In the world of manufacturing, competition is intense. Every day, global OEMs play for keeps, doing the best they can to gain an edge on their competition. Business is like a game, but the problem is that unlike most games, the rules are constantly changing, and what it takes to win is always in flux. What worked ten years ago can’t be relied upon to continue working for the next ten years.
OEMs need a new game plan
Nowhere is this more true than in the evolving role of service within global manufacturing organizations. Servitization is changing up the game more than any other change in recent memory, and the repercussions of that shift are massive. Technology is having a fundamental impact on the way the game is being played. We’re not talking about a minor change to the rules – like adding instant replay capabilities, for example – we’re talking about a change so stark that it barely resembles the game OEMs are so used to playing.
As manufacturers begin selling services instead of products, the entire incentive structure changes, and service will never be the same again. OEMs will essentially become the world’s largest fleet owners of their own products, and customers will subscribe to the outcome or value the product produces instead of buying the product itself. So instead of depending on high-margin revenue from after-sales service, manufacturers will do everything in their power to minimize the cost of maintenance and repairs, because it will be a cost center for them.
What was once an asset will instead become a liability. This shift will dramatically affect product engineering as well, as the rallying cry will become, “how do we minimize the need for maintenance and repair even further to reduce our own costs?” Manufacturers will do whatever they can to maximize product uptime to keep customers happy and loyal to their brand.
Which manufacturers will survive round 1?
Though this transition will be dramatic and affect every aspect of an organization, it won’t all happen at once, and will take some time to evolve and reach an optimized state. If you compare servitization to a March Madness bracket, we are only in round 1 (or the Round of 64, in bracket terms). There are still so many manufacturing brands in the tournament fighting for a top spot. But even in this earliest round, there’s plenty of drama to go around, with many inspiring victories and crushing defeats.
There will be upsets that no one, not even the best analysts, can see coming. Because in business, just like in basketball, the team that wins is not necessarily the biggest or most well-known, but it’s the team that wants the victory more than the other. It’s about guts, talent to be sure, and smart decision-making. It’s about knowing when to take risks and when to play it safe.
Ultimately, it’s the team that’s best prepared and leverages every resource at their disposal before they ever step foot onto the court that’s favored to win. In basketball, that means running practice drills over and over until it becomes second nature — watching game tape to analyze every play with the goal of spotting mistakes and ways to improve. For OEMs, it’s utilizing the best technology solutions available and structuring the organization in a way that sets it up for success.
Winner Takes All
So, how will the servitization tournament play out? Just like in March Madness, teams will be eliminated. Brands will fall by the wayside as more agile and tech-savvy organizations quickly transform to achieve the aims of servitization. As time goes on, fewer brands will remain as the winners gain momentum – and market share. Eventually, only a few will remain, and the tournament will be over. Only the winners will be left standing.
You might be asking yourself, “what can I do today? How can I make sure my team gets through the early rounds and is in a position to win in the later rounds when the all the chips are down?” The good news? Even though your March Madness bracket might fall apart, your servitization tournament journey doesn’t have to.
Your Servitization Playbook
Now’s the time to watch some game tape and learn from servitization experts and other OEMs about how to maximize product uptime and what to plan for in the future. The path ahead is difficult, and success isn’t guaranteed, but failure is if you sit by and do nothing. Lean on the insights we’ve collected in our 2019 After-sales Service Predictions orange paper to give you a competitive edge – and then put those key takeaways into action. Victory is yours for the taking – are you ready for the big dance?
Download our new Orange Paper to learn more about what leading OEMs and industry thought leaders predict will be major manufacturing trends in 2019 and beyond, and what resources and technologies will be needed to win.