Categories of Digital Products

By Dirk Krafzig, Martin Frick, and Manas K. Deb 

This section defines what we mean by ‘digital products’. The digital product strategy of an enterprise defines the degree of digitalisation a product is subject to, i.e., the extent to which digital features are incorporated into the product. Based on the degree to which digital features have been incorporated into them, products are divided into three principal categories.

Products are categorised into classical, hybrid and digital in nature

Generally speaking, intangible products (e.g., a bank account) lend themselves to complete digitalisation, while tangible products (e.g., hardware produced in a manufacturing facility) cannot be virtualised but instead augmented with digital features. Examples of the latter would be the instantaneous usage of available product data (internal and external) to determine the state of the product and react automatically to changes via new feedback loops. It may also be possible to leverage the analysis of big data at the time of customer contact to interact with the customer in an intelligent way.

 The approach to digitalisation depends heavily on the product‘s tangibility

Given the more intangible nature of services, another important digital trend is the potential for a much more comprehensive augmentation of products with services. Services can be embedded into the context of many classical products – e.g., predictive maintenance initiated or even executed by the product itself. Access to such product-related services can be fully digitised, with the customer using digital devices to seamlessly access them and incorporate them into day-to-day life. It is clear that the degree of digitalisation of the product-supporting service can vary significantly from the degree of digitalisation of the product itself. This is due to potentially different degrees of intangibility of products and their supporting services. 

The digitalisation of order fulfilment can also vary: it can combine traditional and digitised (and hence mostly automated).[1] Thus we can have a fully digitised product combined with a manual service, and a fully tangible product with an automated, digital service. One example would be electronic train tickets supported by the classic service desk. Another example would be a physical part of a device with an imprinted QR code (quick response code) to access the description of the part or issue an automated replacement order.

The application of artificial intelligence is an important emerging trend for more advanced, fully automated digital services. Imagine in the second example that an algorithm detects how the device is currently used and offers usage-specific functionality behind the QR code.

Design, production and distribution processes can have various degrees of digitalisation

Regardless of the nature of the products and the services as perceived by the customer, the delivery of such products and services can also have varying degrees of digitalisation. Differing levels of digitalisation translate into various degrees of process automation, as in the context of the automation of production, the automation of the enterprise’s response to service requests, and the automation of product feature adaptation to demand (e.g., adapted driving behaviour of the car or on-demand delivery).

The digital strategy of B2B (business to business) enterprises must take into account the digital strategy of their customers; that is, the demand for digitalisation stemming from the customer’s own degree of digitalisation. The supplier’s product must be able to connect suitably to the customer’s potentially more digital environment. The supplier must also be aware of the changes in demand for digital interfaces. Digital capabilities are driving the adoption of feedback processes between an enterprise and its suppliers with the expectation that the suppliers will react. This fact is even more evident once the enterprise is a member of a close-knit digital ecosystem.

Looking again at the example above of the device with an imprinted QR code: Enterprise A produces physical devices, which Enterprise B uses as part of its production chain. If Enterprise B expects fully automated monitoring, exception handling and corrective action triggering in managing its production and aftersales chain, it will rely on providers like Enterprise A for devices that can support such automation and provide the appropriate interfaces in their aftersales customer interaction. Enterprise A will feel this competitive pressure and must constantly monitor its customers’ expectations, and seamlessly integrate processes running in its customers’ environments into its own internal processes.

[1]        Chui M., Manyika J., Miremadi M.: ‘Where machines could replace humans – and where they can’t (yet)’, McKinsey, 2016.

About 'Modelling for Digital: Best Practices for Digital Transformation in Everyday Project Life [Practitioner Edition]'

In this edition, we focus on the practitioner. We mean those colleagues, who conduct the day-to-day work in the concrete projects delivering digital capabilities. Some aspects presented here are very specific to digitalisation projects, while others are general best practices in projects and hence also apply to digitalisation projects. In digitalisation undertakings, however, speed is of the essence, and a certain explorative approach must be chosen in order to match the needs of the customers best. At the same time, security is a pervasive challenge, as is compliance.

About the 'Digital Cookbook' series

Digitalisation is highly relevant in our private and business lives, and it is better to face up to the changes it drives. Setting aside the sociological, cultural and macroeconomic changes driven by digitalisation in our societies, our focus here is on the microeconomic impacts on our businesses. It is probably the biggest upheaval for society and the economy in this century. 

Altogether, 'Modelling for Digital', 'Managing for Digital' and 'Digital in Action' assist you in the shaping, planning and execution of a comprehensive transformation of the status quo (and you should not settle for less). It will accompany you and your business in meeting this challenge, to open up opportunities unthinkable even just a couple of years ago. It provides the context and best practices for such initiatives from a variety of industries, businesses and viewpoints, strategic, functional, operational, technical and executional. The authors lay out a general, abstracted vision of digitalization across different industries.

About the authors of the 'Digital Cookbook' series

Dirk Krafzig spent the greatest part of his professional life working for large enterprises. As the author of the bestselling book 'Enterprise SOA – Service-Oriented Architecture Best Practices', Dirk coined the term 'SOA' and the concepts behind it in 2004. Today almost all large organisations in the world apply service orientation as the foundation of their enterprise architecture. Since 2007, Dirk has been running his own company, SOAPARK, which specialises in strategy consulting in the area of digital transformation and SOA.

Manas K. Deb is currently the Business Head of Cloud Computing at Capgemini/Europe. He is a veteran of the software industry with more than 30 years of experience including deep work in development, product management, architecture, management of transformative customer projects, and sales and marketing. During his career at TIBCO and Oracle, he focused on the whole spectrum of middleware technologies.

Martin Frick is currently COO at Generali Switzerland. He has held executive positions in large multinational corporations, BPO service companies and start-up incubators in international settings, with a focus on IT and operations in financial services. He has been responsible for large-scale business build-up initiatives and turnaround situations in large organisations, always with a strong need for pervasive change management.