Digital applications support smart product functions everywhere, and the development of these hybrid product-service systems permanently increases. At the same time, technology is getting more accessible and secure, so the risks of digitalizing are systematically declining too. We’re not just talking about creating an app for your product here. To really make an impact with a smart product-service system, you need a whole digital and data ecosystem to support it. By thinking beyond just the product itself, businesses can open the door to recurring income and exciting new opportunities. Let’s dive in!
The misconception of ‘just an app’
Though you can digitalize a physical product by just adding an app, its potential value creation will typically remain very limited. True digital transformation is about creating a digital ecosystem, a group of connected tech tools that work together. If you don’t think about the whole system, you might not even realize what you’re leaving on the table.
The idea of a digital ‘ecosystem’ might sound overwhelming, but it doesn’t have to be. Their complexity can vary though. Often, digital ecosystems involve the interconnection between different systems, ranging from ERP systems to other IT operating systems to online platforms, external data providers, etc.
Put your smartest brains together to think about the potential of an integrated physical and digital value proposition, then develop a feasible development plan, and you can finetune your roadmap over time. For example, you can start by collecting data now and set up tools to analyze it later. In a later stage, you can then also use those analytics to improve the value to your customers as you develop your offering further.
Building the digital ecosystem
A solid digital ecosystem starts with data gathering, governance and connectivity. Once these basics are in place, you can shape the ecosystem however you need. Whether it’s cloud, edge, or a mix, and whether you need an app or an online platform, you can figure out what works best for your company at each step of the process.
The ecosystem needs to integrate seamlessly with your existing processes and systems, but it doesn’t have to be overly complex. To keep it manageable, start by defining system boundaries, identifying potential problem areas, and linking only the necessary parts. This approach avoids creating overly dependent systems that can be hard to manage.
Building a digital ecosystem is a team effort that brings together many parts of the innovation process. From mechanics, firmware and connectivity to data engineering, security, sales and operations, a multidisciplinary team is key to making it work effectively.
Exploring the business case, what’s in it for you
It’s no secret that building a digital ecosystem requires a significant investment. The rewards can be substantial though. It’s not just about making operations more efficient or cutting maintenance and production costs by removing unused components. Digitalization opens doors to new opportunities, like creating in-app services behind a paywall or shifting from one-off sales to subscription- or service-based models. These changes can unlock fresh revenue streams, increase switching costs and hence customer loyalty, and even new markets and customer segments.
However, it’s important to plan for ongoing costs. Maintaining networks, firmware and the ecosystem itself requires dedicated roles and expertise. Plus, implementing these new processes demands effort, from gaining initial customer buy-in to training teams on new workflows. Lastly, anything connected can be hacked, so ensuring state-of-the-art security measures and budgeting for them is non-negotiable.
Conclusion
The technologies driving digital ecosystems are advancing rapidly, just look at the leaps AI has made in the past year. By integrating these tools from the start of your conceptualization process, you unlock their full potential. Taking the leap may feel daunting, but the rewards are undeniable. Dive in, and you’ll always gain something valuable from the journey.
