Wouldn’t life be easier if business transformations just happened because we willed them so?
But we know that Digital Transformation is much more complicated than a board mandate, giving someone a trendy title, or creating an intra-organizational task force. And I have yet to meet a real wizard that can magically transform any product into its digital equivalent.
I work with dozens of executives and managers who wrestle with what digital transformation means for their businesses, their products, their customers, their partners and even their careers. The organizations we work with make, sell and support physical products with complex technology stacks and dozens of components. These businesses are envious of their friends in banking, retail, hospitality, entertainment or even just software. Digital transformation in those markets largely meant moving from paper to digits. Then the digits were moved from on-prem servers to the cloud with serverless computing and APIs to expose, integrate and automate processes behind the scenes.
Many of these companies already provided a service-based product. So moving to an “as a Service” business model was an evolution, not a revolution. I don’t mean to trivialize these changes. They do require thoughtful product management, new pricing models, new billing systems and more. But for traditional software and services businesses - there was no need for an entire new technology stack requiring completely different organizational DNA.
The world of Connected Products is an entirely different story.
Physical products were already complicated. They have electrical and mechanical components, multiple semiconductors and compute modules for data processing and memory, not to mention complex embedded software. Twenty+ years ago, manufacturers started connecting these devices to networks for remote monitoring and periodic software updates. While customers benefited from the new connectivity features, the primary benefactors of remote access were internal stakeholders - mostly field service and customer support teams.
The floodgates opened.
It didn’t take long for the entire Connected Product value chain - product managers, engineering teams, operations and support organizations, customers, resellers and more - to see the power and possibilities. Everyone wanted access to data and events. With the right systems in place, device data could be federated globally to various systems and applications.
Senior management and shareholders saw a new business opportunity.
Software companies moved aggressively to SaaS models and away from perpetual licensing. Hardware-based product companies wondered if they could do the same - and how. This is an existential opportunity - find a way to convert a simple hardware product into multiple new services and even the holy grail of device as a service (DaaS). Connected product companies got their first glimpse of recurring revenue beyond a maintenance contract. Everyone in the value chain has been devising plans to deliver this transformative value, and to monetize it.
For hardware-based companies, this truly involves a new technology stack, a different group of software engineers and product managers, an entirely new ecosystem in the cloud. For the past 10 years I’ve watched the same CEOs and other leaders wrestle with how to do this, and when.