How manufacturers interact with their digital vendors is evolving. IT and product development play a larger role than ever before, and most manufacturers know that it’s not enough to just deliver a great product anymore. Customers want more digital services, like analytics dashboards and remote diagnostics that provide valuable insight into the product. As the global telematics market explodes from $26.34 billion in 2015 to an estimated $140.10 billion by 2022, manufacturers are increasingly working with digital vendors to meet this demand.
In the past, digital vendors were primarily tapped by marketing or branding teams and IT or digital product development support was provided by parent organizations’ staffing firms. Today, however, as manufacturers seek to leverage their most valuable asset—data—IT and digital product development departments are now working much more closely with digital vendors.
A key challenge for manufacturers in this shifting market is that customer demand for digital products differs from the demand for physical products, and their requirements, resources, processes and relationships must adapt accordingly. Consider, for example, a construction OEM. Production of a new piece of equipment could take years, and the equipment is expected to work perfectly when complete. In contrast, a company releasing a digital product faces pressure to roll out new versions much more quickly, and users expect that the product will be updated monthly or more frequently throughout its life cycle.
As manufacturers increasingly turn to digital vendors to deliver high-quality digital products that meet customers’ needs, stay within budget and launch on schedule, three common barriers arise:
No. 1: Willingness to Compromise and Collaborate
In a marriage, both parties in the relationship must work together to keep it strong and effective as needs evolve. That same commitment is necessary for manufacturers and digital vendors to form a cohesive relationship and work together toward a common goal.
When manufacturers are analyzing whether to build, buy or partner on a digital product, they may consider working with a digital vendor as “buying” its product. The reality in most cases is that it is a partnership, with the manufacturer and digital vendor working together on a product throughout its life cycle. This partnership requires collaboration and communication to ensure that each party’s needs are consistently met, but often manufacturers’ IT and product teams aren’t used to working so closely with vendors. This can lead to a strong sense of ownership by internal teams that prevents digital vendors from accessing data, people and tools needed to develop a product. Manufacturers can remove this road block by creating a culture of acceptance, such as being willing to shift their processes, create new roles or have internal staff take on new responsibilities to support the relationship and by pushing for cross-functional training that eliminates dependency on the digital vendor.
Digital vendors, in turn, must also be willing to compromise in three ways:
- Dedicating extra time to education. Software development best practices are new to many manufacturers, and digital vendors will need to plan time to understand how best to enact these practices in the context of a manufacturer’s business and unique customer needs.
- Be patient with adoption. For manufacturers, moving to software best practices often represents a huge change in IT and digital product development operations. This change takes time.
- Respecting the manufacturer’s expertise. Manufacturers ultimately know their business best, and digital vendors may need to pivot their strategies to meet the needs of manufacturers’ customers. For example, a feature that may only serve a small group of customers would typically not be prioritized by a digital vendor but it may be table stakes for a manufacturer.
No. 2: Lack of Transparency
Trust isn’t built overnight, and when a relationship is in its infancy, it’s not uncommon for one party to hold back information that isn’t considered essential. Creating a mutually beneficial relationship, however, requires a higher level of transparency into processes, long-term plans and user context.
For example, vendor insight into how a product is being used by the customer and what aspects of the product are most important to them can lead to a better development prioritization and a product that more effectively achieves its goal. One way to do this is to have digital vendors sit in on customer training calls. This can provide vendors with new ideas on how to improve the product.
Transparency about the factors and strategies that drive manufacturers’ product road maps is also beneficial. Digital vendors can help remove road blocks that manufacturers may not realize exist and develop features that make long-term goals achievable. By sharing overarching timelines, milestones and priorities, manufacturers are better positioned to reap the full potential value of the partnership with their digital vendors.
No. 3: Different Ways of Working
When it comes to project management approaches, most manufacturers and digital vendors could not be more different. The waterfall method – linear development in which individual elements are finished and tested in their entirety, one after the other, with a big launch at the end – is standard in manufacturing because it works well for physical product development. The structure it provides for these products, which often have a lot of dependencies, helps manufacturers deliver a high-quality end product that must be perfect when it hits the market.
Digital product development, though, largely uses Agile principles, an iterative and flexible approach during which priorities can change rapidly in response to business and customer needs. With Agile, products are released as early as possible and constantly improved.
As a result, manufacturers and digital vendors often approach delivery dates differently. Digital vendors must be prepared to shift from working with flexible delivery dates, which are common in software development, to hard delivery dates that are often necessary in physical product development.
While Agile represents a significant departure from manufacturers’ current way of operating, it offers manufacturers the opportunity to take advantage of time- and cost-saving strategies while consistently working toward the end goal for their digital products. One such strategy is to develop a minimum viable product. A product that is just workable can be used to gather customer feedback earlier in the development process, with in-demand features added over time.
At the end of the day, success in today’s digitally focused manufacturing space starts with an open mind and the flexibility to evolve the roles and responsibilities that exist either internally or externally through digital vendor partners. Just like a marriage, it’s all about interdependency, and manufacturers who are able to break down these barriers to forge better relationships with their digital vendors will unlock increased efficiency, higher quality releases and more satisfied customers.
Justin Johnson is a former product manager at Daimler Trucks North America. Lilie Chang Fine is a senior product manager at Metal Toad.