play a game of Scrabble over the course of several days, making a move whenever they have time.
The companies that operate in this new world had better be smart. Tomorrow, we’ll lay out key principles on what it takes.
Paul B. Carroll and Chunka Mui are cofounders and managing directors of Devil’s Advocate Group, a consultancy that helps businesses test their innovation strategies. They are also coauthors of Billion-Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years.