How to grow as a technical manufacturing company, with digital services? That was the main question in the research project Noventum undertook this spring, in partnership with Microsoft and HSO. The research shows that there are excellent opportunities for growth in digital services, however making the transition from a product focussed to a service-led company is not easy. In this blog Aart Schalk and Martin Gilday, both working as senior consultants for Noventum, explain more about the advantage that manufacturing companies have when developing digital services, but also the necessary steps that need to be taken for a successful transition.
Aart Schalk is a commercial professional and service leader with years of experience in services development in manufacturing companies. He has contributed to the Noventum ‘Drivers for Growth in Service’ research project led by Martin Gilday, who has held various service leadership positions in and is currently senior consultant at Noventum.
First, we asked Aart how he defines digital services. Aart: “To me, digital services are in fact data-driven services that companies develop on the foundation of big data coming from their connected equipment, as well as the patterns identified by algorithms. Where in the past, mainly third-party maintenance companies or managed services companies were close to the customer’s business, nowadays manufacturing companies themselves have a huge data-advantage, since they can access and gather valuable data relatively easily. By adding sensors and software to their equipment they can continuously collect data, analyse information, and deliver reports. These data and insights help manufacturing companies to reinvent themselves and develop new services. Which can lead to sustainable growth and higher margins.”
Martin adds: “Our research showed that indeed technical manufacturing companies profit from having a lot of data available, for example, many are collecting machine datafrom their installed base of products. From this data you can learn how a machine is being used, you can predict machine failures and schedule a repair or service visit before the machine breaks down. That saves a lot of time and costs, both for the company and its customers. Think of a healthcare company selling medical devices. If they can analyse the machine data to prevent a failure from occurring this is extremely valuable to their hospital customers especially if this action prevents the disruption of a patient schedule.”
Aart agrees: “In the manufacturing companies I have worked with we typically found that if we could find the right data, trends and patterns, we could develop digital service products that customers were willing to pay for. For example, an automated self-service where end-customers receive notifications based on which they can act. Or being able to prevent failure and deliver predictive maintenance. Because of this data-advantage, manufacturing companies have a strong position to build a growing revenue stream for business related digital services. Thanks to the new technologies that are currently available, I see an increasing number of companies now also offering service models, data storage and digital services.”
Aart: “An important condition for success is that you (the manufacturer) need to be able to deliver on the promise of your digital services. Unless you meet that condition, the customer will not be willing to pay for them. That means you should do your homework and take prerequisites: Get your master data in order and ensure that it matches the digital services in your service product portfolio; involve the relevant stakeholders; and support your process & system users. Before you start there are several critical steps:
Martin agrees on this list: “Alignment of all stakeholders is very important. Product design must be involved, product management has to understand the customer’s needs, sales needs to know what drives the customer and marketing needs to focus on customer business outcomes instead of product features.
Engaging the full organization is a challenge, which makes a successful development of digital services difficult for a lot of companies. As we saw in our research, only 50% of the companies already has a digital strategy and holistic business model in place. One of the key success factors we discussed earlier is the commitment coming from the top of the organization. That is where the services strategy and digital strategy come together. But you can create a true win-win situation when you are able to respond to your customers’ needs as well as your business needs. Therefore, clarity and understanding on the new strategy and business model cannot be underestimated.
Our research shows that customer business related services are important growth drivers for manufacturing companies. As we mentioned, transitioning from a product focussed to a service centric business is certainly challenging, but product manufacturing and technical services companies now have this big advantage of the data that they can access from their machines.,. That is the road to leveraging valuable insights into customer needs and to building services that meet those needs.”
This blogpost is based on the episode of the podcast: Grow your business by selling and delivering digital services, published by Noventum.
Interested in the research report ‘Drivers for Growth in Service’? Download the Executive Summary. Any questions? Please contact us.