IDC TECHNOLOGY SPOTLIGHT

1. IDC TECHNOLOGY SPOTLIGHT Sponsored by: HARMAN Applying digital methodologies to augment existing products is easier said than done. Turning to an outside service provider for help might be a short-term or long-term strategy, but either way, selecting the right engineering services partner requires careful consideration of the entire digital value chain. Connecting the Physical World and the Digital World: Creating a Digital Value Chain December 2020 Written by: Mukesh Dialani, Program Director, Product Engineering and Operations Technology/Services, and Kevin Prouty, Group Vice President, IDC Energy Insights and IDC Manufacturing Insights AT A GLANCE Physical to Digital: A Business-Led Challenge Any company that has a physical product or process is under pressure to transition to a digital approach. That means being able to leverage industry and business insights to develop and support a platform that is made up of Internet of Things (IoT), advanced performance analytics, remote diagnostics, and artificial intelligence (AI) among other technology and digital capabilities. However, developingthe internal organization, infrastructure, and capabilities can be a long and expensive task for mostcompanies. KEY TAKEAWAYS » Digital engineering technologies are playing a significant role in accelerating innovation across the entire technology product life cycle. » Digitizing from the physical will require all internal stakeholders to be committed to the required initiatives. » Digitization projects will necessitate different business units working together to realize the overarching vision. As the business side of the organization increases the pressure on engineering and operations to enable digital capabilities, turning to an outside service provider might be a short-term or long-term strategy. Selecting the right engineering services partner requires careful consideration of the entire digital value chain and an analysis of core and noncore functionsor activities within the organization. Digital Life-Cycle Management: The Value and Cost of the Digital Value Chain Applying digital methodologies to augment existing products is easier said than done. In many situations, customers are not clear about their product life-cycle vision for an existing product or the art of the possible for new product development. They are aware of the enhancements required to extend a product's shelf life, but in many cases, they are not sure where they should start and what technologies or platforms should be adopted to achieve the desired innovation outcome. Some other issues and considerations that impede the decision-making process are as follows: » Lack of highly skilled and domain-specific experienced engineering talent to execute on the digital product vision, revenue, and profitability promise. As we move from physical to digital, a skills shortage could be the most challenging factor. It is a challengeto identify, hire, and retain the appropriate domain-specific talent. At times, some of this talent is not required 24 x 7, and customers struggle to justify keeping them on their books. In many cases, this can also be very expensive if the personnelare local. An entire industry has been builtaround the blending of onshoring, nearshoring, and offshoring of product engineering that addresses cost, scale, and expertise considerations.

2. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain » Clarity regarding cost of transformation. In many cases, customers are not sure which product life-cycle management (PLM) platform they should adopt. In addition, they must look at cloud, analytics, data, and other technology investments as they embark on their product innovation journey —which can be a very complex initiative. In addition, customers are also unclear about the change management required. » Return-on-investment (ROI) timeline and benefits. Customers also need assistance calculating ROI value as well as actual qualitative and quantitative benefits such as reduced cost, faster time to market, increased customer reach, and higher revenue/profits. » Product intellectual property (IP) and security concerns. In many situations, transformational initiatives entail getting connected to the network and collaboration with external third-party strategy, technology, or services party entities. For example, product modernization initiatives can require a sensor to be designed within a product (IoT) to enable it to be remotely monitored and managed. If the implementation is not secured, security breaches can impact IP and product performance. Also, this type of product is core to customers. It is the very basis of their existence. For this very reason, many customers keep all or most talent in-house. Their concerns regarding IP leaving the boundaries of their business are legitimate. However, third-party product engineering companies have built strong IP protection systems to secure their customers' products. In addition, they have invested in technology and the required talent to enable customers to leverage a hybrid talent model including crowdsourcing. » Siloed business and product development approach. Lack of a coordinated product life-cycle strategy and execution between different customer business units that include engineering, IT, and customer experience also compounds the situation. An uncoordinated strategy can lead to duplication in investment and will impede the organization's product modernization initiatives. » Internal organizational change and program management considerations. In many cases, customers embark on a product life-cycle modernization journey without considering the organizational people and process changes that will be required. At times, some teams must be disbanded and a new visionary team with existing and new talent is created. Leaders driving these initiatives must sync up with other leaders from HR, marketing, and strategy teams to ensure that they are adhering to the overall corporate strategy and goals. Envisioning and Executing a Digital Strategy Companies should consider the following factors when implementing a digital strategy for product life-cycle management: » The business problem. Always start with the business problem. It is important that customers understand the issue that they are grappling with and the result they desire. Is the problem one or more of sales, product quality, competition, costs, manufacturing, or any other issue? Once the issue is clear, figure out what needs to be done to solve the problem. Understand the investment that will be required and produce a blueprint/vision and the timeline to execute. You can do this on your own or work with a third party. #US47024820 Page 2

3. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain » The importance and value of design thinking. Design thinking refers to a problem- solvingprocess that innovatively envisionsa product based on customer needs, expected usageprocess, features, and ecosystem integration by leveraging new digital technologies and keeping in mind cost implications. A simple example is using an app to request a taxi rather than making a phone call. The physical action (making the call) is now converted to a digital one where you have an interactive app that provides you with functionality related to billing, communicating with the driver (call or messaging), location technology (maps), and other digital elements that infuse high levels of efficiency into the process and experience. » Platforms. In many scenarios, a company creates products and sells them to customers who use them. A platform approach goes beyond this model by exploring how the product value and experience can be maximized by bringing into the equation other companies and, in some cases, competitorsthatinteract with each other. At times, consumers themselves are also part of this solution-creating process. Considerthe Apple platform. As the company's product range expanded and grew, many other content developersof generalapplications, productivity tools, andgaming and media/entertainment applications wanted to write software for Apple's products. This process creates a combination of hardware (iPhone and other products), software (applications), and services (news, content, cloud storage), all ofwhich becomethe platform. » An understanding of the steps required to execute on the product vision — rethinking new product features and design changes. This requires an examination of sources of ideas related to product enhancements. Besides examining internal sources, customers should focus on learning from customer feedback through various channels including social media. It is important to design customer experiences as you innovate, and product and customer feedback obtained in real time is critical. This will ensure high customer satisfaction and better financial performance. Design thinking refers to a problem-solving process that innovatively envisions a product based on customer needs, expected usage process, features, and ecosystem integration by leveraging new digital technologies and keeping in mind cost implications. » New business, product, and operating models. Once a product or solution is digitally enhanced by leveraging machine learning (ML), IoT, Agile, DevOps, and other innovative technologies or processes, it will provide many benefits for both product companies and end customers. For customers, a connected experience will enable higher affinity; for technology product firms, a connected experience will help customers deploy new features, communicate those features, and obtain product performance feedback in real time. PLM digitization will also require customers to optimize and build resiliency and scale their infrastructure operations. It will require them to do away with operational silos and invest in technology to build and intelligent supply chain network and an always aware product business. Moreover, customers should look at the entire product life cycle —from concept and design to scalable manufacturing —if they are to realize the true potential of a digital PLM investment. » Talent considerations — building a high-performing hybrid model. For digital transformation, it is expensive to carry the weight of all the talent that is required as customers execute on a vision. As stated previously, some of this talent could be difficult to source or retain or require high investment. Unless, the role is critical to your business, avoid owning it. An ideal scenario will be a hybrid model that includes your own engineering talent and talent sourced from a third party. The third-party talent could be dedicated to your needs or sourced as needed or from a crowdsourced platform. Wherever the dedicated talent is located, make sure they are trained and retrained as required so that they are up to speed with relevant new and emerging technology. #US47024820 Page 3

4. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain » IP protection and security. Make sure that your product IP and operations are secure so that you can avoid business disruption. » Trusted data. Customers will have to choose trusted data sources that should be taken into consideration to design, monitor, and manage the connected product including operations. These investments will help build an intelligent PLM infrastructure. » Faster iteration. One of the benefits of a hybrid model is the ability to add resources that can add capabilities faster and cheaper than competitors that don't use this model. Product teams can very cost effectively add to their normal feature upgrades much faster in a hybrid model versus using just internal development. » Industry-specific ecosystem of stakeholders. If customers want to accelerate and modernize their products and platforms, they need to work closely with or build their own ecosystem. This ecosystem should include technology vendors, strategy or consulting firms, and digital engineering services providers. Clear rules of engagement should be defined at the outset, and if any new industry solution IP is created during this collaborative process, it should ideally benefit all stakeholders. Digital engineering technologies are playing a significant role in accelerating innovation across the entire technology product life cycle. Digitizing from the physical will require all internal stakeholders to be committed to the required initiatives. It will necessitate different business units working together to realize the overarching vision. At times, it will mandate a rethinking of how customers build products by taking real-time customer and market feedback. An investment in a myriad of digital technologies will also be required if the true potential of digital is to be realized. In addition, collaborating with a partner ecosystem will be a key differentiator. Examples of the Outsourced Value Chain An organization that wants to take full advantage of the value of digitizing its physical world must become digital as quickly and effectively as possible. As already mentioned, one of the primary ways to become digital quickly and effectively is to develop a partnership with a company that can immediately deliver across the entire digital value chain. But another aspect of a partnership is focusing on where digital provides the biggest impact on business operations and profitability. This section provides examples of companies that have connected the physical world to the digital world through a digital engineering value chain. Healthcare Asset Management In any healthcare setting, the connected patent is a critical component of overall care, especially in a remote medicine environment. That means real-time diagnostic capabilities are needed for patients, regardless of their location. But tracking their location and ensuring diagnostic performance are difficult when patients are no longer at the care facility. Remotely monitoring health parameters such as heart rate, respiration, glucose levels, blood pressure, and even images is becoming a core aspect of patient care. To support the new remote medicine world, medical device companies need digital support to deploy connected medical devices that can operate over existing networks and support 5G rollouts in the future. One medical equipment manufacturer partnered with a digital engineering service company to develop an approach that included the following: » A product redesign that supports real-time connectivity to the remote medical device #US47024820 Page 4

5. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain » An edge computing device that collects local data, does quick analysis, secures the data, and transmits the data to a secure cloud location » A platform to manage data, medical devices, and performance analytics » Services to manage the monitoring of the system and the use of the devices This digital solution not only improves diagnostic data collection but also provides significant capabilities for video in a remote medicine environment. Overall, the system reportedly provides better diagnostic capabilities, secure patient-to- medical staff connectivity, and a more comfortable medical experience for the patient. Telcom Tower Management As anyone with a mobile phone knows, a critical component of the telecom world is the tower used to hold the antennas and signal processors. A company focused on owning and leasing tower space was struggling to effectively maintain the towers and all the fixtures on the towers. The physical inspection of the towers and fixtures requires highly specialized staff and equipment at a very high annual cost. The telecom also knows that any type of failure can mean a significant loss in revenue and trust, along with creating potentially unsafe conditions. The tower owner/operator knew that developing an effective long-term solution to the cost risk of a period-based inspection strategy was going to be difficult in the current digital culture. Instead, it selected a partner with the needed digital skills to develop a continuous monitoring system for its towers. This system uses vision as a sensor combined with environmental sensors in a bundle package that can be easily installed on the towers. The system designed and delivered to the tower owner/operator includes the following: » An engineered and resilient container contains a vision device, a temperature sensor, a wind sensor, an audio sensor, and a battery backup. » An engineered edge device collects and securely transmits the data and can receive instructions from a central site. » A central softwareplatformingests thedata fromthe tower andmergesitwithoperationaldata from the clients' systems. » An analytical system uses machine learning to diagnose tower operations to alert owner/operator staff. » The entire system must be 5G capable out of the box. The tower operator and its clients expect 5G capabilities to be a core aspect of the service provider's design. While the system is still in the pilot phase, the tower operating company has reportedly reduced periodic inspection costs by almost 50% while improving asset uptime by 1.5%. Currently, the management of the central monitoring operation is done through the digital partner with owner staff still having access to real-time and historical information. Smart City Smart Lighting Smart street lighting is one area around which municipalities worldwide have focused their digital transformation activities. Recently, a large U.S. city began the redesign of its entire lighting operations. The current streetlight not only was considered adequate by residents but also was very complex to maintain and manage. There was an existing legacy system to connect streetlights to a standalone lighting management system through a legacy proprietary mesh network. The city wanted not only a more open and connected lighting management capability but also a network that could support lighting, traffic management, first responder coordination, and so forth. The inability to see and predict lighting issues led to unoptimized truck rolls, unnecessary overtime, and unsatisfied residents. #US47024820 Page 5

6. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain The city knew it lacked the digital capabilities to design, develop, install, and manage a system that met its needs. The city turned to a digital service provider that not only developed the lighting management system but also redesigned, produced, and installed new light controllers for new and legacy light fixtures. The entire project encompassed the following from the service provider: » A resilient system was designed and engineered containing a light controller, a temperature sensor, existing network connection, 5G network capability, and compute capacity for future edge analytics. » The system was designed to transition to a 5G network to be expandable to encompass voice radio traffic supporting gunshot detectors, video feeds, and even potentially a wireless router for resident broadband access. » Mobile application development allows city workers and residents to report lighting issues and monitor lighting status. It even includes a system to allow residents to request controlled lighting access at public facilities. » A central software platform remotely monitors the entire lighting system. This includes event notifications for city workers to receive real alarms on lighting system issues. » The remote diagnostics and analytics of the lighting systems were outsourced to the service provider with a contract based on lighting system performance. The system is currently operating in five city neighborhoods, and there are plans to double that number in 2021. In those neighborhoods, local government approval ratings have reportedly increased 15% and the number of lighting truck rolls is down 25%. The analytics capabilities provided by the service partner have significantly improved predictive planning for potential outage mitigation, according to the service partner. The plan is to move the entire operation to 5G for better device security and faster backhaul speeds. The relationship with the service provider is held up as an example of digital engineering and transformation for all city departments and is a showcase for the state's move to smart lighting. Production Asset Remote Monitoring and Diagnostics Every manufacturing company depends on the uptime of its production assets. In light of the increasing complexity of the digital world and the fact that digitally skilled resources are difficult to find, a paper company engaged a digital services company to develop a specialized gateway to collect asset and production information. The digital partner not only engineered the piece of equipment but also developed the analytical diagnostics systems to collect, ingest, and contextualize the asset data. The digital partner was also used to help develop maintainable predictive models of the assets that were the foundation for the diagnostics portion of the system. Currently, the paper company staffs a remote monitoring center with both internal staff and staff from the digital partner. The plan is to eventually turn over full remote monitoring and diagnostics to the digital partner as the project goes companywide. Through this approach, uptime of the assets reportedly improved over 10% because the system is able to anticipate asset issues based on operating environment and product runs. Even better, yields at the plant have improved over 2% in six months, according to the company. #US47024820 Page 6

7. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain As these examples illustrate, digital engineering is having an immediate impact on operations in multiple industries. The key is choosing a digital partner that can bring a multifaceted approach to the challenges: » Software capabilities that support efficient and open development operations » Hardware design for connected products and processes, including 5G networking » Remote monitoring and diagnostics services for connected products and processes » Advanced analytics and AI modeling services for better predictive support of products and processes Working with aservice partner that hasthese abilities is most likely the fastest and most efficient path to becoming digital. Considering HARMAN HARMAN Digital Transformation Solutions (DTS) offers engineering research and development (ER&D) and digital transformation solutions to deliver digital products, platforms, and software solutions for enterprises across industries. The company's Connected Lifestyle business focuses on connecting the consumer, with an emphasis on digital health, whereas the Smart Infrastructure business focuses on delivering telecom and industrial solutions. From offering professional expertise to helping customers with their digital product development and delivering industry- driven technology platforms and end-to-end outsourcing, HARMAN DTS delivers solutions across the physical and digital layers. With HARMAN's deep domain expertise and solutions built on next-generation technologies such as 5G, AI/ML, IoT, advanced analytics, augmented reality/virtual reality (AR/VR), and cloud, the company reportedly enables billions of devices and systems to be connected, integrated, and secured. The company's solutions and platforms are designed to power a connected world and deliver higher returns on experience of customers' digital journey —for connected health, smart homes, connected workplaces, collaboration, Industry 4.0, retail, and hospitality. The following sections illustrate some of the solutions offered by HARMAN. Virtual Care For overstretched health systems, reducing the cost of care and the need for patient and doctor safety is driving the adoption of virtual care. In addition, keeping chronically ill, high-risk patients and elderly out of the emergency room and hospital while improving efficiency and collaboration across care settings has encouraged digital solution providers has HARMAN DTS and healthcare providers to come together. The HARMAN Remote Care Platform (RCP) solution enables care service providers to securely access patient health data by connecting a wide array of medical and nonmedical devices. It allows healthcare providers to leverage data cohesively across multiple use cases —patient care services, chronic disease management, aging-with-independence needs, and identifying insights for patient health programs. 5G Acceleration HARMAN has a legacy of providing communication and networking capabilities to both the consumer sector and the enterprise sector. The company engineers solutions designed to simplify the way people interact with technology and connect to the world around them. HARMAN offers customers a new generation of connectivity with seamless integration. The company offers accelerated 5G commercialization by providing the following: » The world's first Smart Femto Cell, 5G CPE, according to the company #US47024820 Page 7

8. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain » Reliability in vehicles with V2X, collision detection, traffic monitoring, and OTA updates » Smart city, smart toll, smart parking, smart buildings » Various 5G applications, platforms, devices, and professional services across industries AI-Powered Voice Assistant Platform HARMAN eNOVA is an AI-powered voice assistant platform that helps make the user experience more connected, convenient, contextual, and personalized. It has state-of-the-art automatic speech recognition (ASR) capabilities with very high precision. Powered with natural language understanding (NLU) and high-quality speech synthesis, this conversational platform enables clients to build, test, and launch voice-enabled solutions to create conversational experiences at enhanced speed and security. HARMAN eNOVA offers a multitude of compelling features that could help in creating customizable and differentiated voice solutions tailored for specific use cases in industries such as healthcare. Patients are increasingly becoming active participants in the healthcare decision-making process. Voice-based technologies are set to enhance the satisfaction of both patients and providers by automating and simplifying the process and enhancing care coordination. Actual use cases include the following: » For patients: ■Answers for common healthcare questions ■Emergency SOS and vitals monitoring/analysis » For providers: ■Voice-enabled EMR updates/scribe ■Real-time, hands-free, voice-prompted checklist ■Information on the go and automated reminders for nurses and doctors Touchless Retail Solutions The retail industry is becoming highly personalized and increasingly focused on the user experience. The integration of AI-powered voice assistants in retail can ensure seamless omnichannel engagement and higher customer satisfaction for customers. One of the solutions HARMAN is offering to the retail industry is the touchless vending experience. A touchless vending machine powered with conversational intelligence and advanced payment options is the need of the hour. These machines are the key to the future of automated retailing and will grow with time in terms of accessibility, product types, and capabilities. The combination of conversational AI and digital kiosk technology enables customers to use self-service solutions without touching the screen. The integration of cognitive intelligence with conversational interfaces can be a truly unique vending experience. Machines can deliver all the services as before, but in a contactless, personalized, and humanlike manner. This will ensure the automation of routine vending activities (order, item selection, payment, etc.) with augmented convenience for the buyer. HARMAN DTS has invested in innovating touchless vending machines with conversational AI, advanced payment technology, computer vision, IoT, and other state-of-the-art technologies. #US47024820 Page 8

9. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain Challenges Harman DTS has a good set of physical-to-digital product transformation capabilities that are backed by industry-specific services, especially in the healthcare, industrial, and telecom sectors. However, the service provider landscape for these services is crowded and is seeing many new entrants. HARMAN should consider adding more consulting offerings to its business to further strengthen its ER&D portfolio. Adding more consulting services can also help clients that are looking for more strategic planning services envision digital products and what the journey will entail in terms of costs, timeline, and business benefits. HARMAN can also cross-leverage best practices from other industries that have similar needs. For example, capabilities from the automotive sector could be deployed for supply chain or warehousing processes that need autonomous or robotics solutions. Conclusion The physical to digital connection must be a priority for companies to stay relevant and succeed in digital transformation. IDC believes that for this transformation to become pervasive, an ecosystem of stakeholders needs to collaborate and deliver on the physical to digital transformation promise. It will require strategic industry- or domain-focused product development initiatives backed by investment in technology and talent. Companies that lack the talent, capabilities, or innovation process must choose partners that can go from digital design to product management and customer connection. Playing catch-up with innovation will not be easy. About the Analysts Mukesh Dialani, Program Director, Product Engineering and Operations Technology/Services Mukesh Dialani is a Program Director for IDC's Worldwide Product Engineering and Operations Technology/ Services research. He is responsible for executing field research and custom research projects across the entire life cycle of hardware and software products. Kevin Prouty, Group Vice President, IDC Energy Insights and IDC Manufacturing Insights Kevin Prouty is Group Vice President for IDC Energy Insights and IDC Manufacturing Insights. He is responsible for managing a group of analysts that provide research-based advisory and consulting services that will enable energy executives in oil and gas and utilities to maximize the business value of their technology investments and minimize technology risk through accurate planning. #US47024820 Page 9

10. IDC TECHNOLOGY SPOTLIGHT Connecting the Physical World and the Digital World: Creating a Digital Value Chain MESSAGE FROM THE SPONSOR HARMAN Digital Transformation Solutions (DTS) Most enterprises have faced unprecedented business challenges in the last few months. While some sectors experienced enormous growth, others saw a total or immediate drop in customer demand. Some common factors influencing the tectonic shift are tremendous uncertainty, unknown variables in consumer habits, supply chain, workforce, and even severe medical unpredictability. Digital engineering technologies are playing a significant role in helping organization in these challenging times on their digital journey. For example, healthcare organizations around the world are under pressure to rapidly respond to the current health crisis and forced to operate outside of the traditional walls of the hospital. Many Healthcare organizations have stepped up their investments to leverage of advanced digital technologies that can address the gaps and inefficiencies in existing care delivery systems, enable early diagnosis, monitor response to treatment, virtual care and help provide essential care services. The digital shift to resolve uncertainty will bring in some fundamental changes. And most changes are here to stay, to varying degrees, and will even persist after the health crisis is over. The only solution to unlock successful digital transformation is to approach everything with incredible flexibility and agility, deploy the right digital strategies for your business, and selecting the right digital engineering services partner who can help you across the digital value chain from physical and digital, to ensure that you have the solutions you need to be successful. To know more about how HARMAN's Digital Engineering solutions can help you on your digital journey, please write to us as askcs@harman.com. The content in this paper was adapted from existing IDC research published on www.idc.com. IDC Research, Inc. This publication was produced by IDC Custom Solutions. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Custom Solutions makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee. External Publication of IDC Information and Data —Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. 5 Speen Street Framingham, MA 01701, USA T 508.872.8200 F 508.935.4015 Twitter @IDC idc-insights-community.com Copyright 2020 IDC. Reproduction without written permission is completely forbidden. www.idc.com #US47024820 Page 10