White Paper

Five Essential Steps to Digitally Transform Product Innovation

and Experience Across Industry
Sponsored by: PTC
Jeffrey Hojlo
October 2019

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.

October 2019, IDC #US45556819

FIGURE 1

IDC's 3rd Platform

Source: IDC, 2019

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:

▪ Global expansion to local markets and concurrent competitive challenges

▪ Connected and interconnected products, processes, people, services, and experiences
▪ Silos of innovation still exist, and need to be unified
▪ Complexity on multiple fronts — product, demand, supply chain — faces manufacturers every day
▪ The customer is at the center of digital transformation — understanding customer needs and
sensing changing preferences and demand is critical to delivering the optimal customer
experience (CX)
▪ External ecosystems within and across industry are a required element of doing business
effectively
These challenges are leading companies to establish open, digital platforms and invest in technologies
that enable close connectivity to products, services, experiences, customers and related knowledge, in
support of high-quality new products and experiences. Where innovation spans the manufacturing
process chain, experience spans inside and outside the organization, across domain, to suppliers and
partners, and customers.

©2019 IDC #US45556819 2

This point of experience is the closed loop catalyst back to the front end of design, development, and
innovation for continuous improvement and operational excellence.

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

The DX Taxonomy for R&D and Engineering

Product Dynamic Enterprise Product
Product Lifecycle Product-as-a- Smart Products Ecosystem
Innovation Lifecycle Quality & Experience
Economics Service & Processes Orchestration
Platform Intelligence Compliance Curation

Remote Real-time Closed-loop

Data unification Product portfolio Lifetime product Model-based
predictive regulatory Open innovation customer
and federation optimization performance design
management compliance feedback

Augmented Manufacturing &

Collaborative Advanced digital Cognitive root Supplier Intelligent
Extended S&OP service service
development simulation cause intelligence personalization
execution intelligence

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.

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The future of innovation will be augmented through digital technologies and ecosystems that include
multiple domains internally at organizations, as well as partners and customers with a wide range of
skills, capabilities, and resources. Artificial intelligence, machine learning, generative design and
development will become prevalent, freeing up organizations to accelerate the pace of innovation. The
biggest winner in this new, emerging world will of course be the customer as demand will be met more
quickly, needs addressed precisely, and product and service innovation will be perpetually evolving
without any interruption in the customer's experience.

2. Develop New Digital Skills to Maintain Pace

Half of the world's GDP will be powered by digitally transformed companies by 2022, according to
IDC's recently launched Digital Economy Spending Guide. This rapid evolution of the world toward
digital is impacting the way of working for multiple domains within organizations today, and the skills
required to stay competitive. IDC's 2019 Manufacturing Talent Survey shows a perceived talent gap
among manufacturers today, particularly among IT, engineering, and manufacturing. Key takeaways
from the research include:

▪ Manufacturers need external support with R&D/engineering, and manufacturing/operations

▪ Lack of resources and knowledge is an issue, driving the need for talent/outsourcing
▪ 65% of manufacturers say the rate of NPDI has decreased between 6-15% due to resource
issues
▪ 41% of manufacturers plan to implement outsourcing with third parties due to skills and
resource shortage
▪ Cognitive/AI and robotics lead the way in planned tech implementation in next 24 months
There are multiple reasons for this focus on talent today, as shown in Figure 3.

FIGURE 3

Top Challenges Driving a Focus on Talent

Q. WhatWhat
are the
aretop
thetwo
top pressures driving
two pressures your organization
driving to focus
your organization on talent?
to focus on talent?
Pressure to meet company's growth objectives (i.e. geographic growth / expansion)

Company lacks the skill sets that are required for Digital Transformation

Need more staff to meet speed to market goals, and/or competitive pressure

Need new sources of creativity / innovation within the organization

Quality of services is suffering due to the lack of people / skills

Quality of products is suffering due to the lack of people / skills

Retirement of older workers and knowledge voids

Loss of staff due to attrition (i.e. leaving for competitor, layoffs, etc.)

None - we are not worried about talent

Other

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Source: IDC Manufacturing Talent Management Survey, 2019

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In addition to the natural pressure to meet growth objectives, and the need for more resources to meet
demand and growth, there is the realization of a lack of requisite digital skills to enable digital
transformation. The impact of this is far reaching, as evidenced by the negative impact on quality of
products and services due to the lack of resources and skills. Another perceived need is that of new
sources of creativity and innovation within the organization. These challenges can be met through
multiple means, including training programs within and outside the company and working with services
partners that provide the industry and technical expertise to complement a team. Sharing legacy
knowledge across the organization also becomes critical, which can be enabled through digital
technologies such as cloud, mobile, and AR/VR. In addition, organizations are moving to adopt open
innovation practices across ecosystem and industry to create new products and services, and
collectively solve product, service, and customer problems. We're seeing this trend emerge in multiple
industries, where suppliers and partners are now becoming co-innovators with the manufacturer.

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.

3. Leverage the Digital Thread Across New Product Development &

Introduction (NPDI) and Industry Partner Ecosystems
Product and service innovation continues to digitally transform and reshape industries. In response,
manufacturers are turning to IoT, blockchain, augmented reality/virtual reality (AR/VR), and cognitive
computing for internal business process improvement and external ecosystem collaboration and co-
innovation. Our research shows a focus today on unifying the product and service innovation process,
collaborating more closely with extended value chains and customers, and leveraging new, digital
technology to improve the collaboration, analytics, and security across connected processes and
products in the next 12+ months.

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

©2019 IDC #US45556819 5

process that delays time to engineering or R&D change, time to product or service launch, time to
meet demand, and ongoing delivery of value-added services and experiences to the customer. There
is a need for iterative, closed loop innovation — where innovation can be wholesale disruptive,
incremental, or enhanced. For enhanced innovation, there needs to be a focus on the holistic
experience a customer has with a product or service. How can this knowledge be leveraged for faster
R&D or engineering changes, or innovation whether for products or manufacturing processes?

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

Cross-Industry Collaboration & Innovation

Manufacturing
Segment Innovation Challenges Industry Partners Example Initiatives

Aerospace & Defense Sustainability, supply chain, ▪ Chemical ▪ Material light-weighting

customer experience
▪ Software ▪ Customer experience analytics

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

▪ Software ▪ Drug delivery

Oil & Gas/Energy Production efficiency, flexibility ▪ Automotive ▪ Energy grid distribution, Electric vehicles

▪ Engineering, ▪ Design, operation

Procurement,
Construction (EPC)

Retail Ideation, dynamic demand, supply ▪ Chemical ▪ Eco-friendly materials

chain
▪ High tech ▪ Connected apparel & footwear

Source: IDC, 2019

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4. Leverage Cutting Edge Tech: Build 3rd Platform Mashups for New
Digital Approaches
Companies are investing in 3rd Platform technology because of the need to collate, analyze, and
federate large amounts of data from connected products and assets, and move quickly to satisfy
dynamic customer needs. These initiatives, based on internal and external structured and unstructured
data, require close connection and collaboration with suppliers, partners, and customers. This
connection is enabled through customized views into relevant information, whether a single system for
executives, role-based views for specific domain leadership across value chain, or personalized user
experiences per customer. All of this can be powered by a combination of cloud, mobile, analytics, IoT,
AR/VR, and other advanced digital technology.

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

Focus on 3rd Platform, Advanced Technology Accelerates

Currently Over the Next 12 months

3.0% 3.0%
Robotics 14.3% 33.0% 25.7% 24.0% Robotics 9.7% 23.3% 28.0% 36.0%
2.0% 2.0%
Internet of Things (IoT) 15.0% 26.3% 29.3% 27.3% Internet of Things (IoT) 7.3% 16.7% 38.7% 35.3%
7.0%
Augmented and Virtual Reality 9.3% 15.0% 28.7% 26.0% 21.0% Augmented and Virtual Reality 8.3% 24.3% 39.3% 21.0%
3.7% 2.0%
Block Chain 12.7% 29.7% 33.0% 21.0% Block Chain 7.3% 22.0% 42.7% 26.0%
6.0%
3D printing 8.7%15.7% 27.3% 28.3% 20.0% 3D printing 11.3% 24.7% 31.0% 27.0%
6.0% 4.3%
Artificial Intelligence (AI) & Machine learning 17.7% 27.7% 36.0% 12.7% Artificial Intelligence (AI) & Machine learning 11.3% 21.0% 33.7% 29.7%
0.7% 2.3%
Mobility 13.0% 25.0% 38.0% 23.3% Mobility 6.3% 24.3% 32.7% 34.3%
4.0% 2.7%
Social business/collaboration tools 13.0% 27.3% 36.3% 19.3% Social business/collaboration tools 8.0% 20.3% 40.3% 28.7%
1.7% 1.3%
Big Data/Analytics 9.0% 22.3% 41.7% 25.3% Big Data/Analytics 6.7% 17.3% 39.7% 35.0%
2.7% 1.7%
Cloud computing/Software-as-a-Service (Saas) 11.7% 21.7% 34.7% 29.3% Cloud computing/Software-as-a-Service (Saas) 7.0% 18.0% 29.3% 44.0%

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.

©2019 IDC #US45556819 7

In addition to the growing importance of IoT, AR/VR, and AI and machine learning over the next 12
months, of considerable note is the increase in perceived importance of cloud to product and service
innovation teams, with 44% of respondents indicating that cloud will be very important in 12 months.
Product and service design, development, and operation will continue to move rapidly to a public cloud
approach; most organizations have instances of their development systems in at least a private cloud
at this point. Some of the reasons organizations move their innovation processes to the cloud is to
achieve closed loop innovation, multi-domain collaboration, product and service intelligence, better
product and service quality, and establish digital thread visibility. In addition to the cloud, of particular
note (see Figure 5) is the usage of AR/VR to improve visibility and communication across the service
lifecycle, as well as the product lifecycle.

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.

Source: 2019 IDC Product & Service Innovation Survey, n=300

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

©2019 IDC #US45556819 8

across the organization from lightweight models for ideation, configuration, and communication, to full
fidelity models for ongoing operation, simulation, and improvement. AR/VR, cognitive systems (AI,
ML), advanced simulation, generative design, IoT, 5G, and edge cloud computing, work together with
2nd platform enterprise applications (CRM, SCM, PLM, MES, ERP), as fundamental, transformational
technologies for digital twins that enable the design, operation, and optimization of digital twin models.

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

IoT Investment Priorities

Q. What are the top three factor(s) that influenced or will influence your organization's decision
to create a strategy or investment in the Internet of Things?
35.0

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

©2019 IDC #US45556819 9

5. Strive for the Future: Interconnected, Automated, Converged
IDC sees the future of organizations as interconnected, automated, and converged, with physical and
digital coming together to deliver data, knowledge, and decision support within and outside
organizations more rapidly and accurately. IDC's five product innovation predictions from the 2019
Product and Service Innovation FutureScape report reflect this trend, highlighting the importance of
opening, extending, and augmenting the way in which product and service innovation is done. These
five prediction topics are:

▪ Product Innovation Marketplaces

▪ Digital Twin Ecosystems
▪ Generative Design & Innovation Bots
▪ Innovation & Customer Demand Integration
▪ Product Personalization
Whether through marketplaces, digital twins, or AI, each of these technology approaches tie to
demand and customer data and knowledge, with the goal of interconnecting the organization,
automating processes, and converging knowledge across the company and value chain.

Interconnected for Innovation Across Multiple DX Initiatives

Manufacturers over the past 5+ years have worked to unify data, processes, and teams in their
organization, and across their value chain for industry partner collaboration. Once this data unification
and federation project is complete, the establishment of a digital thread between formerly
disconnected domains on a single, flexible data model is possible. We see this interconnection from
innovation, to supply chain, to operations as one that can be achieved through a digital innovation
platform, with product at the center, connected to customer, supply chain, enterprise, manufacturing,
quality, and service information. One critical area for discrete manufacturers as part of establishing
and maintaining a digital thread is configuration management, whether in the automotive, machinery,
or boating market. The CIO of Groupe Beneteau (luxury boats) and CDO from Bosch Rexroth
(industrial machinery) recently presented at an industry event on digital engineering, espousing the
importance of configuration management and a digital thread that links design, engineering,
manufacturing, and service in a closed loop to drive better quality and innovation. One large vehicle
manufacturer, Volvo, talked about the "cost of diversity" (i.e., configuration management) during its
development and manufacturing process — where cars could have up to 6,000 configuration
references, and trucks have 20,000. These trends mandate that manufacturers work within and
beyond their organization in a close, interconnected way.

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The open, extended, and in many cases cloud-based approach to innovation has expanded the role of
R&D and engineering, and impacted the skillsets required, and the different groups within and outside
the organization that they work with. Innovation, R&D, and engineering has become a team sport,
connected to business leadership, product management, sales and marketing, supply chain,
manufacturing, and service. Our 2018 DX Sentiment Survey showed the importance of this extended,
digital approach; Figure 7 shows survey data from the R&D/engineering role perspective.

FIGURE 7

R&D/Engineering
Q, What is your function's approach to digital transformation (DX) efforts?

Integrated, continuous enterprise wide DX innovation

5% is in place with operations and customer/service
8% experiences
DX initiatives are initiated at the function or Line of
30% Business (LOB) level, with some connection to
enterprise strategy
13% DX initiatives are tied to enterprise strategy but with
short-term focus

The enterprise strategy is to use DX to transform

markets and customers by creating new business
models and product/service experiences
DX initiatives are tactical and disconnected from
19% enterprise strategy

25% None of the above

Source: 2018 IDC DX Sentiment Survey

Automated & Converged for Demand-Driven, Quality Innovation

Key to establishing a closed loop digital thread connecting multiple, diverse programs is analytics, IoT, AI,
and ML as companies look to enhance their decision support capabilities across the organization. This is
also where generative design can be discussed, which is essentially a big data analytics and machine
learning-powered approach to design, simulation, and development that provides multiple design options
to the product engineer or R&D manager. The move to an evidenced-based culture that is fundamental to
digital transformation leverages simulation as well as product lifecycle analytics which incorporate much
more than development process performance information. Generative design also supports this move to
an evidence-based culture by improving the speed and effectiveness of the design and product
development process with better, faster decisions and optimized designs that meet customer needs.

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.

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An AI and analytics-powered, customized and contextual view of information by role, by product, by
program, by customer, by experience, etc., is one example of what some may define as "web 3.0." The
container, or vehicle, for the information and knowledge to travel along a digital thread that connects
data and knowledge across an organization is a digital twin — which as previously noted can span from
a lightweight model to full fidelity replica of a product or asset, with all corresponding supply chain,
manufacturing, and service process and resource data within. The lens into this model and the broader
digital thread can be AR/VR (among others), which we are beginning to see emerge at manufacturers
today, supporting early stage design ideation and review, manufacturing operator training, and service
and maintenance scenarios.

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.

©2019 IDC #US45556819 12

About IDC
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory
services, and events for the information technology, telecommunications and consumer technology
markets. IDC helps IT professionals, business executives, and the investment community make fact-
based decisions on technology purchases and business strategy. More than 1,100 IDC analysts
provide global, regional, and local expertise on technology and industry opportunities and trends in
over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients
achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology
media, research, and events company.

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