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A Digital Product Strategy is a Must to Compete in the New Digital Economy

You know the digital WHY but do you know the HOW for your products?

You have all seen the latest figures: this year 9 out of 10 executives are making digital strategy a top priority and by 2020 we’ll see more than 3 trillion connected devices in operation. The daily barrage of these compelling statistics puts us all on notice that we need to seriously consider putting a smart, connected product on our roadmap. But with 3 of every 4 products never making it to market and 9 of 10 products failing to generate a return on their original investment, you’d be better off drawing numbers from a hat and put your money on a lottery ticket.

If the estimates are right, and we end up with over 3 trillion connected devices by 2020, the disruptions to your current product line will be significant. In fact, a recent Gartner report predicts that in just three years, half of all IoT revenue will come from companies that don’t even exist today. For new companies, this is a tremendous opportunity. But for the rest of us, the move to a brave new digital world is daunting and frightening, but necessary.

Smart, connected products are revolutionizing many industries, allowing for greater customer relationships and insight and new revenue opportunities. By exploring new ways of meeting present and future customer needs via smart product features and data, you will be able to fuel a sustainable competitive advantage and growth for your firm in the new digital economy.

Frankly, the more people I talk to the more they’re recognizing the need to begin the process of rethinking their product line and plan for the next generation of smart, connected products. But the big question nagging them is how to put together a business strategy supporting the transition to these next generation products. Drawing on more than 20 years of experience working with clients on business plans for taking new products to market, it was clear to me that traditional business strategy and product management approaches were not even close to being sufficient. So much is different these days, when it comes to putting the digital into your products, your services and your business strategy. Digital product management is not yet part of the current “business curriculum”, and to do it properly, you need to first clarify your digital product strategy.

Let’s be very clear: digital product strategy is not just adding one or more features into the product design mix. A digital product strategy transforms the fundamental nature of your product’s value proposition – digital products drive additional value from the data they generate and the information you can create from it. Specifically, by tapping digital functions as a source of valuable data, you have the ability to drive in-field product customization, product automation and product monitoring. In addition to opening new market opportunities, digital product strategy generates new revenue sources beyond the initial sale of the physical product, including revenue streams from subscription services and sales of product use data.

In response to this very “here and now” need, we’ve developed a digital product management framework and proprietary toolbox, detailing the specific steps to develop connected product solutions for the digital age. Here is an outline of what today’s digital product managers need to do to increase their odds of successfully launching digital products in today’s competitive marketplace:

1. Refine your hypotheses regarding what customers will want in your smart, connected product.

A digital product strategy starts by tapping the foundation of what you already know about the industry and your customers. Exploring four core digital product functions helps you identify the smart and connected features your customers will want.

  • Tracking- monitoring product performance and patterns of use
  • Personalizing- customizing product features, tailored to user preferences
  • Automating- reducing the need for human support in delivering user value
  • Communicating- connecting to users and other devices, through the cloud

Big data considerations expand your vision to include opportunities for selling aggregated data on product performance and customer use, to third parties.  The result is a refined set of digital product design hypotheses ready for the next phase.

2. Test your hypotheses through rigorous prototyping and field-testing.

Prior to field-testing, give your digital product enough of a chance to succeed by subjecting it to rigorous physical and digital prototyping. This is where you nail down the details of form, fit, function and feasibility, the ‘Four F’s’ of successful prototyping. Once that’s done, take your prototype into the field, using proven scientific methods to test your digital product design hypotheses.

3. Develop business plan components to support and manage your digital product launch.

After vetting the design, you draw on time-tested business plan components to flesh out critical details in your digital business model.  Here we leverage our blueprint for what you’ll need to cover in the areas of market segmentation, pricing, channels, product roadmap, operations, management, personnel, legal, regulatory, risk and finance:

  • Define market segments for three key areas of digital product sales and revenue: (1) initial product sale, (2) subscription services, and (3) sales of product use data to third parties.
  • Apply competitive strength and technology adoption curve tools to prioritize the size and value of these market segments.
  • Apply pricing concepts using a proprietary template, identify points of competitive advantage, market disruption and profitable combinations from product sales, subscriptions and digital information (data) sales.
  • Finally, put together your business model blueprint.

4. Prepare a compelling pitch to stakeholders/investors.

While all of this detailed preparation is required, you cannot rest until you secure appropriate buy-in from your stakeholders and investors. Here’s where you draw on proven pitch strategies and compelling business plan formats to unleash the full power of your digital product concept, bringing additional partners on board while increasing your odds of successful market entry, growth and profitability.

For any experienced product manager, you know these simplified steps are not effortless but are essential. And, while you need to leverage your traditional product management background to get started, guidance or expertise in managing the differences for a successful digital product strategy will be imperative. Remember, while the statistics might be intimidating and prove why a digital strategy is necessary, there is help out there and this absolutely can be done.

 

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