It is the ultimate corporate torture. Profits, once plentiful, are withering away, and not just because of the world’s broad economic problems. Profits are still available in the industry, but they are migrating to some other player, and there doesn’t seem to be any way to recapture them.

Today, though, the Internet and other technologies remove the barriers that kept many companies from going after certain types of profits. If you are smart enough, you can get them back.

Let me be more precise:

When an industry is young, profits are available to everyone, whether in manufacturing, distribution, finance, or service. But as the industry matures, manufacturers and distributors find their pieces of the pie diminish, while the finance and service portions get bigger and bigger.

Manufacturers lose because competitors can copy innovations. Likewise, distributors lose because it is hard to keep competitors from horning in. Finance, though, can do well because, as products such as cars become ubiquitous, people feel compelled to buy them even if they can’t afford to pay cash. Service companies can continue to generate significant profits because competition is limited by the reality that it is harder to compare services than to compare products.

Technology accelerates this maturing process. For one thing, the Internet makes it easier to compare manufacturers’ and distributors’ prices and to copy competitors’ ideas.

It might seem to be a straightforward proposition for manufacturers and distributors to move into finance and service, but it isn’t at all simple. Often, partners stand in the way. Even if the finance and service providers were ceded their territory in the early going because a manufacturer saw bigger profits elsewhere, finance and service companies now control the game because they have the direct relationship with customers. Construction-equipment maker Caterpillar (www.caterpillar.com) may want to provide services to construction companies that use its heavy equipment, but it can’t afford to alienate dealers, who could switch allegiance to Japanese rival Komatsu Ltd. (www.komatsu.com) and take many customers with them. Regulators also may be barriers. Auto makers would like to have more control over their network of independent dealers, but many states have laws providing strong protection for dealers.

Still, even as technology speeds the move of profits away from manufacturers and distributors, it also creates ways to chase down those profits more effectively than has been possible in a very long time. The key is to build intelligence into products. In other words, give products a way to monitor their performance, correct problems, and communicate back to the manufacturer.

Adding intelligence gives manufacturers three crucial things:

 DIRECT ACCESS TO THE CUSTOMER. Manufacturers no longer get their feedback filtered through dealers. It comes direct from the products.

For instance, auto maker General Motors Corp. (www.gm.com) has built the OnStar communications system in its cars so that the cars’ numerous sensors can tell the company when a part is about to break or when service is needed. GM has also given itself a platform for selling a host of additional services directly to customers—services that its dealers can’t resent because they couldn’t possibly provide them. Already, GM is selling security services, such as the ability to automatically call 911 if a collision causes the air bags to deploy. GM is also offering concierge services, which let a driver ask an operator for directions or for advice on, say, a good restaurant nearby. Over time, GM will add services such as those that let drivers request stock quotes from mutual-fund concern Fidelity Investments (www.fidelity.com) or have articles from the Wall Street Journal (www.wsj.com) read to them.

Similarly, Merloni Elettrodomestici (www.merloni.com), an Italian maker of home appliances, has sold more than a million appliances, mostly washing machines, that can be connected to the Internet via phone lines and expects 80% of its product line to have Internet access by 2005. Merloni, like GM, will know when its products are about to need repair and, by monitoring usage and performance, will be able to build better products in the future.

 THE OPPORTUNITY TO ACT. While GM typically hasn’t known when its cars will need service and has had no direct involvement in that business, it is using technology to perhaps put itself at the heart of the maintenance business. GM will have the best information possible about when cars need work and will be able to find some profitable way to mete the information out to dealers, who would be delighted to find some way to keep business that might otherwise go to local service stations.

The same is true of Merloni in the business of maintaining washing machines. Merloni also will get a crucial bit of information that will help it fend off other manufacturers. Merloni will know when its machines are on their last legs. Some 80% of washing machines are purchased to replace an existing machine, so knowing that someone is in the market before that person even starts shopping around will give Merloni a great opportunity to retain customers. In addition, Merloni has come up with a pricing scheme that may arrogate to itself most of the financing business. Merloni plans to offer to give away washing machines in return for a payment of 50 cents a wash, to be paid automatically via online credit-card transactions.

 ACCESS TO THE FULL PROFIT POTENTIAL OF THE INDUSTRY. By effectively financing customers’ purchases, Merloni figures it will collect $700 a machine over five years, compared with an average of $450 from outright purchases.

GM, which has seen its manufacturing profits come under pressure, positioned itself well enough in the financing business early on that it now gets about half its profit from financing and half from making cars. By 2010, I estimate that GM will earn a third of its profit from manufacturing, a third from finance, and a third from the information services that OnStar will let it sell directly to customers. GM will have a role in almost every profitable part of the auto industry.

Service may provide greater opportunities than finance, because the service business is so fragmented. In an industry with just a few big manufacturers, there might be 20,000 service dealers. A coordinated, national offering by a major player based on superior information about when and how to maintain a product could pull back to the manufacturer a lot of the profit that had slipped away over the years.

In any case, somebody is going to benefit by embedding intelligence in products. It might as well be you.

Sviokla is vice chairman of DiamondCluster International Inc. and co-founder of its Center for Market Leadership. He can be reached at john.sviokla@diamondcluster.com.