Model Based Systems Engineering (MBSE) has been a dominant methodology for defining and developing complex systems; however, it has not yet been paired with cutting-edge digital engineering transformation. MBSE is constrained to represent a whole system, but lacks other capabilities, such as dynamic simulation and optimization, as well as integration of hardware and software functions. This paper provides the key elements for developing a Smart MBSE (SMBSE) modeling approach that integrates Systems Engineering (SE) functionality with the full suite of other development tools utilized to create today’s complex products. SMBSE connects hardware and software with a set of customer needs, design requirements, program targets, simulations and optimization functionalities. The SMBSE modeling approach is still under development, with significant challenges for building bridges between conventional Systems Engineering methodology, with additional capabilities to reuse, automate, simulate and optimize the system model in order to generate solutions that do not require significant remodeling efforts for each subsequent new product. The proposed SMBSE framework provides the potential for product development teams to focus more of their efforts on the new subsystems and technologies and less time remodeling or updating legacy systems and components.