Differentiating Your Products with Software-Driven Innovation

When legendary venture capitalist and software engineer Marc Andreessen wrote, ‘Software is eating the world,’ he meant that software would soon run nearly everything. Firms that had thought of themselves as ‘product’ companies would soon become software companies. He was right.

Now it’s the software that differentiates products, and it’s the software that delivers unique features and analysis to improve safety, customer experience, and more. Product testing, feedback, and iteration can be done digitally.  Digital twins are virtual representations of individual physical products that can understand and measure the physical counterpart. They exist for everything from plane engines (Rolls-Royce), race cars (F1) to human organs. It's not only the 'things', it's also the networks they create.  As soon as a prospective passenger orders a ride from Uber, 'the passenger... becomes part of a comprehensive digital replica of the firm's inner workings.'

We may not drive race cars, practice advanced medicine, work in aviation, or spend all our time hailing rides.  But we're likely to encounter the ever-growing power and speed of software-driven innovation in our daily lives.  

Creating a higher-quality driving experience: the software-defined vehicle (SDV)

Cars have become four-wheeled computers that can see, sense, and act more and more autonomously. Software is involved in almost all a car’s functions: engine control, heating and cooling, power steering, transmission, parking assist, locks, lighting, navigation, and the communication and infotainment options customers expect in their ‘third space’ between work and home. Want to take advantage of heated car seats on that chilly morning? Soon, you might need a subscription to the software that powers that feature. While this approach has been met with market resistance, it's an example of how far car makers are willing to go when it comes to innovating their business through software. 

BCG estimates that software-defined vehicles (SDVs) will create in excess of $650 billion by 2030. Said BCG’s Alex Koster:

The magnitude of change that the software-defined vehicle represents cannot be overstated. Software changes the source of competitive advantage at the heart of the product, the way and speed at which innovation is achieved, the role of firms and entire industries in making the car, and the relationship to the end user.

Such change has led to occurrences that would once have been unusual.

Carmakers are now eyeing one another for their software. In 2022, Honda partnered with Sony, to bring customers the latest in electric vehicles along with Sony’s top-notch entertainment. 2024 saw Volkswagen investing heavily in fellow car maker, Rivian, a deal that gives VW instant access to Rivian’s EV software.

Companies aren’t the only ones in the driver’s seat. Vehicle owners are raising their voices when the software-based aspects of their cars don’t work as expected. Thousands of car buyers, furious about the dodgy performance of their cars’ systems, have turned to the courts. In 2020, Subaru spent $8 million on a class action suit bought by disgruntled owners.

Developing the vehicle’s software

The software development behind these innovations will be a gargantuan task: fully autonomous cars may need 200-300 million lines of code. Unlike the car’s frame, the software is subject to continual revision via patches and updates during the car’s lifetime. All this must be done in an agile way so that developers can move in response to customer feedback, competitors’ moves, or the needs of a business that finds itself having to develop the competency of designing mechanical, electrical, and software components together.

Innovation today must start with the question—what role will software play? 

With application lifecycle management (ALM), software developers can handle requirements management, design, testing, quality assurance, and compliance with an all-in-one system across the entire ecosystem. This is particularly important for car makers, who must ensure every product is audit-ready. One Tier-1 automotive supplier chose PTC’s Codebeamer, a solution that offered full coverage of the development cycle (including suppliers) and the end-to-end traceability that the safety-oriented automotive industry requires.

Developing the vehicle for consumers and industry

The lightest road car weighs more than a ton, but consumers expect the same degree of personalization as they do with their coffee or their smartphone. This expectation tests manufacturers’ ability to remain fast and productive because one vehicle model can exist in tens of thousands of configurations. It’s not any easier for producers of non-consumer vehicles. At one factory in Italy, 60,000 tractors roll off the assembly line annually. Twenty tractors share identical configurations. The remaining 59,980 have unique setups.

A manufacturer runs on its product data.

To meet speed, efficiency, and quality goals, stakeholders in the manufacturing process must agree on what each customer will get in the product each customer buys. If that alignment falls short, bad/out-of-date information (spreadsheets, macros, pdfs, idiosyncratic personal systems, meetings) spreads at record speed, causing a domino effect of manufacturing mishaps and, when the product is in customer's hands, ‘an overabundance of service calls.’ 

Product lifecycle management (PLM) on an enterprise scale can free up time, energy, and focus to determine what customers want next and how to keep ahead of competitors in the manufacturing context, PLM ensures alignment on complex product data, so every decision made along its manufacturing journey—from user requirements to product support—is properly informed.  

PLM answers the question—for engineers, procurement, suppliers, manufacturing, and quality—“Did you build what you intended to build, and do you have traceability?” With enterprise-level PLM the most up-to-date product data can be trusted, found, and used across the ecosystem.

Construction equipment, such as that made by Volvo CE, is already a complex product. It becomes even more so because multiple discrete domains of science, engineering, and software development need to come together. Using PLM, Volvo CE experienced a host of benefits, including progress on sustainability and reduced product development time.

Designing better consumer experiences

Whirlpool is a century-old, globally respected manufacturer specializing in laundry and kitchen appliances for consumers. Its first product offering was a hand-use wringer-washer designed to remove some of the drudgery, inconvenience, and hard labor from laundry day. Whirlpool now aims to create new customer experiences. To do that, it needs control over its product data across different processes and systems. With PLM, this 59,000-employee company is making progress.

The ultimate software-driven innovation: the digital thread

This innovation doesn't have a part number. A digital thread is a concept—an interconnected flow of relevant data that defines a product throughout the product's lifecycle. The digital thread provides a comprehensive view of a product's journey, from initial design and development to manufacturing, maintenance, service, and retirement. When a digital thread is in place, the business can set the stage for value creation by giving access to the right data to the right person at the right time in the right context.

Most executive teams prioritize innovation. While no tool chain or philosophy can guarantee innovation will occur, together they can create circumstances that favor the development of original, useful ideas.

The alternative is to watch competitors drive up behind you, ready to pass.