Digitally Transforming Innovation and Experience
Digitally Transforming Innovation and Experience
Digitally Transforming Innovation and Experience
EXECUTIVE SUMMARY
In this white paper, IDC explores what digital transformation means to product and service innovation,
and the importance of tying customer experience to these processes. We will focus on five key digital
transformation initiatives:
▪ Enhancing the role of the product and service innovation core team
▪ Closing the digital skills gap
▪ Establishing a digital thread for new product development & introduction (NPDI) and cross
ecosystem collaboration
▪ Cutting edge technology: Developing combinations of 3rd Platform technology for maximum
digital value
▪ Striving for a future that is interconnected, automated, converged
We believe technology and organizational investment around these areas will lead to successful
product and service innovation and compelling customer experiences.
INTRODUCTION
The scope of product innovation has evolved dramatically in recent years as manufacturers digitally
transform their businesses. As the data, processes, and people that touch innovation continue to
expand, manufacturers need to unify data, digitize processes, and extend collaboration. At the same
time, manufacturers must establish the decision support systems and tools that accelerate speed to
market and value, as well as drive continual improvement of products and customer experiences.
Product, supply chain, manufacturing, and service domains in organizations, along with their partners,
are working more closely together, enabled by 3rd Platform technologies which include cloud,
analytics, mobile, AR/VR, and IoT. IDC's definition of 3rd Platform technologies is depicted in Figure 1.
According to IDC Research, 3rd Platform tech investment is growing at almost 14%, vs. flat to negative
growth for 2nd platform, classic enterprise application technology. The future of innovation is data,
knowledge, ecosystem, customer-centric processes and 3rd Platform digital technologies that will
enable the required rapid collaboration, development, and decision support.
The challenges driving digital transformation (DX), and more specifically the digital transformation of
design, innovation, engineering, R&D, and experience are numerous:
Organizations are realizing that product and service innovation, production, and customer experience
need to be focus areas of any digital transformation strategy.
The end goal of digital transformation is not only operational excellence, but also consistently
delivering excellent products, services, and experiences to customers in the fastest, most effective way
possible. How can organizations proceed toward this goal? IDC has identified five key focus areas,
which we outline in the following sections.
1. Expand the Role of the Product and Service Innovation Core Team
Organizations that take a use case approach to determining how they digitally transform innovation will
be the winners in their respective industries. This approach will enable a focused effort that considers the
current situation with the company, market, and customers, goals and objectives, and technology
required to support each use case. IDC's digital transformation taxonomy provides guidance on the key
programs by industry and role that companies need to focus on for digital success. Digital transformation
is complex and means different things to different manufacturers. Having a use case framework as a
guiding force will empower the organization to leverage the constant flow of data from products,
processes, and people, continually in a targeted way that ultimately produces consistent quality products
and experiences. This new DX taxonomy for R&D and engineering is as follows in Figure 2.
FIGURE 2
Crowdsourced
Case based Design for data Generative Agile application Thinking supply Omni-experience
application/prod Digital twins
learning monetization design lifecycle delivery chain design
uct ideation
Source: IDC
Dynamic customer demand, multi-dimensional supply chains, and complex, customized products
mandate that manufacturers establish a digital innovation platform to connect products, supply chain,
manufacturing, and service. Manufacturers must leverage partnerships across their supply chain, as
well as across other industries to grow and nurture the ecosystem required to innovate and deliver
products, services, and experiences that their customers and consumers want, when they want. There
are multiple domains inside and outside organizations that must work together to achieve a consistent,
high quality customer experience with products and services. DX use cases such as lifecycle analytics,
advanced digital simulation, digital twins, and collaborative, open innovation are enablers of this
extended, digital approach to innovation.
FIGURE 3
Company lacks the skill sets that are required for Digital Transformation
Need more staff to meet speed to market goals, and/or competitive pressure
Loss of staff due to attrition (i.e. leaving for competitor, layoffs, etc.)
Other
Of course, these approaches will only be successful with the proper digital transformation leadership in
place. As such, much as the chief digital officer (CDO) title rose to prominence a few years ago, the
roles we see emerging today require someone who is both digitally savvy and can drive cultural and
organizational change. In most cases, this is the CDO, the CIO (chief information officer), CMO (chief
marketing officer), or CTO (chief technology officer) taking on the role of DX facilitator — that is, a
broadening of their skillsets is required. We have also seen new roles emerge such as head of
industrial IoT, and transformation leader for different groups across the business including operations,
engineering, and manufacturing. Regardless of title, it is only through this leadership and ecosystem
teaming approach that organizations will thrive in this dynamic, digital world in which we live.
The NPDI process is a key part of this digital innovation transformation, supporting this unified, digital
approach to the creation, development, production, operation, and service of products and assets.
With multiple platforms in place at many organizations — product innovation platforms, thinking supply
chains enabled by AI, ML, analytics, digital manufacturing, and service lifecycle management — NPDI
serves as the unifying process that links related data and workflow across each domain. While NPDI is
not a new process, what is new is digitally transforming NPDI by creating a closed loop through 3rd
Platform technology. Through these digital technologies, NPDI today is more accessible, more
collaborative, more innovative, and more effective for disparate global teams in products,
manufacturing, supply chain, and service that perpetually need to work together to ensure customer
needs are met, as if those teams worked in the same office.
Speed, in the connected world in which we live, is the name of the game, and a connected, digitally
transformed NPDI process is critical to compete in the market today for limited customer and
consumer bandwidth. The reality is at most manufacturing organizations today, multiple domains
inside and outside the organization do not "talk to each other," resulting in a disconnected, fragmented
This new, digitally transformed workflow connecting different roles and groups across the organization
must be automated and intelligent, with most decisions human-led yet augmented by a constant flow of
curated information accessible by role and specific process on any device. The ultimate state has
customer and demand intelligence at its core, and is a closed loop from asset, product, and customer,
back to design, engineering, R&D, supply chain, and manufacturing for iterative improvement. In today's
connected world, the opportunity exists for manufacturers to create intelligent data models that facilitate a
digital thread and multiple closed loops along the NPDI process (e.g., between marketing and product
management; design and R&D; manufacturing and supply chain; engineering and service) — and of
course, one overall closed loop that connects asset, product, and customer, back to the manufacturer.
Establishing a digital thread across the business is fundamental to drive innovation and growth across
digital engineering, customer experience, and ecosystem. Ecosystem collaboration can be internal
/external to organizations, or external through work with suppliers and partners within and outside an
organization's core industry. Increasingly, manufacturers are collaborating outside their industry to
build cross-industry partnerships for enhanced value and growth. Table 1 shows common challenges
within industries and examples of this cross-industry collaboration:
TABLE 1
Automotive & Mobility Quality, safety, customer ▪ High Tech ▪ Connected, autonomous vehicles
experience
▪ Government ▪ Smart Cities, Passenger economy
Life Sciences Time to market, regulation, quality ▪ High Tech ▪ IoT patient monitoring
Oil & Gas/Energy Production efficiency, flexibility ▪ Automotive ▪ Energy grid distribution, Electric vehicles
The increased investment today and in the next 12 months in 3rd platform technology is depicted in
the Figure 4 from the recent IDC 2019 Product and Service Innovation survey. Clearly, manufacturers
see the value in making these investments to drive innovation.
FIGURE 4
1 - Not at all important 2 3 4 5 - Very Important 1 - Not at all important 2 3 4 5 - Very Important
Source: IDC Manufacturing Insights 2019 Product & Service Innovation Survey, n=300
Companies realize that if they don't digitally transform their organizations (and their product and
service innovation processes in particular) they will not survive. The majority of respondents to one
recent IDC survey said that they feel that a lack of digital transformation will result in business loss in
the short term; most expect to be disrupted in the next 12-18 months. These risks span the ability to
expand to new markets and include security concerns due to increased connectivity of products,
supply chain disruptions, and lack of innovation. In response, companies need to have a flexible
platform for efficient operations, as well as innovation that sparks growth.
FIGURE 5
Trends in AR/VR
Q. Does your organization plan to apply augmented reality or virtual reality for the following?
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Cost, price, quote Remote expert field Product design Customer self- Remote expert field Supplier We don't use AR or We don’t use AR or
(CPQ) support – field service with support – field collaboration VR in our products VR in our products
technician to field technical support technician with or processes, but or processes
technician centralized remote plan to in the next
collaboration expert 12-24 months.
The reason for this focus on the cloud, AR/VR, and the 3rd Platform overall, is that companies realize
that they are more productive, more efficient, more competitive, and more profitable when they invest
in digital tech. In fact, according to IDC's research, those companies that adopt digital technologies
and processes grow faster and are more profitable than non-digital companies.
Now that these investments are being made in the short term, what's the next step in digital
transformation for organizations? New digital approaches aim to take advantage of multiple
technologies working together — mashups, or complementary combinations of technology — while
organizations improve digital skills and continue to work across domain, value chain, and industry.
Digital twins are a prime example of this, as outlined in the recent report IDC TechScape: Worldwide
Digital Twins. IDC sees digital twins as the visual collaboration and decision support vehicle across the
digital thread, inside the company, and across ecosystems that requires multiple technologies working
together. The data models that are the foundation of digital twins can be defined and applied flexibly
Another example is IoT. IoT communities and marketplaces are evolving to become data and analytics
hubs to support manufacturing businesses in process and discrete manufacturing. These digital
environments, for software development, collaboration, data analytics and federation will evolve to
become digital twin operating systems, whether that digital twin is of a product or asset, or a business
process. They also can be a hub of enterprise quality information: Product quality is a major reason for
investment in IoT, according to our latest research (see Figure 6), ahead of reducing operational costs and
improving business productivity. Product quality is also the top reason why manufacturers invest in
product lifecycle, service lifecycle, supply chain management, and manufacturing execution systems. IoT
becomes a logical complement to these systems to achieve a cross-enterprise view of quality.
FIGURE 6
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Improved Reduce Improve business Improve security Improve Reduce internal Improve Support my Competitive Faster/better Reach new
product operational productivity/ productivity/ maintenance costs customer organization's differentiation decision making customer target
quality costs efficiency efficiency experience digital segments
internally for customers transformation
strategy
Source: IDC's Global IoT Decision Maker Survey, 2019 – Manufacturing", n=1,259
FIGURE 7
R&D/Engineering
Q, What is your function's approach to digital transformation (DX) efforts?
The data model that product lifecycle analytics can be applied to can include information about
customer needs and demand, supply chain performance, manufacturing execution, product and asset
performance, service and customer experience, as well as markets and competition. The resulting
body of product, service, and customer knowledge with analytics is enabling organizations to establish
multiple, context-rich closed loops across the organization, and directly from the product, asset, and
customer, enabling faster time to market for product and engineering teams, faster time to volume for
manufacturing, faster time to demand for supply chain, and faster time to operation for service teams.
CONCLUSION
For product innovation success, the future remains augmented and artificial intelligence powered.
R&D, engineering and service teams realize that to increase their product's success rate, they must
leverage 3rd Platform technologies, IoT-connected product and process data, and work with an
extended internal business and technical team, as well as suppliers and partners, on a digital
innovation platform — not simply a product lifecycle management (PLM) or service lifecycle
management (SLM) system. These teams must also consider a broad set of demand and customer
data at an early stage of product planning and ideation to complement the work they already do getting
input from a select group of customers.
Taking this unified, service-oriented, demand-driven, digital approach to innovation will enable teams
to work faster, deliver quality products more consistently, and more accurately understand customer
needs. With advancements and 3rd Platform technology such as cloud, analytics, cognitive systems,
IoT, and AR/VR, training and enablement is and will be key for manufacturers to succeed. In the next
five years, a broadening of skill sets to include digital and the management cultural and organizational
change will be critical, internal training programs and university curriculum will evolve to prepare
existing and new digital professionals, and external service providers will be tapped to provide the
resources and training required.
How do you get started on this digital journey? There are five key initiatives, in the following order, that
can serve as a foundation for digital innovation transformation.
1. Expand the Role of the Product & Service Innovation Core Team
2. Develop New Digital Skills to Maintain Pace
3. Leverage the Digital Thread Across New Product Development & Introduction (NPDI) and
Industry Partner Ecosystems
4. Leverage Cutting Edge Tech: Build 3rd Platform Mashups for New Digital Approaches
5. Strive for the Future: Interconnected, Automated, Converged
Manufacturers are making product and service innovation, development, and operations a primary
digital transformation focus because this drives company growth. Before DX settled upon the world of
technology, those (public) companies that invested in R&D and innovation were more profitable and
their share prices rose consistently over time. Adding digital to this investment and innovation
approach accelerates this success because companies can move faster, have access to more
actionable data from across their business, and make better, more accurate decisions that result in
product, and customer experience, success.
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