Product IT and its implications for
companies, IT, and enterprise architecture

Product IT can be tricky. Several important questions need to be answered here, such as: How should product IT be defined? Which capabilities are needed? What are the interrelationships between product IT and commercial IT? How is the "new kid on the block" to be integrated into the company as a whole, and what do stakeholders need to pay attention to here?

The Cross-Business-Architecture Lab defines product IT as a pool of resourc- es for all technologies and functions that are necessary for the development and execution of digital customer projects. The Product IT Sprint Work- stream assumed from the outset that creating digital customer products and services (e. g. apps, digital services, predictive maintenance tools) requires close coordination between commercial IT and product IT because there are few companies that are able to begin creating digital products in a greenfield environment.

Changing business models

At the strategic business level, digital customer products and product IT lead to changes to business models in the direction of data-driven business models that not only use data as a key resource but also pass data on and sell it as well. In this sense, data becomes a core activity that accounts for a large share of added value. This change in turn requires the utilization of new organizational capabilities involving agile work organization, for example, as well as new and expanded technical capabilities.

Three questions determine actions

The workstream also offers a basic recommendation for action when implementing a product IT system. This recommendation defines questions relating to the goals to be achieved, the conditions needed to achieve them, and the associated implementation process:

What do I want to do?

  • Develop a common understanding of product IT and digital customer projects.
  • Find out what the expectations of the stakeholders are.

What do I need in order to do this?

  • Identify the required technical and business capabilities at your company.
  • Fit/gap analysis – how fully are capabilities, skills, and degree of maturity requirements covered at your company as a whole, and in its various departments?
  • How can identified gaps be closed and existing capabilities optimized?

How do I implement what I want to do?

  • An idea-to-EOL process for digital customer products must be established (EOL = end of lifecycle). This will form the foundation for the process organization and the organizational structure to be derived from it.
  • Along with assigning tasks, authority, and responsibility, it makes sense to utilize an accompanying change management program for the entire company, not least in order to learn and internalize the various agile work methods.

Which requirements require which capabilities

Enterprise architecture must therefore more extensively address additional requirements and the capabilities needed to meet them. The workstream defined the following requirements:

  • Compliance in target markets; industry-specific requirements.
  • Legal requirements – e. g. GDPR, Germany’s Product Liability Act, Chinese Cyber Security Law.
  • Data ownership – provider, customer, both? Depends on the location where the data was created.
  • Invoicing and licensing models for digital customer products and their combination with traditional products; calculation of ROI and analysis of the business case.
  • Market analysis and pricing, consumption measurement and monetization.
  • New business models (freemium, pay-per-use, razor and blades business model).
  • Digital product delivery and entitlement with on-premises installation.
  • Positive value generation – cost to revenue when digital customer products are introduced.
  • Sales model and incentivizing: Cost of sales in the context of margins.
  • Skills at all levels relating to digital customer products.
  • Customer success management – retention and loyalty in the subscription economy.

In order to identify the capabilities needed for all of these aspects, the workstream participants analyzed several capability maps from the participating companies, whereby they considered business and technical capabilities separately. The companies need to expand – and in some cases develop from the ground up – many of the capabilities needed for product IT. Examples here include retention and loyalty management, product license management, operation of digital prod- ucts and services, data management, and business case evaluation.

IT needs to address the following requirements

In general, commercial IT specialists need to expand their expertise. They need to obtain a better view of what’s going on outside their company so that they can better understand customer requirements and help the company meet them. It’s clear that commercial IT and product IT must complement one another. The respective specialists need to decide among themselves which of them should take on which tasks for the development and operation of digital customer products, and in which situations. Here, three basic questions need to be answered first:

  • Welche Anforderungen werden an die kommerzielle IT in Zusammenhang mit digitalen Kundenprodukten gestellt?
  • In welchen Bereichen soll die kom- merzielle IT an digitalen Kundenprodukten mitwirken?
  • Welche Erwartungen hegen die Fachabteilungen im Unternehmen?

"The development, sale, and operation of digital customer products as a service basically amount to a new business model for many companies," says Workstream Coordinator Christian Schwaiger, who is also Head of Enterprise Architecture at KUKA. "This means that certain business capabilities and even new business units need to be established, or else existing ones have to be further developed. This also applies to product development, commercial IT, and all business units and departments that are needed here."

The workstream produced an ex- tensive presentation and detailed documentation
The workstream has since been concluded, and CBA Lab members now have access to an extensive presentation of the results that also includes a video. The work and results have also been documented in detail. The participating companies analyzed examples from their own and other participants’ organizations, presented examples of innovation processes, examples of how agile teams are organized, and much more. All of this can help companies develop and launch their own digital customer products.

The development, sale, and operation of digital customer products as a service basically amount to a new business model. This means certain business capabilities and even new business units need to be established, or else existing ones have to be further developed – for product development, commercial IT, and all business units and departments that are needed here.
Christian Schwaiger
Workstream Coordinator