Organisational inertia
Most firms still optimise for hardware-centric lifecycles. Industrial DevOps — fast, integrated iterations where hardware prototypes evolve alongside software — is the exception, not the norm.
With insights from
From a hardware mindset to system-driven value
Value now lies in cyber physical systems (CPS), where hardware, software, data, and services are tightly interwoven.
Companies with decades of hardware-driven success now find themselves constrained by their own legacy strengths. Processes, structures, and business models were built around their mechanical excellence.
Hardware was the thing to sell. Software was merely an afterthought, an enabling feature — a control, an interface, or a digital button.
“A manufacturer of physical products will always be a hardware provider. The aim is not to alter that identity but to grasp the value creation method, recognising that we live in a world where system outcomes, not hardware capabilities, create value.”
To stay competitive, organisations must embrace new dynamics:
- Software has become a value creator, enabling adaptability, intelligence, and new customer experiences.
- Integration defines competitiveness as customers expect seamless interaction between hardware, software, data, and connectivity.
- Time-to-market is decisive as speed matters more than ever, customer expectations grow, and market windows shorten.
- New revenue streams emerge with service-based, subscription, and platform models thriving when products are conceived as systems.
The winners are no longer those who build the strongest machines, but those who design the most effective systems.
The trap of ‘digitally upgraded’ products
Let’s examine some examples of how legacy companies ‘digitalise’ their products:
- A robotic arm with a remote dashboard.
- A washing machine with a smartphone app mimicking buttons.
- A tractor with an online manual and GPS guidance.
These are not cyber physical systems. They are digitally upgraded products where hardware remains the star and software is bolted on as a supporting act.
What advantages come from a systems-first approach over hardware-first development?
The traditional approach often traps firms in a cycle of incremental innovation — useful but rarely transformative. Customers gain digital convenience but not the transformative leap in functionality, usability, or ecosystem integration that defines true CPS.
Take a ‘digitally upgraded’ robotic arm. While it may improve monitoring, it has a minimal impact on operations. By contrast, a genuine cyber physical robotic system integrates adaptive programming, AI-driven predictive maintenance, cloud-based fleet coordination, and effortless human-machine collaboration. This synergy not only reduces operating costs but also enables scalable growth.
One is merely a better machine. The other is a system that generates recurring customer value.
Why do legacy organisations struggle
Even when leaders recognise the urgency, three entrenched forces typically hold companies back.
These barriers critically undermine development from the start.
When ideation and concept design start with a hardware-first mindset, digital integration inevitably falls behind, limiting software capabilities, misaligning features with customer needs and forcing costly retrofits.
Without a fundamental shift in thinking, a truly sustainable business model will never take shape.
Are your products ‘digital natives’ or just digitally upgraded?
Here’s a quick way to assess your organisation’s digital maturity. Answer these questions to discover your starting point on the journey toward cyber physical systems.
1. How do you usually define your products?
A) We lead with hardware features, shaped by our mechanical expertise (torque, precision, durability)
B) We focus on hardware, but add some digital add-ons (apps, dashboards, monitoring functions)
C) We focus on the outcomes the entire system will deliver (predictive maintenance, autonomous operation, ecosystem integration)
2. Where does software sit in your development process?
A) We design the hardware first and add the software later, mainly to control or support the machinery
B) We consider hardware and software in parallel, but software remains secondary and often siloed
C) Software is key to the product, being designed alongside hardware and services from day one
3. What is your organisation’s primary business model?
A) One-time hardware sales, with service limited to after-sales or warranty
B) Hardware plus some digital services like data dashboards or premium add-ons
C) Multiple recurring revenue models such as subscriptions, platforms, or outcome-based services
Your result
Wherever you land, the opportunity is clear: embedding systems thinking early will accelerate your transformation and unlock sustainable growth.Basic
Move to a cyber-physical system approach quickly.
You’re at the beginning of the system journey. Your value still comes mainly from your hardware, with digital features playing a supporting role.
Systems thinking as the key enabler
As products grow more complex, we can no longer view them from a single perspective. We must think in systems. That means shifting the focus from components to outcomes.
Principles:
- Hardware, software, and services are conceptualised together.
- Cross-functional teams collaborate with an end-to-end view.
- Customer journeys define requirements, not internal engineering silos.
- Value is measured by system performance and business impact, not specs.
Benefits:
- Faster development with integrated teams and modular architectures.
- Higher product quality from early alignment between hardware and software.
- Greater customer loyalty via outcome-driven innovation.
- Sustainable growth through digital services and platform-based models.
Rather than asking ‘What features can we add to the washing machine?’, you should ask ‘What outcomes do households need from their laundry system?’. That mindset is why digital native players thrive. They design products holistically and only then shape the hardware, software, data, and connectivity to deliver it.
From features to outcomes
The benefits of cyber physical systems are immediate, but envisioning a true system outcome is often challenging. Across industries, the shift is clear: where once the focus was on features, today it’s all about the value delivered.
Vacuum cleaner
Before: Strong suction power and fine dust filtration.
After: The home is cleaned autonomously: cleanliness becomes a background service, not a chore, while the user cooks, works or is away.
Car
Before: Horsepower, torque, and fuel consumption.
After: Continuous mobility service: the car updates itself over-the-air, integrates with smart-city traffic systems, and offers personalised infotainment and driving assistance.
Elevator
Before: Fast and smooth ride, reliable uptime.
After: Optimised building flow: elevators predict traffic patterns, group passengers intelligently, and integrate with energy management systems to cut costs.
MRI scanner
Before: High resolution and image clarity.
After: An end-to-end diagnostic journey: AI-assisted image analysis, automatic patient history comparison, and seamless results transfer to electronic health records.
Industrial pump
Before: Durability and maximum flow rate.
After: Guaranteed uptime and lowest cost-per-litre: the system monitors itself, predicts failures, and optimises energy use across the entire production line.
The business case for leaders
Hardware-driven success still matters, but it is no longer enough. The true differentiator is now the system's outcome: smarter, faster, cleaner, and more sustainable. That is both the challenge and the promise of the cyber physical future.
For legacy companies, the mandate is clear: to stay relevant, deliver customer value, and secure healthy returns, they must learn to think in systems. This mindset enables:
- New revenue models, such as subscription and platforms
- Built-in use of emerging technologies like AI and machine learning
- Outcome-driven development that breaks down silos and accelerates innovation
- Innovative, fully integrated products delivered faster and with minimal failures ´
Thinking in systems is no longer optional. It is the only path to future competitiveness.
