Software company Syncron discusses how emerging technology is driving what some call the ‘Fourth Industrial Revolution’
Automotive care professionals know the value in preventive maintenance; a fluid change or leak fixed today can mean potentially avoiding a major failure down the road. But what if a vehicle could predict the future, in a sense telling you when a component is nearing failure and to allow service to be performed before that happens?
As more sensors are installed on all types of equipment and vehicles, it’s not far-fetched to think of a time in the near future when a vehicle’s self-diagnostics will advance to the point that the need for a major service or repair can be predicted, instead of waiting for a component to fail.
It’s an evolution of the aftermarket, in which manufacturers have long had a “break/fix” business model, said Gary Brooks, chief marketing officer of Syncron. The company provides cloud-based after-sales software to OEMs in a number of industries, including but not limited to industrial equipment, warehousing and distribution, and automotive.
“They build a product, they typically sell it through a dealer, and at some point, there’s high-margin parts and high-margin service that’s sold into that piece of equipment,” he said.
A shift from selling vehicles to selling services as products is underway
Driving this shift to proactive maintenance and repair is what’s known as “servitization,” where service, and not the durable good itself, is the new product, and is what some have termed “the Fourth Industrial Revolution,” Brooks said. The company will explore the topic at Innovate 2019, a global leadership summit for OEMs from various industries exploring a shift to servitization, Nov. 13-14, in Stockholm, Sweden.
There are a variety of reasons, he said, why consumers are beginning to prefer to buy access to a piece of equipment (in this case, a vehicle) instead of buying it.
“I was talking with the president of aftermarket service for a large auto OEM a few weeks ago, and he said in the future, many OEMs will no longer sell cars. That’s a pretty bold statement, and it’s probably a decade away, but they will sell mobility as a service. There’s even a new car manufacturer, Lynk & Co., that’s a holding group out of China that’s a new brand of vehicles that will never be sold; you can only subscribe to these vehicles.”
More-common names, such as Cadillac – with its Book by Cadillac service – Care by Volvo, and Porsche Passport, currently allow a subscription for a monthly fee and access to a fleet of vehicles, delivered by concierge.
“So if I want a Panamera for the week and a 911 for the weekend, I just order up what I want. And as the subscriber, I’m no longer responsible for the maintenance of the vehicle, the tires, the wiper blades, the oil change, and the insurance. I’m basically buying access to mobility.”In fact, research by Frost & Sullivan notes that by 2025, up to 10 percent of all new and used vehicle sales – more than 16 million vehicles – will be by subscription, a number that is expected to continue to grow.
Younger generation’s changing attitude is one factor
Demographics play a large part in the shift to products-as-service, Brooks said, with generations Y (millennials) and Z valuing access over possessions and experiences over ownership.
“It seems like they prefer to spend money on concerts, sports, wellness, and restaurants, rather than caring for depreciating assets.”
The ability to quickly switch between vehicle types to support various activities: say, a pickup truck for towing a boat this weekend and a compact SUV to commute in next week, could be more economical for some buyers. And for others, it’s a desire to contribute to environmental sustainability.
With servitization, upkeep costs shifts from operator to OEM
When products are sold as a service, the responsibility and costs associated with maintaining a vehicle shifts from the owner/operator to the OEM, which owns the asset and needs to minimize its downtime, Brooks said.
“I think we’ll see manufacturers become very creative and sophisticated in the way they maximize the uptime of that vehicle to which they’re selling access.”
Brooks said with increased computerization of durable equipment, there is now a larger number of sensors that can detect a number of parameters, including heat and vibration. Syncron Uptime collects that sensor data, and combining artificial intelligence with machine-learning, helps determine which part could be failing and then notifies the OEM so the part can be moved to a forward location. The flexibility in moving the part to where it’s needed “just in time” reduces the volume of parts needing to be stocked at the dealer, he said.
Shift will not happen overnight
The shift from the break/fix service model will start gaining traction over the next decade, Brooks said, and most OEMs’ service networks will continue to offer traditional (to service older vehicles) and proactive maintenance service models.
Brooks drew parallels to how Netflix first entered the market, offering DVD rentals by mail while at the same time rolling out its streaming service. Brooks recalled a recent experience he had with Syncron colleagues in Tokyo.
“One night, as we’d always do, we ended up singing karaoke. And one of my colleagues requested a John Lennon song, ‘Imagine.’ There was a verse that said, ‘imagine no possessions. I wonder if you can?’ And afterward, we got into this dialogue: ‘You know, when John Lennon wrote that song, did he really have a vision of servitization, that we no longer purchase products that end up in the landfill, that we just purchase the output of these products? Did John Lennon have a vision in 1971, and it’s finally becoming reality?”