Manufacturers find themselves in an increasingly complex environment. The global nature of today's business is marked by regional demand variability, supply uncertainties, and the incessant mandate to increase revenue while controlling costs. Product sales alone are not delivering the results that shareholders and leaders want, driving many manufacturers to turn to after-sales services for revenue and profit growth. Services are an underutilised opportunity area for many manufacturers, but that is starting to change.
Many manufacturers are approaching a connected product and connected service transformation. IDC Manufacturing Insights defines connected service as the delivery of differentiated service from the product's OEM through connected products that adopts a service life-cycle management approach to after-sales service. Connected service leverages data from connected products and a 360-degree view of the customer to drive additional service offerings such as preventive and prescriptive maintenance, parts/consumables replenishment and, in some applications, self-healing capabilities.
In addition to understanding what connected service is, and why it's important for manufacturers to consider adopting it, manufacturers need to involve the right stakeholders for success, right from inception. There is a need to involve the top management from the IT department, along with leaders in product engineering, service engineering, and after-sales service management. Depending on the scope of the initiative, it may be necessary to involve other business leaders, including finance, sales, and marketing, if there is a decision to pursue a business-changing transformation to product-service systems.
The paths of entry to providing service through connected products will vary based on the maturity of the existing service strategy within a manufacturer as well as the level of executive support. The key takeaway here is to do something because there is a sense of urgency around IoT and its impact on after-sales services, customer experience, and the product life cycle.
Planning the Move from Reactive to Prescriptive Services
As manufacturers seek to deliver value-added services to their customers through connected products and connected services, they are moving away from the traditional, "break/fix" model of service toward more predictive and even prescriptive offerings. In our recent survey of manufacturing service leaders, 39% still have a reactive approach to service operations and 38% have adopted a preventive maintenance approach. These service management approaches do not reflect today's customer needs or service opportunities. What's needed is a move toward more proactive services, with connected products sharing key machine health information that can be acted upon before a machine breakdown. With connected products, there is a further opportunity along the service continuum, where a machine self identifies its problem and calls for service itself — including ordering of parts and scheduling technicians with the proper skill set to make the repair — a process that becomes prescriptive in nature and enables the highest level of connected services.
Planning for the Service Transformation Journey
IDC Manufacturing Insights offers the following guidance for manufacturers to employ the best approach to service innovation for their business:
Educate key stakeholders in engineering, IT, service, marketing, and sales. Depending on the scope of the service innovation initiative, it will be important to engage with a number of business leaders beyond service. Because some of the more transformative models for connected services require different pricing models, billing models, or sales incentive models, leaders of service innovation will need to "win" support across domains to ensure success.
Roll out a pilot project for incremental adoption. It is important to take some action, and many manufacturers will not be able to wait for the complete service transformation to crystallise. Therefore, consider rolling out a pilot for connected services in one service area (field service, or warranty) or product line, and measure the results to drive the business case.
Consider retrofitting existing products. Many manufacturers have tens of thousands of "installed base" products that are in use today and not connected. Evaluate what subset of the installed base products it makes sense to connect based on the life of the product and costs associated with doing so. Technologies exist that make this more straightforward than it appears (e.g., Delphi Connect has essentially done this for automobiles).
Adopt a "design for serviceability" approach for new products. While this is a big undertaking, it is important to link service offerings back to product design to create a closed-loop system with connected products that have inherent connected service capabilities. This requires the involvement of key stakeholders in product engineering and development working alongside service to succeed.
Connecting with InVMA
The Internet of Things is now transforming the way companies design, sell, support and service their products and by collecting real-time data it unlocks a whole new range of possibilities to increase profitability, build passionate customer loyalty, and accelerate data-driven decision making.
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Author: Heather Ashton, IDC Manufacturing Insights
How can manufacturers create new revenue streams while also competing more effectively in a global market that seems fixated on lowest-cost production?
Service transformation, enabled by connected technologies and alternative service approaches, is the key to diversifying manufacturing revenue streams while generating unprecedented value for customers. In this paper, PTC, a global provider of technology platforms and solutions that transform how companies create, operate and service products, looks at changes that are enabling manufacturers to redefine service. PTC commissioned International Data Corporation (IDC), the premier provider of market intelligence, to provide research, analysis and commentary on evolving market dynamics.