Faculty & Leadership Blog / Research and Practice

8 Ways Digital Transformation is Changing New Product Development

Post by Ruben Mancha, Sebastian Fixson, Jennifer Bailey, Victor Seidel, Bala Iyer, Sinan Erzurumlu, and Steven Gordon

Increasingly competitive market verticals and Digital Titans crossing traditional industry boundaries place pressure on organizations to innovate. Seventy-nine percent of CEO’s participating in a large-scale global survey report innovation as being their top-most or among their top-three priorities.1 At the same time, digital technologies are changing the enterprise, transforming the product innovation process.

Innovation, defined as the development of novel products and processes, from ideation to implementation, acquires new qualities under the digital revolution. Software is permeating every industry, or as investor Mark Andreessen famously put it: “Software is eating the world.”2

Traditionally, the NPD process has followed the so-called waterfall model of innovation. It starts with a scope, a list of specifications and requirements used to determine the extent of the innovation sought, followed by an estimation of required resources. This process leads to a list of tasks that the development team will complete sequentially. That is unless uncertainty in the requirements and specifications results in unexpected issues and the need to revise the resources needed and the development timeline. Novelty in the innovation, as opposed to incremental improvement, increases the risk of miscalculation and failure in the innovation effort.

“The digital transformation is changing the new product development (NPD) process, and we at the Digital Experience Initiative strive to understand the mechanisms and consequences.”

The software development process, on the contrary, has been reenvisioned during the digital age. If the traditional software innovation process followed a sequential waterfall model similar to the NPD process described above, agile development methodologies allow for the ongoing redefinition of scope in continuous learning from the customer. The agile methodology permits software companies to adapt to changing market and user constraints in the face of highly competitive business environments.

New-product development, when supported by digital technologies and resulting in products with digital components, is subject to new forces that we are only starting to understand. These are some of the many instances in which digital technologies are impacting NPD process:

  • Software such as computer-aided design (CAD) and finite-element analysis (FEA) simulation support the design of new products. Their availability on cloud infrastructure simplifies the access and use of these software applications (e.g., OnShape)
  • Artificial intelligence can enhance the design activity itself by exploring myriad solutions in short periods of time, beyond what humans can accomplish (e.g., Autodesk’s generative design application)
  • Computer-aided manufacturing (CAM), both additive manufacturing methods (e.g., 3D printing) and subtractive manufacturing (e.g., computer numerical control), accelerate the prototyping and manufacturing processes
  • Robotic assembly automates the production line
  • Computer-integrated manufacturing (CIM) digitalizes the production process, integrating data obtained from the factory floor
  • Embedded systems, sensors, and the Internet of Things (IoT), when embedded in the manufacturing environment, permit the real-time capture and analysis of manufacturing data (frequently identified as the Industrial IoT)

In addition to the direct impact the digital transformation is having on the NPD process, digital technologies are transforming the nature of physical products, their monetization, and the innovation process:

  • Embedded systems and sensors, when incorporated into products, allow for the collection of detailed data on product utilization and performance
  • Software governing the digital components of physical products can be remotely updated (or ‘learn,’ if incorporating AI algorithms) to change the properties and behavior of the product itself
  • Analytics of product data can identify new patterns of product utilization, and foresee product failure

“We identify eight broad trends that product development companies should carefully consider in the digital age.”

Analyzing the many effects digital transformation is having on the NPD process, we identify eight broad trends that product development companies should carefully consider in the digital age:

  1. Disintermediation – Open source designs, cheaper and more flexible computer-aided manufacturing systems, versatile assembly robots, and blockchain technology enabling trustful exchanges will facilitate the disintermediation of production processes
  2. Participation in production ecosystem – Increased data sharing in manufacturing and consumption ecosystems, enabled by digitization and application programming interfaces (APIs), will facilitate the integration of manufacturers in production ecosystems and the exchange of data in the network. The growing role of data in the manufacture and innovation processes will lead to new organizational models around the aggregation and analysis of data
  3. Automation – Automated production and robotic assembly lines will reduce human input in the manufacturing process, increasing efficiency and quality. When companies combine sensor data from those automated systems and predictive models, they will identify new approaches to equipment maintenance
  4. Augmentation – Artificial intelligence and augmented reality will facilitate the search for design solutions and the data-driven human decision process
  5. Unitary NPD – Fast and augmented design processes, increasing volumes of data on product requirements and utilization, and cheap on-demand manufacturing will enable agile prototyping, “batches of one,” and further product personalization
  6. Accelerated innovation – Product sensor data will inform the innovation process, while software-governed hardware and shape-shifting materials will enable new approaches to product release. Both processes will accelerate the rate of innovation
  7. Agile NPD – Product design will need new methodologies to accommodate the co-development of physical and digital components and the changing nature of the innovation process
  8. Data blending – Data from manufacturing equipment, employees, products, and users will be organized into coherent and persistent digital representations of those entities. Digital replicas will emerge to offer a link between those physical entities and the data accumulated on them. Digital replicas will lead to new forms of data monetization



  1. Ringel, M., Taylor, A. & Zablit, H. (2015). The most innovative companies in 2015 – Four factors that differentiate lead.  In BCG Perspectives: Boston Consulting Group.
  2. Adreessen, Marc (2011). Why software is eating the world, Wall Street Journal, August 20, 2011.
  3. Ruh, Bill (2017). Waking Up as a Software and Analytics Company. Available online at https://www.ge.com/digital/blog/waking-up-software-analytics-company-building-intelligence-machines-systems, accessed June 5, 2017.