Digital transformation for
physical product companies
How to make it happen

Product+ digital transformation

Contents
Introducing the Product+ playbook03

Getting started 04

It’s easier if you know where to look

04

Making it work

06

For the real world, at scale

06

Making it happen

08

Consider these options for your organisation

08

Why it’s worthwhile

10

Insight creates competitive advantage

10

What it’s worth

11

Discovering the real value

11

I’ve been there, done that

13

So what have I learned?

13

Meet the author
Jennifer Gomez
Consumer Digital Transformation,
Cambridge Consultants
If you’re a consumer business intent on transforming digitallyand growing in entirely new ways, then Jen’s got your back.
She is able to draw upon more than 20 years of experience inbrand and global business management and has a passion
for breakthrough innovation and launching new platform
opportunities. As her record with brands like Colgate proves,
Jen is adept at turning great ideas into in-market success –thanks to her personal experience of designing, developing
and commercialising consumer products.

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Product+ digital transformation

Introducing the Product+ playbook
Now is the time to switch your brain to creative, experimental mode and start imagining how digital
innovation could enable you to solve a problem for consumers in your category. While you’re at it,
consider what that breakthrough could do for your business – if it was launched by you, or if it was
launched by a competitor.
The movement is irresistible. Traditionally physical product categories, from beauty to laundry, areembracing the opportunities of digital. We’re calling this the ‘Product+’ trend… as companies reachbeyond their traditional physical products to discover digital ways of creating additive value for theirbusinesses. The brave and the bold are already reaping new revenue streams, stronger relationships
with consumers and priceless insight into how their products are used. Thermostats to control yourhome when you’re out, socks to monitor your sleeping infant – some innovations have been decried as
gimmicks, but most make small but meaningful improvements to people’s lives and enable the brands
to learn.
FMCG/CPG giants like P&G, Colgate and L’Oréal have entered the space, answering their consumer’s
needs in engaging new ways but crucially staying true to their brand. (That’s rule number one in the
Product+ playbook, by the way.) They’ve drawn on their decades of consumer experience to create
sharply focused solutions that win hearts and minds.
If that includes you, then let’s get started. But remember, the digital opportunity is a rich innovation area
drawing on multiple disciplines – from software and product design teams right through to consumer
insights, digital marketing, finance and supply chain. Finding the right partners, internally or externally,
will be key to success.

03© Cambridge Consultants 2022

Product+ digital transformation

Getting started
It’s easier if you know where to look
New territory can be daunting. So, let’s focus on the upsides. Rich data-based insights, new revenue
streams, high-value loyal users. And don’t dismiss the risk of getting left behind as categories get
disrupted by digital innovation – with no prospect of catching up with the scale of data accumulated bycompetitors. Big tip number one, then: start by focusing on the problem your brand can solve.
The most meaningful innovations solve a core category problem. The good news? You probably alreadyknow about it; because many companies have spent decades, building insights about the needs ofpeople who buy products in their category.

Nike just did it
Well-fitting sports shoes prevent injuries and are key to product selection. Nike answered this with theHyperAdapt 1.0 in 2016 (recently relaunched as Adapt), an auto-lacing smart shoe that electronically
adapts to the wearer’s foot shape. The smart connection also allows users to adjust on the go with theApple Watch. A totally new solution, with added benefits, for a well-known problem.

04© Cambridge Consultants 2022

Product+ digital transformation

A brush with genius
Oral-B knew that most people miss up to 80% of surfaces when they brush, causing health issues.
Different bristles and education campaigns hadn’t solved it, now smart technology leads the way. The
AI-powered Genius X tracks missing areas and provides personalised feedback for better results. A
breakthrough that potentially saves time, money and pain in the dentist’s chair.
Neither example created a new problem to solve or promoted radically new behaviours. They built on
existing habits to maximise market potential and remained true to the essence of their brand.
Remember, starting with existing knowledge is a competitive advantage for category incumbents.

What’s in a name?
Most people use smart products, many advocate the benefits. But there’s no common term todescribe them. Digital, connected, smart, IoT (internet of things) or wearable devices are often usedinterchangeably. We’re talking about internet connected devices that collect, analyse and sendvaluable information back to the user – whether that’s the end-consumer or the brand. We’re using
the term ‘smart product’ to capture them all. Also, we’re using the phrase ‘Product+’ to specificallytalk about traditional physical product companies that are moving into digital. Businesses thathave been built on delivering high volume physical products have different digital opportunities/
challenges than new entrants or existing software-based businesses. We believe it’s important toacknowledge this difference.

Action points
 Consider the central reason consumers
buy your category or product. What’s at
the core of their intentions? How well isthat need satisfied? What gaps exist?
 Think about your brand position andgoals. How could a digital product withunique functions deliver your brandbenefit in a new way?

05
© Cambridge Consultants 2022

Product+ digital transformation

Making it work
For the real world, at scale
There is no blueprint because every situation is unique. But there is a universal logic called systems
thinking that can be applied. It refers to the creation of synergistic relationships between the physicaland digital solution, the product and the service. Getting this right unlocks success for product owners.
When innovating a Product+ solution, systems thinking relates to the elements needed to design, develop
and operate the new solution. From the look of the device, to the cloud data transfer requirements, tothe customer support line and much more. With physical products, the full system might include how
packaging materials interact with product formulations or take into consideration the complementary
nature of two items – like a coffee machine and pod. As a product owner you’re probably used toconsidering the purchase, unboxing and usage experience. The same systems thinking approach must
applied to a full physical/digital system.
Let’s say your smart product needs to provide a regular activity update. Should all the data be sent tothe cloud, or only the extracted insight? What happens if the device loses connectivity – is the transfer of
information safety critical?
These decisions have an impact on the overall system functionality and performance as well as thephysical requirements of the device, such as memory, power or connectivity. If they’re not consideredearly, it could lead to significant rework later.
A common mistake is separating the physical and digital parts of a development into different groups,
often with an initial focus on the physical side. Product management for Product+ systems starts with acomplete physical/digital system approach. This enables you to create a far more innovative solution
and get to market faster with less rework.

It’s second nature for a physical product company to consider production requirements such ascomponentry supply chain or tooling approaches. A similar approach is required for digital. Things
to consider include: How will the complete solution be operated?
 Is it designed to scale?
 How will it be kept secure?
 How will you handle customer support?

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Product+ digital transformation

Check out this general picture of a physical-digital solution and all the interactions between the
different parts.
Wireless
Connection

DeviceCloud Data
CentreVIEWA
FRO NALYM D SIS
EVIC
E

User Interface

Data
Actionable Insights

Existing Enterprise
Data Centre
User Setup &Onboarding

hts

sig

e In

abl

ion
Act

Business &CRM Analytics
CR

EAT
ACC E YOU
R
OU
NT
HER
E

ts

igh

Ins

Data

Product &UX Analytics

Actionable Insights

Every system is like a Russian nesting doll. There’s a relationship between each component and balanceis maintained by considering both the whole and the parts. Successful programmes maintain an overall
holistic system view with parallel project teams focusing on the individual parts with regular check ins toensure the system works as a whole – as seamlessly as you intend.

Action points:
 As product owner, have you
considered the core componentsof the development – physical anddigital? Where do the interfaces
occur?
 Does your organisation have thecapabilities to create a multifunctional physical-digital-productservice team?
 What gaps exist? Where are the weak
points? This is where you can tap into
external experts to help get you up
and running07© Cambridge Consultants 2022

Product+ digital transformation

Making it happen
Consider these options for your organisation
If you’re focused on physical products and now want to expand into digital, it’s likely you have gaps inyour organisation. Don’t worry, there are multiple avenues open to you that allow for differing levels ofinvestment, risk tolerance and desire to insource/outsource expertise.
Common options are:
COMMON OPTIONSPOSITIVESNEGATIVES

Build via your own internalteam or external provider
e.g. Philips Hue light bulbs

 Custom solution; own vision
 Leverage existing brandstrengths and category
expertise Steep learning curve(internal team)Acquire market-ready solution
e.g. Under Armour suite ofproducts for UA HealthBox

 Quick entry
 Known financial
commitment

 Long term investmentcommitted upfront Integration of new andexisting entity

Partnere.g. Apple Watch Nike+ Complementary expertise Potential competing
priorities and plans overtime

Invest to learn and/or buy inthe future
e.g. P&G Ventures

 Low financial commitment
 ‘Inside’ knowledge of newopportunity as it develops

 Limited influence overactivity/ability to experimentfor benefit of own business08© Cambridge Consultants 2022

Product+ digital transformation

None are inherently better than the other. Many options exist for the wide variation of needs of individualcompanies and business opportunities. With no ‘right’ answer, you should consider requirements for ROI,
payback period, scalability, portfolio fit and potential expansion, and your company’s ability to adopt
and exploit the opportunity.
This flexibility is another reason why Product+ solutions are so attractive. It’s an exciting prospect tocombine different areas of expertise and create something meaningfully different and impactful for
consumers, the market and your company.

Further reading
Of course, we need to consider the importance of data security and also the perception/reality ofprivacy. There’s no time for the detail here, but you can catch up with our exploration of the newtechnologies for decentralisation of data to address exactly this. Read: The new digital services
contract: you control your data, we’ll deliver your experience.
Our Capgemini colleagues have examinedthe value of data-based insights in theirrecent report: The age of insight: how
consumer products and retail organisations can accelerate value capture from data.

Action points:
 Consider how much influence yourorganisation would like to have over whatis developed and how it will expand overtime. Does that lend itself to a bespoke
solution, or are you willing to trade control
for partnership benefits?
 Consider the gaps in your existingorganisation to determine which of these
options make the most sense for yourneeds. Perhaps you’re a brand expert, witha clear understanding of the market need,but need technology expertise to support
your vision. Are you seeking to enter adifferent product category and wanta head start to do it? Think about yourcapabilities and ambition09© Cambridge Consultants 2022

Product+ digital transformation

Why it’s worthwhile
Insight creates competitive advantage
Digital technology can redefine everyday products, in almost every category. When done well, they
make life easier and better, incentivising consumers to remain engaged. Engagement leads to insight.
Incredibly valuable insight. Usually, we gather product insights largely via consumer research studies.
But imagine those same insights built through everyday home use.
For the first time, you’ll have access to real-time usage behaviour, trended over time. It’s true behaviouralinsight because it’s not under observation. There’s no awkwardness of being watched. Sample sizes
are limited only by the number of devices in market. With enough users you can examine how people ofdifferent ages, markets, genders use your product, how their needs differ and how you can better designfor group X in the future.
The data and analytics can enable predictions of how it will or could be used in the future. By extension
this provides insight into the needs and wants of the user and the potential to predict their future needs.
The ability to embed this learning into future solutions can create a divide between smart and nonsmart products. Arguably, the one who holds the insight holds the future of the category.

Action points:
 Consider the existing gaps in yourmarket knowledge. What type of
information is needed to fill them?
 Imagine different ways that information
could be collected. How could that beembodied in a device?

10© Cambridge Consultants 2022

Product+ digital transformation

What it’s worth
Discovering the real value
The device is the tangible product that lives in the physical world. But the real value comes from theservice it enables. It can be simple and straightforward or complex and multifaceted. The point is that itshould be created specifically for a defined user case.

Services may seek to deliver:
Personal insights – easy access to information, for example monitoring blood-oxygen levels
on the Apple Watch
Self-improvement – learn existing behaviour, set and track tasks for improvement, forexample the Sycada DriveTag which provides real-time feedback on how you drive plus
suggestions for improvement
Convenience – simplification of tasks, for example Garmin’s activity tracking or Alexa’s
voice-enabled search
Challenge – real-time coaching and motivation, for example leader board results in digital
fitness such as MIRROR from lululemonEntertainment – amplify enjoyment from an otherwise mundane task, for example Colgate
Magik’s toothbrushing games for kids11
© Cambridge Consultants 2022

Product+ digital transformation

Product+ systems provide the pathway for brands to deliver services and truly differentiatedexperiences. They can, therefore, radically change what is built and sold.
Arguably, Peloton, the at-home exercise bike that features a screen, speakers and a live link to classes
and fellow riders, has delivered this vision. For loyal users, Peloton is not just a bike or even access toclasses (the service). It’s customised workouts, it’s an inspiring community and a human connection toothers in the ‘club’. It’s memorable and valuable. Peloton bikes are priced at the high end of the market
and riders pay a monthly fee of $39 to access the service. Fees that have helped Peloton achieve amarket cap of US$30b (March 2021).

AVOID THIS PITFALL
Will your Product+ innovation evoke the ‘care factor’?
The benefit must be enough to motivate someone to consider, purchase, use and habituate theproduct. In addition, the benefit or value must be satisfactorily greater than what users are asked
to ‘give’.
Most Product+ systems are an enhancement to a familiar solution already adopted into the user’s
life – the fridge that tells you when something has expired, the doorbell that shows you who’s on
your front porch. The smart versions of these products ask users to do something more. Check an
app or view a notification, say. This extra step occurs under a ‘give-to-get’ proposition. Users arewilling to make trade-off decisions where they consider what they are asked to contribute versus
the additional benefit of the smart solution – convenience, personal insight, self-improvement,challenge, or entertainment.
Take a win-win approach to your early idea development to avoid this problem – what’s in it foryour user, what’s in it for you. Is it balanced? Keep ideating until you make it is so.

Action points
 Think about where your consumers could benefit
from extra help – would behaviour tracking provide
valuable insights; are they seeking help to makea change and stick to it; are they looking for
personalised information at their fingertips? This
could be a single benefit or combination of social,emotional and/or functional needs
 How could this ‘help’ be delivered digitally? Whatmight a basic solution look like? What might be
included in an extravagant, comprehensive service?
 What is appropriate for your category? There
isn’t a one-size-fits-all approach here. For
example, consumers will never interact with a low
engagement category like cleaning in the same
way as they would with a fitness system!

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Product+ digital transformation

I’ve been there, done that
So what have I learned?
I’ve got the t-shirt. In 2014, I was working with Colgate-Palmolive, thinking about the intersection of health,wellness and technology. The ‘quantified self’ movement was in its infancy and Fitbit had just launched
the first smart version of a pedometer. A few years later, we delivered Colgate’s first smart product, first
digital/data driven business and first direct-to-consumer retail operation.
What did I learn from this rollercoaster experience?
Don’t try to make the perfect solution
With so many unknowns – for ourselves, the market, and users – we didn’t attempt to foresee every
requirement or create the perfect design before we hit the market. We created MVPs (minimum viable
products) and tested early – a significant change in practice versus the company norm. This minimised
our up-front investment, shortened our time to market and maximised our learning.
Bet on more than one thing
Our early deep dive into the opportunity revealed several opportunities – ideation work often resultsin more than one solid option. So, we didn’t pre-select a single idea to develop. We chose a range andmade bets on each of them. This gave us more than one chance of success, and due to variations indevelopment time, we also created a pipeline of activity.
Imagine what the future could look like but don’t be rigid in execution
We created a future vision of consumers, what the market would look like, and our role within it. But
we weren’t afraid to make changes as we learned. This flexibility allowed us to take advantage of newopportunities that came up, which was especially relevant once potential partners realised we were
exploring the space.
Take advantage of the experience of others
We knew there was a lot we didn’t know, so we widely partnered, outsourced and insourced newexpertise. This meant our development team included a mix of technical consultants, start-ups,
university research teams, new hires and the upskilling of existing talent. This mixed team allowed us tobe agile, exploit multiple opportunities at once and identify problems early.
Would I do the whole thing again? Of course! Who wouldn’t want to explore the future, create it andwatch it grow?
Contact me to discover more about how Cambridge Consultants can support your ambitions by
exploring the possibilities of expanding from pure physical into the digital. Beyond that, we can help
deliver the full design and development of the system to launch.
Jennifer Gomez, Consumer Digital Transformation
jennifer.gomez@cambridgeconsultants.com

13© Cambridge Consultants 2022

About Cambridge Consultants
Cambridge Consultants has an exceptional combinationof people, processes, facilities and track record. Brought
together, this enables innovative product and services
development and insightful technology consulting. We
work with companies globally to help them manage thebusiness impact of the changing technology landscape.
We’re not content to deliver business strategy based ontarget specifications, published reports or hype. We pride
ourselves on creating real value for clients by combining
commercial insight with engineering rigor. We work withsome of the world’s largest blue-chip companies as well aswith innovative start-ups that want to change the statusquo fast.

UK — USA — SINGAPORE — JAPANwww.cambridgeconsultants.com
Cambridge Consultants is part of Capgemini Invent,the innovation, consulting and transformation brandof the Capgemini Group. www.capgemini.com

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With a team of around 800 staff in Cambridge (UK), Boston,
San Francisco and Seattle (USA), Singapore and Tokyo,
we have all the inhouse skills needed to help you – fromcreating innovative concepts right the way through totaking your product into manufacturing.