Integrating Information and Communication Technologies in Established Products: A New Managerial Challenge?

Paper in proceeding, 2005

This paper addresses the integration of information and communication technologies into established mechanical engineering products. By adding e.g. sensors, communication capability, and real-time information systems, the customer value provided by mature products can be substantially increased, thus offering an interesting way of differentiation for products that are normally exposed to severe price competition. The specific task of integrating information and communication technologies in established products appears to have some specific characteristics, and does not seem to fit into earlier suggested typologies of innovation. An explorative in-depth case study of an attempt to undertake this type of innovation at the Swedish multi-national company Alfa Laval has been performed. The empirical observations show that the most difficult challenges confronted in order to realize the innovation in question regarded the management of technological competences and business model changes, both showing increased complexity. The latter involved substantial changes to the revenue model used, involving the use of license fees, in order to make it possible for the innovating firm to appropriate a large share of the additional value created by the new and improved product.