The digital layer of our world is rapidly expanding, and even more so today due to disruptive technologies such as generative AI. The latter is especially driving record-breaking adoption rates for digital tools and services (McKinsey, 2023).
In the meantime, this has become a commonplace. Something we tend to pay less attention to, however, is the fact that our physical products, no matter how important and indispensable, are deeply affected by this trend. In other words, digital growth isn't confined to purely virtual products; it's increasingly integrating into the physical or analog world around us. The Internet of Things (IoT) is just one manifestation of this trend as it embeds physical products or devices through the cloud, vastly increasing their functionalities and interconnectedness. The IoT alone is expected to reach over 18 billion devices by 2024 (IoT Analytics, 2024).
And there are myriad other ways in which physical products are increasingly augmented through digital technologies. For instance, real-world items are being tokenized using blockchain and distributed ledger technologies (OECD, 2025). Continuous monitoring and digital servicing allow manufacturers to maintain ongoing relationships with products, offering enhanced service, resale, and new licensing opportunities (Journal of Business Research, 2024). Additionally, just like smartphones and computers, our vehicles, industrial equipment, or security systems receive continuous updates and feature expansions, thus shifting towards a software-defined hardware paradigm (Lotus Capital, 2025).
However, these trends and the underlying push toward embedding analog and physical products into the digital sphere are not just a convenient addition to one's existing products. More and more, companies that don’t embrace this shift (and whose physical products don’t tap into their digital potential) risk becoming just another commodity. Meaning that if physical products don't effectively integrate into the digital domain, they may lose value and become indistinguishable from cheaper alternatives. And sooner or later, these products will be unable to compete at all.
This is also reflected in the fact that hardware margins have been steadily declining, often reaching minimal levels as hardware alone becomes less differentiated (LeBlanc, 2024). Meanwhile, consumer expectations have evolved, with buyers increasingly expecting connected, digitally enhanced solutions. Companies focusing exclusively on physical goods risk losing market share to competitors integrating dynamic digital services into their offerings. Let us take a closer look at some real-world cautionary tales.
The risk of failing to recognize digital potential isn’t just theoretical—there are concrete, high-profile examples of companies that paid the price for overlooking this shift. TomTom and Fabriano are just two cases of formerly innovative hardware brands that lost ground as the digital layer began to redefine consumer expectations.
TomTom was once a household name, synonymous with standalone GPS devices. At its peak in the late 2000s, the company’s personal navigation hardware was a must-have accessory for drivers everywhere. But as free navigation apps emerged on smartphones (complete with real-time, crowdsourced traffic data) TomTom’s core product quickly became outdated. Rather than shifting aggressively into cloud-based services and user-driven platforms, TomTom doubled down on selling hardware, only later pivoting to B2B software and automotive APIs. By then, however, much of the value and consumer trust had already migrated to digital-first competitors. Today, TomTom’s consumer revenue is a fraction of what it once was, its brand a reminder of how quickly hardware can become commoditized when the digital layer is ignored. But TomTom’s products are physical products where software is an already inherent component. But even companies with completely analog products must face the growing importance of the digital layer.
Fabriano, a town in Italy with a rich history of papermaking, has long been celebrated for producing high-quality paper used in everything from artists' sketchbooks to euro banknotes. However, in recent years, the town's paper industry has faced significant challenges due to a failure to adapt to the digital age (Financial Times, 2025).
One notable example is Fedrigoni, a prominent paper manufacturer in Fabriano. In December 2024, the company shut down its office paper production line, resulting in the loss of 200 jobs. This decision was driven by declining demand for traditional office paper, increased competition from global markets, and a lack of investment in the digital domain. While Fedrigoni continues to produce specialized paper products, the closure highlights the consequences of not exploring in a timely manner how their analog product can be embedded in future digital ecosystems (Financial Times, 2025).
The upshot: Companies that miss out on creating enabling digital layers for their physical product (portfolios) risk losing their competitive edge, leading to job losses and economic decline in communities that rely on these industries.
Given the urgency of this issue and our experience with transformation projects aimed at unlocking digital potential, we knew: It is time for a streamlined and easy-to-implement process that specifically helps companies unlock the digital drivers of their physical product.
This is how leap.product came into being. Understanding the challenges companies face in navigating digital transformations, leap.product provides a clear, structured, and easily implementable approach to identifying, validating, and capturing digital opportunities in existing product portfolios.
This is how it works: We first help you analyze your product lineup, pinpointing exactly which of your products has the greatest potential to benefit from an integrated digital ecosystem. Next, together with your team, we identify compelling digital use cases that add genuine value to your product and customers. Finally, we develop a robust business model tailored to your chosen product’s new digital capabilities, clearly outlining financial prospects and strategic next steps.
The entire leap.product methodology is condensed into an efficient, collaborative, and results-oriented process that delivers tangible outcomes within just 12 weeks. At the end of this structured journey, you will have:
Through leap.product, your company achieves targeted, impactful results without unnecessary complexity, rapidly validating and capturing high-potential digital strategies. This approach unlocks sustainable revenue streams through innovative subscription models, data monetization, or platform-based services. By grounding decisions in concrete evidence and collaborative validation, you reduce uncertainty and financial risk. Moreover, engaging your team throughout the process fosters a strong sense of ownership, strategic alignment, and collective enthusiasm for the digital future.
Are you ready to explore the digital potential of physical products? With leap.product, you gain a clearly defined digital use case and a business model built to activate it – giving you the direction needed to make confident, future-focused decisions. It’s a decisive first move toward securing long-term relevance, growth, and differentiation in a rapidly evolving landscape. Have we sparked your interest? Be sure to reach out and book a meeting with us using the form below. We’d be delighted to delve deeper.
Images: Christian Wiediger (Unsplash)
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