Product owners in appliance brands across the world are sitting on the threshold of extraordinary digital opportunities – but a radical change of mindsets is vital if they are to take advantage of them. For decades, their traditional emphasis on developing sales within clearly defined categories has predominated. But with digital transformation of the home products sector starting to gain real momentum, commercial benefits will come to those who can switch that focus to an open, digital-first orientation.
Digital transformation for physical product companies
In this article I want to explore the tension at play right now for appliance brands and explain the crucial link between digital-first orientation and internal process. Getting this right can clear the way to seamless physical/digital solutions with transformative operating and commercial models. This is relevant across many traditional physical product sectors. For a deeper dive into digital transformation for physical product companies with a focus on the FMCG sector, have a look at our Product+ playbook
If you operate within the appliance sector, you might recognise a characteristic situation. In everything from washing machines to food mixers, vacuum cleaners to hairdryers, the digital dream is often clouded by a fundamental inertia, with a lack of push from product owners and lack of pull from consumers.
What’s the opportunity in genuine digital-first orientation?
It’s about new value, new types of proposition, integration into wider systems – including through partnerships – and transformation of the way you deliver value. Throughout everything, it is crucial to remain true to your brand essence. Take for example sports sector brands that have transformed themselves from selling sports clothing and equipment to selling connected products that enable people to achieve their fitness goals.
Look too at the oral care sector. Today consumers are investing in toothbrushes that guide them on how and where to brush to get a better result. The data gathered links back to dental health professionals driving personalised support and guidance. Both sectors are remaining true to their ‘reasons to be’ but transforming the way they deliver value and opening up new revenue streams. Consider also how the skin care sector is helping consumers learn about their skin and helping them select the right product, monitoring their skin condition over time. The consumer is benefiting, but also the brand is getting a huge amount of insight into consumers.
So why is this hard?
At the heart of the challenge is a tension between traditional category orientation and digital first orientation. Digital transformation is changing the way consumers behave, and physical product brands are struggling to move fast enough or be agile enough to respond to sudden changes in consumer behaviour. It’s often unclear who has the ball internally in responding and leading with digital. Does the responsibility fall to a strategic initiative lead, the digital lead or the seasoned product lead?
As for the innovation journey itself, it’s rare to find a company with the necessary tools in place to iterate new prototypes – and enhance them with real-time data analytics. Within the consumer sector, appliance brands differ to FMCG brands in that their traditional businesses are built on electronic products. But while they have often made initial incremental steps into digital, that in itself can make it harder to drive genuine transformation from a truly digital first mindset. There’s often too much baggage.
What are the particular challenges for appliance brands?
Taking a historical category orientation tends to favour hardware over software and as a result it is characterised by business cases built firmly on quantity sales as the key KPI. If I’m responsible for the product, my priority is how many units I can forecast to sell. That judgement tends to be driven by benchmarking, and what I might be able to accelerate or inflate with my launch and marketing budget. I’m competing within a clearly defined competitive mix in which retailers who own the benchmark influence product planning and direction. Recognise this mentality? It is one that can run counter to a digital-first mindset.
When I was at Panasonic, retailer relations were important to protect as an asset built up over many years, and the retailer’s power and presence in the market had impact. But at the same time, it was clear there was an opportunity to transform the offer all the way from how to build and define the fundamental business case, through how solutions would be brought to market, and of course to the very solutions themselves and how they would be developed.
Now let’s dig deeper into the challenges to overcome when considering the value proposition behind a solution. The traditional definition of value would be centred around a fixed use case orientation. Say the use case is to be able to wash wool without shrinking a garment. That clarity leads to a clearly defined marketable feature and product specification line (doesn’t shrink your lovely wool clothes, ever). But it doesn’t need a digital layer. It may be that the feature ends up on an app as a setting, but it’s not justifying the app.
The point here is that to move with digital transformation and take a digital first orientation we need a wider viewpoint on the definition of value, beyond a fixed use case. Take the examples from the sports, oral healthcare and skin care domains above. None of them are addressing fixed use cases alone. They do address them, but in a dynamic way that draws value from reaching goals, linking to expert advice, or personalising treatment based on progress, for example.
What to do going forwards – digital-first process
Behind this fixed use case orientation has been the typical end-to-end stage gate product development process, which is entrenched in a pre-digital mindset and culture. For appliance brands, a stage gate or checkpoint process would typically start with some consumer insight articulating a pain point (typically narrowly defined in order to be understandable, succinct, and marketable through the sales channels).
Then it’s on to concept generation, followed by quantity based business case modelling against a competitive set (benchmark), and – with sufficient confidence – on to R&D development before ending with the go-to-market strategy. The product solution is fixed early, any contribution of technology to the fundamental concept is lost downstream, and the go-to-market strategy is mainly retrospective.
The conventional developmental mindset must change. So, let’s unpack what a digital-first mindset actually means in this context. Crucially, it must begin by putting data first. By prioritising data strategy, you are opening the way to live insights that will drive direction and be the core asset to solutions through development and in the wild. They will not only colour and inspire the project, but will create the engine room of innovation, as you let the data strategy do the hard work of making solutions valuable and relevant.
Take Alexa as an example. Amazon is gathering huge amounts of high context data on the way consumers interact with the solution. Without that data it would be difficult to build a true picture of the value of Alexa in behavioural terms. Who could have predicted that so many people so quickly would have been happy to have a microphone listening to them all day for the chance to play music? There’s something deeply psychological going on.
It seems people are drawn to Alexa partly for convenience but also by the powerful urge to be understood – and they get that subtle stimulation every time they use Alexa. She gets me, mostly! To really understand these kinds of dynamics, you’ve got to use interaction data to build behavioural insights, and from those develop the solution as you go (think DevOps). The attractive stimulant of being understood doesn’t represent a feature as such, but it is a driver that could bring alive solutions in a new way with a very sticky retention dynamic.
It’s been difficult for appliance brands to navigate the question of on-boarding platforms like Alexa without a digital-first strategy. But going forward, we predict that machine vision will be even bigger than voice or touch in this sector, primarily due to the amount and type of data that can be gathered in the context of a consent journey – feeding new value in areas like emotion AI, healthcare detection or predictive solution models and so on.
Here at Cambridge Consultants, we advocate taking a broad-based approach that involves looking at the opportunity from a connected ecosystem perspective. Holistic digital service innovation ensures that the project delivers much more than a collection of disparate elements and creates value that exceeds the sum of individual parts. Key to the process is an early focus on user interfaces, to make sure experiential value is delivered at every consumer touchpoint.
An agile approach is vital. As I alluded to earlier, predefined value and a pre-prescribed vision doesn’t cut it anymore – solutions will benefit from a process that responds to evolving context and the latest learnings from data. Remember also what I said about the problems of building for a fixed design? With a digital-first approach, success flows from ‘building to test’ with the intention to remain agile, rather than ‘building to make real’ with a view to scale (too early). Iterative testing means challenging the next hypothesis to discover if it proves to be valuable – developing solutions with value baked in.
Customer retention and loyalty
I talked earlier about the outmoded myopia of focusing relentlessly on the numbers of units sold. In a digital-first world, this is replaced by a much broader appreciation of customer engagement that spans onboarding, retention, loyalty and so on. Such perspectives, of course, are prerequisites for the much more valuable, long-term consumer relationships that digital innovation can enable.
Want to learn more?
By comparing and contrasting the old and the new, I hope I’ve given you a flavour of the attitudes, processes and methods that are needed if appliance brands are going to truly grasp the rewards of digital innovation. There’s plenty more I can share – and in my next blog I plan to dig a little deeper into the importance of taking innovative learning paths. Such an approach involves focusing on activating new behaviours, rather than simply addressing specific pain points alone – a recognition of the fact that value delivery these days is nothing without customer engagement.
But more of that next time. For now, please reach out to me if there are any aspects of this topic you’d like to discuss in more detail. I’ll leave you with some recommended reading, a blog from my colleague Martin Cookson. He reveals his secret sauce for digital services, charting an innovation arc that begins with end user goals, and leads to solutions that scale and grow.
