The Approach to Agile Product Development: What Leaders Do Differently

As the pace of innovation has accelerated, we have been bombarded with new terms for concepts to describe advanced solutions and processes.

Terms like digital twin, edge computing, and machine learning are now common in manufacturing—just 10 years ago, many would have been unfamiliar with these concepts. In the product development space, Agile is now at that inflection point: 10 years from now it will likely be the dominant workflow process for product designers and engineers. This is not agile as in fast or flexible, rather we’re referring to Agile, an adaptive and collaborative approach to project management.

Over the past two decades, software development professionals have embraced Agile as a better way to work. It is now the most common methodology to improve how they bring software to market. When it comes to the creation of physical products, however, Agile product development adoption is only now making inroads.

In another 10 years’ time, it is unlikely the average hardware professional will be unfamiliar with Agile, but for now, a divide exists—one that is creating a real competitive difference between those eager to embrace Agile product development and deploy it when appropriate and those who are still reluctant about the methodology.

In this white paper, we will examine the behavioral differences between self-identified industry leaders and laggards as it relates to Agile product development. The data shows not only are leaders embracing more Agile practices, but they are also taking a proactive approach in how they leverage technology—and are benefiting from it.

• Agile product development is becoming more common for physical/hardware products, not just software. Leaders are more likely to have fully implemented Agile workflows compared to laggards.
• Agile principles align with digital transformation initiatives like using cloud-based tools and SaaS products. Leaders are more likely to proactively adopt new technologies that enable Agile capabilities.
• Leaders are more likely to use automation and data capture technologies across product development phases. This transparency helps measure the impact of Agile on productivity.
• Leaders express more confidence in applying Agile methodologies to physical product creation. Laggards are more hesitant, suggesting they do not fully understand Agile benefits.
• Leaders encounter less internal reluctance to adopt Agile. Laggards face more obstacles, often preventing adoption. An open mindset across the organization is key.
• Agile does not require a major upfront investment. Starting small, like using collaboration tools for daily meetings, moves organizations closer to Agile workflows.

PTC conducted a survey in July 2023 to evaluate the market’s general state of Agile product development adoption, with a focus on potential pain points and the characteristics of the organizations involved, and to discern which traits, if any, enabled certain organizations to excel at embracing Agile product development methodologies while other businesses struggled.

Exactly 105 respondents were interviewed from North America and Europe, representing a range of industries, including electronics and high tech, automotive, medical devices/life sciences, industrials, and aerospace organizations.

All respondents are decision-makers, manager level and above, with the largest segment (33%) occupied by senior or executive directors. Other roles represented in this survey include senior managers (20%), managers (17%), VPs or assistant VPs (14%), C-suite (10%), and EVPs or SVPs (6%).

Since Agile product development is expanding in its potential applications, respondents reflected this diversity, including hardware-focused, software-focused, and simply general business-focused individuals. Through their inclusion, we hope to better measure and represent Agile product development’s true utilization within an organization.

For this white paper, we focus on respondents who self-identified as either industry leaders or laggards. These respondents were asked: “When it comes to physical product development, do you believe your company to be leading or lagging the competition when it comes to leveraging the latest technologies and solutions?” They divided themselves into two groups: 46% identified as leading, and 54% identified as lagging.

Agile product development is more about increasing efficiency in the process and producing quality results than it is about speed. At PTC, we define Agile (in the context of Agile product development) as the application of software development methodology to a physical manufacturing process. To put it bluntly, using Agile product development is very much about making hardware like software.

The principles of Agile product development were initially constructed for software development. The Agile Manifesto was the first document crystallizing the core concepts and outlines of the framework, and it was made by and for software developers looking to deliver value with more consistency and speed. That said, none of the 12 principles of Agile (or its four core values) are specific to software. They are adaptable—and are successfully being adapted to reflect the realities of physical product creation.

For instance, the sprint cycle (central to most Agile organizational workflows) can be shifted from delivering a working product every few weeks—unrealistic for hardware—to simply delivering a measurable value or outcome.

The flexibility of Agile product development’s application—and confusion over terminology (agile vs. Agile)—has led many organizations to prematurely conclude they have adopted Agile workflows and methodologies, despite not fully committing or, more importantly, realizing any of the benefits, including increased efficiency, adaptability, customer satisfaction, along with early and predictable delivery and better risk management.

Why Agile now?

When asked, 58% of total respondents reported using Agile processes for developing physical products rather than the traditional Waterfall method. Interestingly, this statistic was the same for leaders and laggards. This finding challenges the notion that Agile product development brings any discernable competitive advantage – however, is everyone talking about the same Agile?

We do not need to dig too far into the respondents’ data to start to see potential signs of discrepancies. While hardware and software processes can differ, and both can still be considered fundamentally Agile, leaders and laggards reported very different results when asked if issues arose from different developmental processes for hardware and software:

These findings conflict with one of Agile’s core values: individuals and interactions over processes and tools. In a truly Agile environment, employees work to ensure timely product delivery that can be sustainably repeated, even if that means completely abandoning traditional workflows or breaking down previously established barriers. The fact that laggards still frequently encounter issues due to process differences suggests they are not as Agile as they claimed.

Further data explores this nuance. PTC asked respondents to choose an option that best described the state of adoption/implementation of Agile product development processes for physical products:

Agile is enhanced by technology, and the organizations that proactively embrace it are more able to quickly discern when it’s needed, and then deploy it quicker. Nearly half (48%) of leaders were confident they could implement an Agile development workflow within two years, only 29% of laggards said the same.

This positions leaders as more invested, more proactive with technology, and more willing to accept the change that makes Agile product development successful.

Becoming truly Agile can be a challenging process. It is not as simple as flipping a switch, and it is not easily verified through a simple declaration or even purchasing new software. There is no solution on the market, from PTC or another vendor, that will inherently make a company Agile.

Agile principles and values, however, are more innately supported through the adoption of cloud-native solutions and SaaS products. For example, solutions that operate within the cloud can be accessed anywhere by authorized users–in addition to scaling easier than on-premises solutions.

Since real-time collaboration and communication are hallmarks to Agile product development, organizations benefit from using software tools that are not restricted by employee location.

On the flip side, legacy toolsets can hinder Agile workflows. These include locally installed applications, which by nature keep files siloed on product designers' local computers. Collaboration becomes a forced activity, requiring moving and copying files.

Now, the data: Almost half (48%) of leaders stated they preferred innovative technologies, compared to only 27% of laggards. Exactly 17% of leaders said they wanted to be on the cutting edge compared to only 2% of laggards. This makes a significant difference when exploring how ready each of these respective groups is to implement Agile effectively.

Agile is part of wider digital transformation

Agile is also centered around transparency and risk reduction. Agile product development processes typically allow authorized users a quick overview of the project process, giving immediate visibility into any obstacles. Capturing these processes is crucial to being able to observe them more accurately, and data shows that leaders are consistently more likely to use digital transformation technologies that better facilitate data capture (see chart for comparisons).

These technologies, as well as other digital transformation initiatives, give organizations the foundation to better utilize Agile product development strategies. Before a process can be improved, it must first be understood and documented.

On the practical business side, automation not only helps document a process, but it also typically improves the speed and consistency with which value can be delivered.

Leaders were far more likely than laggards to use automation during physical product development, no matter which phase was in question. Differences were especially pronounced during deployment (31% vs. 18%) and testing (29% vs. 16%).

Further, only leaders (13%) reported using automation within the ideation and planning phases. Given that Agile product development starts here, it is unlikely that laggards are taking full advantage of Agile product development since none of them have applied any automation procedures here.

Agile is not a silver bullet to solve every problem or automatically improve every situation. There are many variables in business, and not every organization faces the same challenges or regulations.

As a product development strategy, however, Agile is nothing if not flexible. This means organizations can apply Agile methodologies to a wide array of projects, including physical product design and creation, provided they feel confident in their implementation.

Leaders distinguished themselves in this category by expressing this confidence: 35% of leaders said they were at least very likely to consider Agile methodologies for their physical product creation, compared to only 8% of laggards. While it is true that laggards were significantly more likely to say “somewhat likely” (64% vs. 30% of leaders), we view this as proof of hesitation, not of confidence.

The confidence in leaders’ responses contrasts sharply with the uncertainty of laggards. If 58% of laggards were truly Agile, would 64% of them only be somewhat likely to state they would use it in physical development? By being firmer in their choice, we view leaders as having a greater understanding of Agile, their workflows, and knowing when Agile is the right fit.

Implementing Agile product development goes beyond a technology upgrade; it represents an entire shift in workflow policy, reorienting employee priorities, obligations, and expectations.

Buy-in from leadership is crucial to successful implementation. Employees will need to be educated and empowered to pursue Agile product development. Certain challenges, such as the change in management complexities, are expected.

What is not always expected—and is a clear divider between leaders and laggards—is internal reluctance. Our data showed a massive gap—a 32-point difference—between leaders and laggards on whether they have encountered or expect to encounter internal reluctance when adopting Agile product development practices. This one is critical because internal reluctance often stops the adoption process before it can even start.

Laggards are facing notable obstacles from within that leaders are simply not seeing on the same scale. While there is nothing wrong with caution, too much hesitation brings its own dangers as well, such as being left behind not only technologically, but by organizations using superior workflow methods to deliver quality products more consistently.

Agile is enhanced by technology but not necessarily bound by it. Businesses can experiment with Agile product development for a relatively low investment cost. Something as simple as using Microsoft Teams or Zoom for daily team meetings moves a workflow closer to Agile and is very unlikely to put a company in the red in the process.

Shifting to Agile is not an overnight process, companies should start small, measure progress, and scale up when appropriate.

That said, an organization must be willing to begin. Leaders have clearly started seriously moving toward Agile product development outside of just software, while laggards risk further loss through hesitation and reluctance. Agile product development holds the potential to unlock new thinking, improve transparency, and optimize workflows. Start finding ways to incorporate more Agile processes into your product development, it will only serve you well in the long term.