Unlocking greater value from physical-digital convergence

The convergence of the physical and the digital, or hybrid trend is advancing in both industry and consumer tech — even if progress isn’t always smooth, or readily evident. 

One of the bigger recent developments in the space was the launch of Apple’s Vision Pro in early 2024. While it garnered much fanfare initially the excitement quickly dwindled, and adoption has proven disappointing. But that shouldn’t be viewed as emblematic of the trend as a whole, which continues to develop in lower-profile ways that will present opportunities and gain traction beyond the current core base of power users. 

One case in point is consumer health technologies, where a recent deal has valued rising star Oura, a maker of smart rings, at over $5 Billion. The popularity of Oura’s elegant body-monitoring devices demonstrates there’s significant potential for convergence in specific domains like medicine and supply chain management.

In some cases, hybrid experiences are almost business-as-usual.

Taking advantage of these opportunities will depend on a high level of domain understanding, and selectively implanting cross-reality innovations in ways that deliver tangible benefits — rather than building products or systems without clearly defined business or consumer use cases. Enterprises will also need to be sensitive to changing consumer expectations and emerging regulations such as the EU Data Privacy Act and Texas Data Privacy and Security Act, which restrict what companies can do with the consumer data garnered by connected devices.

Rather than a barrier, regulatory developments should be seen as a chance for proactive businesses to think through how they leverage more prevalent hybrid technologies safely and effectively. The EU Act may enable more players to participate, potentially growing the ecosystem. And by ensuring data is accurate, reliable and carefully managed, and conducting robust testing to ensure system reliability and resilience, enterprises can demonstrate transparency and build trust with their customer base. 

Meanwhile, the physical-digital trend will get another boost as GenAI systems turn from consuming the available written data on the internet to integrating data from smart devices and wearables fashion. Expect significant innovation in this space.

Signals:

• The mixed track record of consumer VR/AR tech, which despite multiple high-profile launches in 2024, from the aforementioned Vision Pro to the Meta Quest 3S, has yet to truly take off. This is due in part to doubts about their interfaces, and the purpose such devices serve. The return of tactile buttons is another sign some consumer VR/AR devices may be racing ahead of what the market wants, or is ready for. 

   

• Success stories arising from domain-specific, business use cases. The expansion of Saga Robotics, which develops multi-functional robots capable of treating the diseases that strike some crops, and BMW’s promising testing of humanoid robots to reduce employees’ strain in its assembly lines show how leveraging convergence in a targeted way can deliver positive outcomes.  

   

• The rise of generative AI enhancing supply chain management, by automating processes and expanding the types and quantity of data used to predict product demand and disruptions. That said, this is a relatively new field, and enterprises should be monitor the extent to which such initiatives can deliver ROI.    

   

• The continued emergence of high-fidelity digital twins. Their full impact may have yet to be realized, but developments like NVIDIA’s powerful Earth 2 platform, which breaks new ground for climate and weather forecasting, show how digital twins are solving problems by allowing data to be visualized and manipulated in a more immersive way.

   

• Industrial automation and IoT introducing new potential vectors for cyberattacks, as they are integrated into more essential business or production processes. 

   

• New legislation around data collection and privacy, often specifically targeting wearables. Jurisdictions like California and Colorado are leading the charge with laws that extend privacy protection to data gathered by health implants and wearable devices. More such moves are likely to follow, arguing for enterprises active in this space to solidify their governance strategies and adopt policies on ethical data use.

The opportunities

By getting ahead of the curve on this lens, organizations can: 

• Improve interactions for customers and employees by thinking through the accessibility implications of hybrid technologies and embedded systems. In addition to making some experiences more intuitive and impactful — for example, by creating training simulations that allow employees to get ‘hands-on’ with processes in a risk-free way —  physical-digital convergence is opening new possibilities for the differently abled. Financial services is one area in particular where digital onboarding and biometric authentication are improving access to services for people who face mobility issues. 

   

• Embrace emerging regulation to build trust with consumers. Research suggests consumers are likely to abandon companies they don’t trust with their data, and gravitate towards those with transparent data practices.  

   

• Leverage automation, embedded systems and other cross-reality technologies to improve operational resilience and efficiency, and deliver value for the business or end-users. The application of digital twins in supply chain management demonstrates how cutting-edge simulations and real-time data can predict risks and identify areas of a network or system that are ripe for optimization. 

   

• Empower employees by adopting automation and smart devices, to take over repetitive or even dangerous tasks and enable teams to concentrate on more strategic or creative work. Companies like Microsoft are also adopting a hybrid approach to bridge the experience, engagement and productivity gaps between remote and on-site teams. 

   

• Develop a deeper understanding of your operations and your customers. The data collected and shared by smart devices and embedded systems can unlock new levels of information and insight, to guide both tactical and strategic decision making. New data sources can also enable leaps forward in the organization’s use of AI and analytics - provided data is harnessed and used in a secure and sensitive way. 

Actionable advice

Things to do (adopt)

• Treat data as the key enabler of physical and digital convergence. Smarter devices adopted by consumers or in the work environment can vastly increase the amount of data available to the enterprise; however it’s only when this data is accurate, reliable and carefully governed that it can be used to inform decisions or credibly reconstruct real-world conditions. Embrace data engineering principles to ensure data travels where it is needed and can be leveraged with confidence. 

   

• Make domain knowledge the starting point for hybrid innovations and experiments. Rather than attempting to apply new physical-digital solutions enterprise-wide, explore how they can improve or supplement parts of a specific business process. Applying these technologies in a limited way is more likely to yield results, and can also build the knowledge and momentum needed to support broader adoption.  

   

• Embed security and resilience in systems that span the physical and digital by adhering to proven engineering practices, such as robust testing and continuous delivery. Having team structures that encompass embedded and backend development can smooth the path to production.

Things to consider (analyze)

• Consider how existing and new legislation might impact how your business uses data, particularly data connected to individual consumers. Conduct an honest assessment of not just existing risks, but the risks that might emerge if regulations were to tighten further. Look for opportunities to improve trust and transparency. 

   

• Understand that automation, robotics and IoT are long-term infrastructure projects. Making the most of convergence in complex environments such as manufacturing facilities will often require significant investments, the retooling of multiple roles, and skills that the organization may lack. It’s important to consider these barriers and whether the organization has the capacity to deliver. The decisions leaders make now could have implications for the next five to 10 years.

• Examine opportunities to improve experience through convergence of the physical and digital – not just for customers or employees facing physical or location-related barriers, but for everyone. The use of biometrics to facilitate payments, and the adoption of contactless technologies to create a safer, less strain-inducing environment for workers, are good examples of convergence that can benefit a wide range of end-users.

Things to watch for (anticipate)

• Tighter legislation around data privacy, and a hardening of consumer attitudes, which may limit what the organization can do with data or its ability to pursue convergence-related opportunities. This is especially when it comes to sensitive areas like health, with research from Deloitte showing consumers are increasingly concerned about privacy breaches or excessive tracking linked to their wearable devices. 

• The evolution of the AR/VR market. While these technologies remain outside the mainstream, it may be only a matter of time before a device emerges that kicks adoption into high gear, and creates viable commercial applications or use cases in the process.