In this month's newsletter, we outline how Connected Risk will transform Regulation
Why Data is a Decisive Asset For Insurance Companies
19 October 2015 | Blog Post
A fascinating new article published in the October 2015 issue of Harvard Business Review investigates the transformative nature of the IoT and the connected products that have the power to change and/or disrupt the modern world.
The article, titled How Smart, Connected Products Are Transforming Companies outlines a present and very near future where:
“The new capabilities and vast quantities of data that smart, connected products offer are redefining the activities of the core functions of companies—sometimes radically. As software and cloud-based operating systems become integral to products, new product-development principles emerge, manufacturing components and processes change, and IT security becomes the job of every function.”
One startling, opening paragraph in a publication that is not particularly given to overstatement, asserts:
“What is under way is the most substantial change in the manufacturing firm since the Second Industrial Revolution, and the effects are spreading to other industries, like services, as well.”
Smart, Connected Products, and Complex Risks Force Exposures Re-think
The authors believe that the evolution of products into intelligent, connected devices will completely reshape companies and competition.
In today’s world therefore:
“Smart thermostats control a growing array of home devices, transmitting data about their use back to manufacturers. Intelligent, networked industrial machines autonomously coordinate and optimize work. Cars stream data about their operation, location, and environment to their makers and receive software upgrades that enhance their performance or head off problems before they occur.”
The paradox is that in such a world, our machines, our constructions and products are autonomous yet connected at the same time. It is a strange concept to grasp yet grasp it we must if we wish to maximise the opportunity and minimise the inevitable risks.
Wearing our risk management hat, Russell Group is primarily focused on the risk aspect and how it potentially impacts our underwriting clients and their clients. As a business we have been at the forefront of a debate that is asking the question “How does the connected nature of risk today cut across traditional vertical industrial structures such as aerospace, shipping, offshore energy and, increasingly, financial services?”
According to the Harvard authors: “Smart, connected products can generate real-time readings that are unprecedented in their variety and volume. Data now stands on par with people, technology, and capital as a core asset of the corporation and in many businesses is perhaps becoming the decisive asset.
“As the ability to unlock the full value of data becomes a key source of competitive advantage, the management, governance, analysis, and security of that data is developing into a major new business function.”
In this new environment smart, connected products need to be significantly re-thought in terms of design as product development moves from mainly mechanical engineering to proper “interdisciplinary” systems engineering, particularly as products mutate into complex systems containing software.