Electronics

Global industry agenda


The future of electronics starts now

Get ready to reinvent: Capitalize on the next wave of platforms, data, insight and customer experience

Disruptive forces

Powerful global forces outside the control of any one company
are compelling rapid change for the electronics industry.


Multi-industry forces are a current reality


Platforms transform industry design

Pressure on margins and intense competition are challenging the standard strategy of differentiating through features and devices.

Platform proliferation and convergence service opportunities into the industry.

Changing market expectations and financial dynamics demand new value creation decisions, many relating to introducing ecosystems and partnerships.

Virtualization and the artificial intelligence (AI) revolution change the value equation

AI and virtualization are promising but complex technologies, with data and software increasing their impact.

Building on enterprise assets continues to add value and economic growth.

However, the adoption of AI requires training and organizational discipline.

Internet of Things (IoT) devices and data create an unmanageable tsunami

The rapid and continuing adoption of IoT contributes wave upon wave of fast-moving data.

This chaotic convergence of “things” at the edge needs to communicate, learn and resolve conflicts amongst itself.

Existing tech was not created to support such expansive volumes and velocity. The result? Infrastructure fragility.

Organizations are inventing, adopting and optimizing at breakneck speed

Innovation and convergence blur lines across ecosystems, compounding this challenge.

At the same time, AI can mask technology’s complexities.

This makes technology more accessible but makes differentiation more challenging.

The relationship between markets and workers is shifting

The digital divide is expressing itself in new ways.

AI and technology biases are coupled with digital privilege, creating a growing gap between empowered consumers and those left behind.

This is true in the workforce as well, with departing workers taking their knowledge with them. Organizations need new approaches to talent acquisition.

Digital technologies

Redefining possibilities in the electronics industry, digital technologies will compound disruption and have hyper-exponential impact.


AI icon

Artificial intelligence

AI icon

Artificial intelligence

  • Facilitates reasoning about specific situations
  • Drives actions in context

edge icon

Edge computing

edge icon

Edge computing

  • Helps enable personalization and autonomy for devices
  • Enhances their ecosystem roles

cloud icon

Cloud computing

cloud icon

Cloud computing

  • Powers new services and business models through low cost, ubiquitous availability and consumability

VR icon

Virtual and augmented reality

VR icon

Virtual and augmented reality

  • Redefines human-computer interaction
  • Creates new experiences and services
blockchain icon

Blockchain

blockchain icon

Blockchain

  • Protects data shared across companies, reducing friction and risks
  • Fuels new business models

View our IBV Blockchain/IoT thought leadership library

Iot icon

Internet of Things

Iot icon

Internet of Things

  • Generates a wealth of new data
  • Creates new ecosystems of devices, providing new services

AI icon

AI-inspired architectures

AI icon

AI-inspired architectures

  • Helps create new models of computation, vastly expanding the reasoning power of AI

robotics icon

Robotics

robotics icon

Robotics

  • Improved training and safety facilitate smaller scale use of robotics at a lower cost

3D Printing icon

3D printing

3D Printing icon

3D printing

  • Allows mass customization, custom designs and just-in-time management of spare parts

Emerging consequences

Each manifestation of disruptive forces has the ability to shape a new future and affect the customer, the enterprise and the market.


Number 1 graphic

Customer impacts

AI fosters digital reinvention and opens up product differentiation opportunities, challenging traditional competition

AI fosters digital reinvention and opens up product differentiation opportunities, challenging traditional competition


User experience: AI embedded in a device enables user experience differentiation. However, it can also obscure the underlying hardware or product differentiation, requiring companies to find new ways to demonstrate value.

Disintermediation: Cloud-based AI platforms have helped create ecosystems that can disintermediate manufacturers. If differentiation is based on the ecosystem, electronics companies must find new ways to distinguish their products and services.

Trust: Participation requires an increasing level of trust – whether driven by companies protecting customer data or by legislation that could impose penalties for not doing so.

Data proliferation: As technology platforms become a commodity and data emerges as a key to differentiation, it becomes easier for data-savvy competitors to enter the market.

New application spaces: Wearables, 5G, blockchain and sensors create opportunities to expand into new application spaces.

Number 3 graphic

Enterprise impacts

Virtualization causes hardware commoditization, disaggregating value chains and driving the need to increase an organization’s speed and agility.

Virtualization causes hardware commoditization, disaggregating value chains and driving the need to increase an organization’s speed and agility.


Flexibility: Virtualization of computing resources, including storage and communication, drives enormous cost reduction and flexibility, enabling new products and services.

Commoditization: Virtualization can also promote commoditization, demanding new sources of differentiation in software and services.

Differentiation and scalability: Software-defined device functions create new opportunities for differentiation and also the potential for faster, more fluid scalability and
prolonged viability.

Data centers: Investments in cloud data centers continue to drive industry consolidation.

Ecosystems: Virtualization of non-core functions make it possible to obtain them from the ecosystem, shifting focus to core functions.

Change in the investment balance: Migrating development funding to software, services and surrounding ecosystem ventures changes the shape and value of organizations.

Number 5 graphic

Market impacts

Concentrated platforms both expand and limit strategic opportunities

Concentrated platforms both expand and limit strategic opportunities


Moving from value chains to ecosystems: Data platform companies become the orchestrators of the ecosystem while peripheral companies become participants. Data platforms become winner-take-all markets, with fewer but larger companies.

Power concentration: The number of horizontal platforms with core capabilities will rationalize into fewer platforms, diminishing value at their endpoints. Niche platforms will emerge but may take time to reach scale.

Data quality control and privacy: Core horizontal platforms expand the use of data for alternative purposes, with little transparency. Increased information sharing requires flexible integration of new data sources into business operations.

Market power: As more information is disseminated across platforms, questions emerge regarding what data and AI capabilities should be shared and what should be kept “in-house.”

Trust, transparency and bias avoidance are key as ecosystems share more data from more sources

Trust, transparency and bias avoidance are key as ecosystems share more data from more sources


Customer relationship: Electronics companies face a tension between sustaining direct relationships with their customers, and managing an ecosystem of partners that are also competing for customer influence.

Ownership: “Possessing the data” may not be sufficient. Data usage is expected to evolve to a permissions-based approach that balances control and access, with, for example, emerging personal data stores.

Ease of use: Understanding the tradeoffs between features and interactions can be challenging to product-driven organizations. Typically, these issues are more readily addressed through software and data. However, ineffective design in any area can increase the negatives: poor usability, AI bias, digital segregation, inequality and digital privilege.

Transparency: Companies need to understand data provenance and usage rules across their ecosystem. In many cases, there is little transparency, shared data, algorithms, and
obscure ownership.

Number 4 graphic

IoT data volumes and complexity challenge legacy infrastructure, interoperability and trust across ecosystems.

IoT data volumes and complexity challenge legacy infrastructure, interoperability and trust across ecosystems.


IoT chaos: Connecting large numbers of independent devices, particularly via IoT, has unpredictable effects. This chaos challenges traditional infrastructures.

Collaboration adds complexity: Communities of developers, spanning hardware, software and data, face threats related to interoperability, adjudication, data ownership and intellectual property protection.

Latency: Edge computing streamlines the flow of traffic from IoT devices and provides real-time local data analysis. 1 Increasingly, decisions will be made at the edge.

Data integrity: The range of the 4 Vs – variability, veracity, volume and velocity – and the differing quality and complexity of data sources reduce value, sow confusion and compromise security.

Intellectual property: Expanded ecosystems with additional hardware, software and data layers allow electronics companies to change their intellectual property strategies. This adds value by protecting investments and differentiating products.

Number 6 graphic

Product-focused businesses are under pressure and are challenged on margins and scale, yet software and data opportunities abound.

Product-focused businesses are under pressure and are challenged on margins and scale, yet software and data opportunities abound.


Commoditization: Electronics hardware is threatened with becoming commoditized or standardized. Perceived value moves out of the device and into the ecosystem of apps, content, and services. It’s a build vs. buy question. Core value you build, commodities
you buy.

Migration: Product-to-service transformation drives migration from discrete product sales to subscription models. Contrary to manufacturers’ core competency in engineering products, better software and rich context drive interactions.

Geography matters: Customization and localization will be increasingly deferred to software and services to allow for flexibility, speed to market and cost control.

Scale: More differentiation in hardware detracts from scalability. Yet more differentiation in software- and context-dependent services is simpler to scale up – and with lower margin costs.

Pressing challenges

Acknowledge and act upon industry challenges
in the near term to stay competitive.


Connecting ecosystems, data, products and services with integrated platforms requires rebalancing of organizational investments

Connecting ecosystems, data, products and services with integrated platforms requires rebalancing of organizational investments


  • Business platforms must include new capabilities and services, including data aggregation and management, using analytics for differentiated products.

  • The organization should rebalance design and development, based on data, so that hardware and software are equally interoperable.

Placing strategic bets to target new services and competitive differentiation

Learn more

Placing strategic bets to target new services and competitive differentiation


  • Leaders will use Digital Reinvention® to sense and respond rapidly to market opportunity.

  • Capability improvements come through new technologies (3D printing, blockchain, robotics, and so forth).

  • Integrated data and AI across the enterprise drive improved execution and operations.

Increasing organizational agility to both manage profit and capture new opportunities

Learn more

Increasing organizational agility to both manage profit and capture new opportunities


  • Greater ecosystem and platform engagement requires more openness and shared resources.

  • Solutions should address downside risk in a connected environment, going beyond individual products or services.

  • Roles and competencies evolve, leading to re-educating resources.

Transformational opportunities

Technology-enabled opportunities empower your organization to address pressing challenges and compete in the marketplace.


Reconfigure the enterprise and ecosystems to deliver solutions as a service

Learn more

Reconfigure the enterprise and ecosystems to deliver solutions as a service


Differentiation is necessary due to external threats to the value chain.

For deep competitive differentiation, shift focus beyond products and into software, services, analytics and AI.

Carefully manage the shift from Capex to Opex when refocusing
the business.

Design data-enabled businesses based on AI-enabled products

Learn more

Design data-enabled businesses based on AI-enabled products


Learn to participate in and successfully benefit from ecosystems that others control, but without being locked in. Evaluate your ability to establish new platforms. Don’t overreach if you can’t fully implement a vision.

Evaluate external data sources to extend value.

Leverage user-centric design to reach underserved markets and transform worker performance

Learn more

Leverage user-centric design to reach underserved markets and transform worker performance


Create a strategy and execution plan for delivering new experiences to the market, including prototypes using agile approaches.

Focus on enabling new skillsets for workers to increase productivity and satisfaction.

Start here to assess your readiness for
the future

Critical question 1

Are you ready to reinvent your business?

  • How will you center your product design and digital strategy around the user experience?
  • How quickly can your organization create and support data-enabled businesses?
  • Where could your processes and organization be more agile to pursue new opportunities?
  • Can you develop distinctive data- or platform-based assets and competitive differentiators that are easily scalable?

Critical question 2

Can you engage your partners and ecosystem for optimum benefit?

  • How should you build and manage the optimal ecosystem to extend and amplify products, insights and capabilities across the market?
  • How do you align your ecosystem(s) to strategic imperatives related to data, design and delivery?
  • Does your strategy make the most of growth opportunities and mitigate risks across partners and consumers?

Critical question 3

How can technology help you be agile, adaptable and scalable?

  • How can you embed more AI into differentiated solutions and agile operations?
  • How can blockchain utilities benefit your value chain and change the cost equation from supply chain efficiency to warranty management and field service?
  • How virtualized and flexible is your architecture?

Take action

Explore electronics industry solutions

Discover how IBM's breakthrough technologies are transforming the industry with smarter ways to do business, new growth opportunities and strategies to compete and win.

Access more IBM Institute for Business Value electronics industry research

Read business insights and recommendations in our library of electronics industry thought leadership reports built on primary research and analysis.

Connect with industry experts

©2018 IBM Corporation
18023618USEN-00