Enterprises across industry verticals are facing disruption from digital native businesses delivering digital products and services that better meet customer needs. Digital transformation has become imperative, and enterprises have accelerated digitizing their business value chain and products to remain competitive.

Figure 1: McKinsey & Company [1]

The first phase of IT-enabled business transformation, during the 1960s and 1970s, individual automated activities in the value chain, from order processing to computer-aided design and enterprise resource planning. The second phase of IT-enabled business transformation, during the 1990s, was driven by internet-enabled coordination and integration across individual activities. Even as the business value chain was transformed, creating new business models, the product remained unaffected.

In the third wave of IT-enabled business transformation, during the 2000s, IT became an integral part of the product itself. Products are embedded with sensors and processors for connecting and exchanging data with other devices and systems software. Digitizing products drives tremendous product functionality and performance improvements and creates new revenue streams for companies. As digital products become ubiquitous across different spheres of our lives, and the value of embedded technology within physical products increases, companies need to accelerate innovation to maintain revenue growth and profitability for which enterprises are leveraging digital product engineering.

What is digital product engineering?

Digital product engineering is an integrated process that combines software, IT hardware, and embedded technologies to design and develop digital products. Digital product engineering practices apply not only to the technology industry but to other industries such as automotive, pharmaceutical, life sciences, and more. Digital product engineering solutions help you overcome challenges to transform your legacy products to the demands of the digital world by using the latest development trends such as Agile and DevOps methodologies.

What are the phases of digital product engineering?

There are five main phases of digital product engineering, though it may vary from company to company.


This is the first phase when a product idea is discussed and debated extensively in customer requirements and likely features that will meet the requirements. Design thinking is used to refine product ideas and create specifications for a minimum viable product (MVP). According to research by McKinsey[2], 44% of digital reinventors say their companies use design thinking at scale.


The design phase in digital engineering represents the evolution of a product from concept to design that covers digital experience design, key features, and navigation. This is a crucial phase, considering that UI/UX plays a vital role in adopting digital products.

Prototyping / Minimum Viable Product (MVP)

Prototyping refers to using digital tools to create a replica of products that can be evaluated in test environments to verify performance.

An MVP is created with basic features testing with early users whose feedback is used as a benchmark to refine the design before product development begins.

Product development

Once the product design is finalized after prototyping or testing the MVP, the product development begins, which follows an agile development methodology centered around an iterative process. Product releases occur in shorter cycles that enable companies to update functionality to respond quickly to market requirements.


After the product is released, significant upgrades are made to ensure it stays competitive and meets new customer demands.

How does digital product engineering accelerate innovation?

Incumbent companies across industry verticals are under pressure to develop innovative products and services to drive organic growth quickly with increasing disruption across business segments by digital-native companies. The incumbents find themselves hampered by rigid sequenced processes, siloed organization structures, and legacy innovation practices that have not kept pace with the current market’s demands. Digital product engineering will help you mitigate these challenges, accelerate innovation, and achieve significant digital transformation results to optimize cost.

Shortened product innovation and development cycle

Speed to market is of great essence in the digital economy, characterized by a winner-takes-all approach. The ability to innovate faster to tap into new business opportunities while competing with data-driven digital disruptors is critical for success.

Digital product engineering helps you quickly launch good products with some rough edges, which contrasts with the traditional method of launching completely developed products. The new approach leverages agile methods, A/B testing to constantly improve products and frequently release new versions by incorporating customer feedback, thus staying ahead of the curve.

Product development process overhaul

Traditional product development following a linear sequential model is reengineered to create a flexible process that aligns with the iterative development practices of the agile model. The reengineered process helps improve quality and reduces delivery timelines and cost.

Innovation to create new revenue streams

Digital product engineering services not only help take products to market faster but also create new revenue streams through digital solutions while simultaneously solving customer problems, thereby creating a win-win scenario. Heavy machinery company Caterpillar has sensors fitted to its machines connected to the cloud. The sensors constantly send data to the cloud, which are analyzed to monitor the health of machines and if they require any change of parts. The monitoring services have created a new, small but growing revenue source.

Besides, the companies also get good quality, cost reduction, and fast turnaround times.

How can you leverage a partnership to augment your internal capabilities?

Many companies want to expand their products and services by building and leveraging digital business solutions, but a lack of in-house product innovation capabilities and technical expertise is their biggest challenge. Product innovation in the digital economy requires process reengineering and expertise in emerging technologies such as Artificial Intelligence, IoT (Internet-of-Things), which may not be feasible for all companies. Large companies have acquired companies that specialize in digital engineering to build their capabilities. Besides the inorganic route, you have the option to partner with a software product engineering services provider to augment your digital product innovation capabilities. As a trusted product engineering company, Nous Infosystems has used its digital product engineering expertise to help traditional companies and independent software vendors (ISVs) with business innovation and product development. For more information, get in touch with us.


1. The case for digital reinvention

2. How digital reinventors are pulling away from the pack

Vinod Varma K
Asst. General Manager - Sales Operations

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