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The trend: Every product is becoming a digital product

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Marc Andreessen’s prediction has come true: software is eating the world.

That’s why the savviest executives are building a product engineering mindset. They understand that technology adoption is critical for success, and employees and customers expect a great digital experience with every product and service.

650%

increase in software supply chain attacks between 2020 and 2021

2.5x

more value when using hybrid cloud as a base for new IT architectures

Our insights

Physical products across industries are being enhanced with digital technologies, increasing the need for all companies to have software product engineering capabilities and skills. Half of all companies—and 70% of top performers—are now using software they developed internally to differentiate themselves from their peers.

As software is eating the world, AI is now eating software. That means companies will use AI to compose and reuse software from multiple sources, integrating a software bill of materials into their own product development processes. They will use platforms to manage the end-to-end software life cycle.

Open-source code—used in 96% of code bases—speeds development and innovation. The downside is that if bad actors introduce malicious code into open-source software or its components, infected code can easily be shared across the software supply chain. Between 2020 and 2021, software supply chain attacks grew by 650%.

As digital transformation and business automation accelerate, the so-called hybrid cloud architectures have become the most compelling standard for mission-critical systems. These architectures enable running the same applications in private, dedicated, or public clouds. They increase productivity and resilience of IT departments seeking to transform the skills and ways of working while helping ensure data privacy, cost savings, and operational flexibility without single points of failure. A hybrid cloud approach yields 2.5 times more value than using a single public cloud as a base for new IT architectures.

CEOs are starting to prioritize employee experience equally to customer experience, and they’re looking to their top technologists to elevate digital products and experiences across the board. Incumbents in industries like banking are attracting digital natives to help IT departments think like product engineers.

Successful future CIOs will understand that user adoption is the most important factor in digital transformation, and will apply consumer application mindsets in order to generate enterprise IT experiences similar to those created for consumer apps.

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Meet the authors

John Granger, Senior Vice President, IBM Consulting

Jesus Mantas, Senior Managing Partner, IBM Consulting

Salima Lin, Vice President and Senior Partner, Strategy, Transformation, and Thought Leadership, IBM

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Originally published 08 May 2023

The priorities

Transformation is greater than the sum of its parts. While each technology brings its own benefits, leaders need to rethink their operations holistically to develop a digital-first strategy.

Great product organizations get the right products to market quickly by testing, learning, and iterating—something enterprise IT departments rarely do well. They must be entrepreneurs, technologists, and engineers all at once. This is especially true for CIOs, who tend to think in terms of requirements and tickets, not user experience and adoption.

Shifting to a product engineering mindset requires companies to reward innovation—even if it fails to produce the desired results the first time. Recent research from the IBM Institute for Business Value found that a culture of not penalizing failure in the context of technology adoption and digital transformation delivers a 10% revenue growth premium. Leaders need to inspire teams to be willing to test hypotheses even if they are wrong, and showcase teams that take these risks.

Developing next-gen digital products requires partners across the ecosystem to increase quality, resilience, and speed to market. To get the most from these collaborations, organizations need the right technology infrastructure. An open hybrid architecture provides flexibility that allows teams to write and maintain one single version of code that can run everywhere. This shift requires organizations to strengthen their tools, governance, and skills, and adopt a “DevSecOps” culture.

The bet

Invest as much in your software supply chain as in your physical supply chain

Actions to take

Act like a software company: set up agile squads that pair product, technology, and functional skills with a single definition of success.

Realign teams in product-centric squads empowered to drive the end-to-end lifecycle of products.

Develop and reskill team members to new digital skills, including design, software engineering, digital content management, and AIOps.

Adopt open hybrid cloud architectures to enable flexibility, scalability, and resiliency now and in the future.

Implement a data fabric strategy that allows applications to access data across the organization and ecosystem in real-time.

Accelerate the creation of “digital twins” for mission-critical constraints to improve early detection, simulation, and reaction to demand signals, driving significant cost improvements and decreasing risk.

Transform IT to deliver no-code/low-code applications for employees that are as easy to use as those built for consumers.

Eliminate complexity and training requirements by implementing a natural language interface to back office systems.

Introduce feedback mechanisms and update apps frequently to improve employee experience.

See the bet in action

Connectivity and data deliver innovation in the field (and on the lawn)

A leading global manufacturer of agricultural equipment looked to emerging technologies (analytics, sensors, and software) for inspiration to meet its innovation goals and develop a revolutionary product offering for its commercial businesses.

Using design thinking approaches, the working team conducted user interviews to uncover the unexpressed need and pain points of the manufacturer’s landscaping customers. The team built detailed service blueprints and customer journey maps as they looked for invention or improvement opportunities.

To operate more efficiently at scale, the team designed advanced sensors, which were integrated into the machines and into light wearable vests for crews. This technology delivered the ability to collect data across the operation—from property schematics to machine operation. This manufacturer also designed and developed a user-friendly software dashboard that allowed management to centralize, visualize and measure the data in real time.

With the new easy-to-use and up-to-the-minute data dashboard, operations managers were able to instantly visualize and evaluate the efficiency of each mower, manage downtime, coordinate routes and schedules, monitor worker safety and capabilities, optimize fueling strategies, predict equipment attrition, and anticipate maintenance needs for the machines.

By applying sophisticated technology to a traditionally hands-on industry, the client created a unique product that revolutionized the way professional landscaping companies conduct their business. The level of data provided by the innovative hardware and software applications resulted in a significant increase in the efficiency of crews, machines, and organization, and allowed for a more streamlined approach to managing landscaping projects. As a result, the client was able to gain a meaningful competitive advantage.

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