August 28, 2023
Software-driven transformation has become a critical part of product development, innovation, and maintenance. Across industries, enterprises are integrating software into their physical products to drive a more intelligent, connected, and autonomous product ecosystem and boost revenue.
Software is unlocking significantly more value in modern products and speeding up the innovation cycle at unprecedented rates, pushing organizations to keep up with constantly evolving consumer needs. Once thought of as an “add-on” to the product life cycle and value chain, software transformation is now the key to staying ahead of the competition and unlocking new revenue streams.
So what factors are driving this software revolution and influencing engineering leaders to invest heavily in this transformation? The answer is threefold: consumer, industry, and technology trends.
The expectations of modern consumers are constantly evolving. From personalized experiences, to tailored recommendations and purpose-driven brands, today’s digitally savvy customers are becoming increasingly difficult to please.
For this reason, no product today can exist as just a physical asset. Consumers want to be connected to one another -- and want their products to connect -- in seamless and innovative ways. This has made software a critical element across the entire product life cycle and is the solution to keeping consumer attention long-term. The goal for organizations is to maintain strong brand loyalty, and software transformation allows them to achieve this by introducing new business models, exposing new ways to engage with customers, and opening up new revenue streams.
Data also plays a key role. The software transformation process enables the collection of crucial user data that can reveal how the product is being interacted with by the consumer. These insights result in better and more targeted product improvements and updates of the software to provide a better user experience.
Beyond the customer, industries are constantly evolving and searching for the next best product or service. Faced with mounting environmental and customer pressures, organizations across sectors are looking for ways to define and differentiate alternate revenue streams -- a process that is significantly aided by connected products.
One example of this is the growth of as-a-service business models. The shift toward more subscription-based services has provided a win-win for customers and enterprises alike. While consumers feel that they are getting a more curated, holistic, and personalized experience, organizations are able to generate a continuous revenue stream and expand into a more advanced ecosystem.
What’s further, because of data privacy regulations, this servicization of products (also known as verticalization) allows for information and data sharing between organizations and third parties, resulting in even more cash flow. In this process, the data generated from connected products is sold to third parties, which means that the enterprise is incurring revenue from their third-party ecosystem on top of the profit they make from selling their services to customers.
Traditionally product-driven sectors such as automotive, life sciences, utilities and beyond have also shifted to become more software-driven industries. Consider the impact of advanced driver-assistance system on the automotive industry, or the growth of intelligent medical device design. The growth of these software-driven products and services has permanently altered the state of these industries.
The benefits of software transformation are especially prominent in the engineering sector. The intelligence and connectivity of smart products has resulted in improvements to the research and development process. Because these products generate large amounts of data, which details everything from product performance to maintenance needs and issues, manufacturers are able to access those diagnostics to improve their features in the early stages of development -- ultimately benefiting both the end-user and the enterprise.
It is no secret that technology is a great enabler, constantly advancing and unlocking new innovative products and services. Technological innovations such as 5G, IoT, digital twins, and beyond have accelerated products to even greater heights -- and transformed the customer experience significantly. Advancements in technologies like connectivity and artificial intelligence have enabled use cases that would have seemed impossible even just a few years ago.
Cloud is a major driver of software-driven transformation, as it supports the optimization, control, monitoring, and autonomy of a product. Cloud computing is a core component of intelligent products and services, hosting product databases, offering a platform to develop product software, and providing key data analytics to improve performance and personalization.
With enhanced technology comes improvements to the overall product life cycle. Because connected products have advanced far beyond traditional models, enterprises can develop new updates and releases at a much faster cadence. Organizations can now roll out upgrades over-the-air, substantially altering the product life cycle and shortening new product release timelines.
A prime example of this is smartphone upgrades. Before smartphones, cell phones operated on a contract platform. Many consumers kept the same phone for years with no upgrades or updates, utilizing the same features and ‘applications’ as when the phone was purchased. Even with the advent of the smartphone, upgrades were still few and far between. Today, smartphones are rolling out new upgrades and models at such a fast pace, it is almost impossible for consumers to keep up. This is a result of technology evolving so quickly, and innovation happening so continuously, that customers will never be left without a new feature, color, camera, and beyond.
It is important to note that while data represents a massive opportunity to push the boundaries of what products can deliver, experts are seeing a disproportionate rise in product complexity -- especially in the digital sector. New product requirements result in new software functions, which in turn increases the complexity of the network and the software architecture.
Software transformation is at the top of the Intelligent Industry agenda -- and for good reason.
The combination of high customer expectations, paired with the speed of industry and technological advancement, should signal to leaders that software transformation should be high on their priority list and push them to evaluate how to incorporate these initiatives into their roadmaps.
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