Up until now, manufacturers’ historic dependence on service and parts revenue alone hasn’t inspired product development with servitization and maximized product uptime in mind. In fact, traditional, break-fix service business models were intentionally designed to inevitably fail at some time during their lifecycle.
Originally, this model created opportunities for manufacturers to sell high-margin parts and service, which worked initially because the responsibility of the repair (think: maintenance and uptime) fell on the customer. But, in today’s connected world, where customers are not only acknowledging the imbalance but demanding a change – that model won’t cut it anymore.
With technological evolutions in IIoT (the Industrial Internet of Things), machine learning and AI, manufacturers will soon be able to predict and prevent failures faster than ever before. And, ultimately, modern and effective after-sales service can only succeed in making servitization a reality by adopting these technological innovations. That’s why we created our newest Orange Paper, 2019 After-sales Service Predictions: Powering The Journey To Servitization Through Maximized Product Uptime, to give manufacturers a look at what’s to come, and what actions will be necessary to rise above the rest.
A major misconception is that the disruption associated with servitization is limited to the service side of organizations, but, in reality, it has major potential in the technology and development side, as well. Manufacturers’ journey to servitization and maximized product uptime will not only disrupt the after-sales service part of their business, but it will require radical transformation and evolution in other parts of the business, especially product development, in particular.
According to McKinsey, what was once the undisputed business model of traditional industrial equipment and machinery companies is in a major formula shift as a growing number of components become commoditized. Subsequently, the antiquated phrase “sell quality hardware” now discounts the fact that that commoditization, along with intensifying global competition and a shift in technology stack value pools, is driving industrial equipment and machinery manufacturers to reallocate resources that were once solely dedicated to hardware toward digital.
This redirection ultimately opens manufacturers’ eyes to the limits of new product revenue models and hardware-driven growth, causing companies to look to IIoT as they develop new customer-oriented, revenue-boosting business models. And, as the responsibility for ensuring product uptime shifts from the end-user to the OEM, the manufacturer will be responsible for all technical aspects that guarantee the uptime of the product – including the costs associated with ensuring a product’s expected outcome. This shift in responsibility will drive the OEM design products that not only maximize uptime from the start, but it will prevent them from profiting from expensive spare parts – which will completely change the game.
McKinsey agrees that manufacturers considering this transformation need to develop a clear perspective to drive impact at scale. And, by revolutionizing the way manufacturers view success by putting servitization and maximized product uptime at the core of all business decisions, that perspective is becoming clearer every day.
Download our new Orange Paper to learn more about what these thought leaders predict will be major manufacturing trends in 2019 and beyond, and what resources and technologies will be needed to win.
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