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Energize the Core: Focus on What Matters Most


  • Reimagine products to evolve the core
  • Transform products into digital growth opportunities
  • Design products around people
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As a product or service portfolio matures, revenue and operating profit typically decline causing a compression of the business. In a recent study, the performance of more than 1,200 companies in asset-heavy industries—including automotive, energy, industrials, telecommunications and utilities—depends on their ability to pivot to face digital disruptions head on, or else fall prey to compression.

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Asset-heavy companies that don’t digitally transform their products suffer a decline in revenue and operating margins(Source: MIT Sloan Management Review, Accenture)

The ability of a company to avoid the impact of compression and prosper over time depends on how well it balances stability and dynamism. Stability means keeping the company’s existing products and services—the ones responsible for generating the lion’s share of revenue and profit—relevant and refreshed. Dynamism means investing R&D dollars to introduce new products and services that will supplant the core.

For example, over the last five years, General Electric, Schneider Electric, Siemens and ABB have positioned themselves as industrial internet platform providers. These companies are taking advantage of their core competencies as they target new markets where the source of value is software and algorithms. Schneider Electric announced a new digital service, called StruxureOn, that monitors and proactively generates alerts of potential failure in a datacenter’s physical infrastructure.

Companies experiencing compression from digital disruption face a variety of challenges.

Underperforming products.

Products with declining revenues and margins, poor customer experience or poor price performance.

Complex and dated product portfolio.

Products that are unfit for future needs with fragmented teams and slow feature velocity.

Non-strategic products.

Products that drain time and resources from strategic objectives and distract from disruption imperatives.

Product overlaps.

Products with the same or similar capabilities, often resulting from mergers or acquisitions.

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GE’s jet engines are as much digital products as they are physical products(Source: General Electric)

Digitally remaster core products

Digital is penetrating every industry segment in varying degrees and the effects of compression are creating a sense of urgency. Companies need to map out a digital transformation journey for their mature products before they near the end of life in order to reduce the negative impacts on the business. The objective is to ensure the core business remains profitable for as long as possible while successfully incubating and launching fresh product lines shaped by emerging technologies and strategic priorities.

Digital is penetrating all sectors, but to varying degrees

Perception of digital penetration by industry, % of respondents

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(Source: McKinsey & Co.)

The transformation becomes a “digital remastering” of mature products. First and foremost, that means reinvigorating the product’s relevance to a new generation of customers that expect more immersive engagements, whether that’s proactive assistance, real-time feedback or mobile augmented reality. In fact, research by Bank of America predicts that spatial computing technologies, such as augmented reality and virtual reality, are on track to have 300 million users by early 2020.

The demand for a better customer experience means outmoded enterprise and consumer products will need a new lease on life.

For example, IBM needed to revitalize a successful suite of secure networking products. The company’s intent was to enhance the customer experience for millennials that are familiar with Dropbox, Facebook and Slack, where work gets done quickly and efficiently in a more natural way. Aricent helped IBM modernize the user experience to make the products relevant to new industry segments beyond their dominant position in financial services.

The decomposition of workloads
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From monolithic apps to machine learning, the unit of value is moving to data (Source: Aricent)

Remastering also extends to the infrastructure and software that underpin the product as both need to be virtual, agile and modular. So, the IBM networking products were architected to be cloud-native where microservices decompose monolithic applications so they can better withstand changes.

Microservices are now a standard in new product development because they significantly speed up the delivery of capabilities. Hewlett Packard Enterprise (HPE) released containerized versions of its IT Operations Management software that uses a microservices architecture not only to increase feature velocity but also resolve incidents faster and decrease product downtime.

Moving forward, container platforms that run microservices workloads will open up an ecosystem of applications that brings value from the outside in. Namely, developers would on-board microservices after they are verified and certified. And a DevOps approach allows applications to be orchestrated at the edge or in the datacenter using frameworks such as Docker Swarm, Kubernetes or Mesosphere DC/OS.

Together is better

Companies need to get the most out of their design and engineering teams to create products and services that delight customers with compelling and surprising experiences.

However, it’s no secret that design and engineering cultures are different and there can be passionate debates over tradeoffs. For example, a designer may argue for the experience of a touchless user interface, while the development team argues for ready-to-release velocity, code contribution productivity or test efficacy.

Designers and engineers can’t work in silos. It’s vital the two camps communicate early and often to deliver a technically sound solution and an experience that’s relevant and compelling. Designers and developers should share ideas, learn from each other and keep everyone informed of progress by relying on collaboration tools such as Slack, Microsoft Teams and Google’s Hangout Meet and Chats. While workflows from JIRA, Sketch, Zeplin and InVision also allow more seamless ways for design and development to collaborate. Of course, tools and technology will not make a significant difference unless a culture of partnership, exploration and iteration is instilled.

Appreciating the style differences between designers and engineers leads to better working relationships and more effective outcomes.
Slice 1 Healthy collaboration for tradeoffs