On a single day in November 2014, Chinese smartphone maker Xiaomi sold 1.16 million Mi phones. Each week, the company ships a new batch of “incrementally better” phones that incorporate user suggestions in a matter of weeks. The company has been rewarded with an avid fan base that largely eliminates the need for PR or marketing and is now the world’s third-largest smartphone manufacturer.
As consumers, we expect the world to shape itself around us. Consumer power has been growing for the past several years, and with it, an expectation of products and services that not only meet our particular tastes but also our particular needs over time. But engaging the customer isn’t always straightforward. Xiaomi has invested significant energy into its user community, and product managers spend half their time in user forums to fuel the company’s extreme adaptivity and responsiveness. And even if you’re listening to customers, what if they don’t (or can’t) articulate what they want? What if they have needs they aren’t even aware of yet?
With the Internet of Things (IoT), the customization and personalization of our world can be as dynamic as the lives we live. IoT-enabled products open up a world of consumer-oriented products and services that deliver value through data collected automatically, without the inaccuracy of self-reporting or the inconvenience of manual collection or transmission. Value will come from at least two distinct areas: 1) insights derived from collective data generation and insights—Waze, for example, uses collective traffic data to provide information that helps users to reach their destination faster or more safely; and 2) personalization derived from individual use data—the Nest Learning Thermostat incorporates a user’s behavior (e.g., turning the thermostat down before bedtime) into the automatic schedule to use energy most efficiently around the individual’s preferences and habits.
Automatic feedback loops that revise and customize a product are powerful. We’ve talked before about the many ways digital platforms have allowed customers to more easily provide and access feedback on products and services. IoT-enabled automatic feedback loops takes customer input well beyond user reviews, focus groups, and rating systems.
This will increasingly become a question for all products or services: what data are we generating and how could data add more value? Consider services such as personal styling service Stitch Fix and music service Pandora that already rely on learning algorithms to learn an individual consumer’s preferences and deliver increasingly relevant products or content. What might happen if clothing were “sensored” such that Stitch Fix knew not only what items from each shipment the user sent back but also which items the user wore most often (and which languished in the back of the closet) or which items the user ended up wearing together.
How might these developments drive future growth and innovation? In February of this year, performance apparel-maker Under Armour made a $710 million bet on connected fitness with the acquisition of fitness app firms MyFitnessPal, Endomondo, and MapMyFitness. On the one hand, the 130 million unique users that came with these apps provide Under Armour with a vast amount of passive data about consumer use and behavior (sleeping, eating, activity)—collective data—that can be fed into product design to make apparel products better suited to active consumers’ needs. But possibly the more interesting opportunity for Under Armour is to integrate personal data collection into the apparel itself, creating true wearables that not only track, but respond. Biometrics, data on the personal level, could be constantly monitored by the apparel and might be used to inform the wearer and provide insight about their health, behavior, and performance. With more sophisticated product materials, we could imagine the biometric data being used to adjust to the wearer’s needs and enhance her performance in real-time.
While most consumers aren’t athletes focused on peak performance, IoT-enabled feedback is an indicator of the increased power of the consumer. In response to decreased brand loyalty and increased demand for products that fit the individual, companies are involving consumers, enabling customers to build what they want so that products become more customized and personalized. Companies with strong, automatic product feedback loops will have an advantage, being positioned to continuously shape the product around the consumer.
For consumer-oriented companies, strong product feedback loops will be more than a “nice-to-have.” While consumers gain power, data—collective and individual—will continue to go where it creates the most value. Whoever figures out how to harness data to make a better product or service will get more customers, and more valuable data, over time.
John Hagel III, director in Deloitte Consulting LLP, is the co-chairman of the Deloitte Center for the Edge based in Silicon Valley. John Seely Brown is the independent co-chairman of the Deloitte Center for the Edge.