Granularity and Dependency of Digital Products

A Digital Product may be composed of, or relies upon, other Digital Products. For example:

  • An app that offers room booking or transportation may rely on a cloud-based Digital Product providing mapping-as-a-service

  • A web or mobile app-based streaming video service may rely on a separate platform of web service products to manage and provide streaming content

The network of dependencies of interconnected Digital Products may be deep, and may form very complex systems.

Each component in the system may be another Digital Product. Each Interaction may have a Service Offer, though sometimes they are not well defined.

Examples of Digital Product Granularity

Consider an insurance policy (a type of Digital Product) that relies on software to calculate premium charges.

Case A
The insurance company uses a third-party software package and signs a license agreement allowing use of the software. The agreement is a contract for a Digital Product Instance and defines the exact details of how the insurance company can use the software, including pricing and payment terms. The contract will also include vendor guarantees of calculation accuracy and system performance, and may define penalties and liability for failures. Information about this contract should be easy to incorporate into the design of the insurance product to meet stipulations of compliance and audit, consumer needs, and warranty. The cost of the calculation system’s software license – as well as risk management for possible errors – will be a factor in setting valuation and pricing rules for the insurance “book” that represents the affected product line.

Case B
The software used to calculate premiums is created, managed, and supported by a separate in-house department. Is it a “product”? Should it still be managed as a Digital Product? If not, will there be the same confident understanding of long-term cost and risk for this software over the life of the insurance “book”? Does using in-house software make it any less important to track the cost of the calculations, to define and manage expected performance, or to analyze the risk and liability of incorrect calculations?