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EXECUTIVE SUMMARY
Connected Machines and Servitization
Connected Machines and Servitization
In the next three to five years, 75% of industrial B2B supplier manufacturers expect services to be a significantly bigger part of their business, with revenue from “advanced service contracts” anticipated to more than double by 2024.
Across industries, legacy products without digital features are losing out in the marketplace. In response, manufacturers are developing connected product solutions that provide proactive predictive maintenance, production optimization services, and “outcomes-as-a-service.” Successful servitization initiatives depend on a holistic approach. This includes deeply understanding customers and the competition, as well as engaging all parts of the organization to support a comprehensive program.
Panelists
Context
Randy Cox, Daniel Scharfen, and Gahl Berkooz discussed trends and leading practices associated with connected machines and servitization.
Panelists
Context
Randy Cox, Daniel Scharfen, and Gahl Berkooz discussed trends and leading practices associated with connected machines and servitization.
Virtual Roundtable: Connected Machines and Servitization
Manufacturers are developing connected product solutions that provide proactive predictive maintenance, production optimization services, and outcomes-as-a-service.
Download Summary PDFKey Takeaways
Servitization, data monetization, and digital services are gaining momentum in the manufacturing sector.
Connected technology transforms products into smart, connected solutions with services that go well beyond standard dashboards and diagnostics. Connected technology supports proactive predictive maintenance, product optimization, and outcomes-as-a-service.
Randy Cox highlighted three important aspects of the servitization trend:
As companies get closer to their customers, they also see higher levels of loyalty and growth in product sales.
“When you incorporate digital features into products, it makes those core products more desirable. We have examples where we have closed traditional OEM business because our products have digital features.”
– Gahl Berkooz, ZF Group
“When you incorporate digital features into products, it makes those core products more desirable. We have examples where we have closed traditional OEM business because our products have digital features.”
– Gahl Berkooz, ZF Group
Servitization Initiatives
As companies develop servitization initiatives, they must address customer, operational, and financial concerns.
Manufacturing companies often struggle with three challenges when entering the servitization space:
1
Customer-related issues
Teams must segment customers and package new service offerings to meet their needs. Key considerations include pricing and sales strategies, as well as addressing customer concerns about data and cybersecurity.
2
Internal operations
Companies transitioning to a business built on digital services with an enabling IIoT architecture can face challenges in transforming the sales culture to focus on customer value and lifecycle relationships.
3
Financial considerations
Teams developing new digital service offerings must identify the right business model, level of risk, and amount of investment that will be required before the company sees returns.
Digital Services
Digital services add new dimensions to customer relationships.
Infineon builds digital services that enable customers to design systems faster and differentiate their businesses. Its power control division recently created the first service business unit within the company, offering two types of digital services: simulation-as-a-service and real-time analytics for predictive maintenance.
ZF Group started its digitalization journey about four years ago, resulting in the development of a digital venture accelerator that enables the company to rapidly spin up internal startups. ZF Group currently has four startups focused on advanced driver assistance systems (ADAS), field digitalization services, carbon dioxide and energy management, and digital bus fleet services.
Secure Data Transmission
Secure data transmission is essential.
Cloud Service
For customers who don’t have their own IoT device management system, Infineon offers a cloud service.
Machine Connectivity
When the interpretation of Infineon’s digital models must be performed locally on the machine, Infineon helps customers incorporate this functionality into microcontrollers.
ZF Group has found that its digital services enrich its customer relationships.
Thought Leadership
Servitization establishes the company as a thought leader, opens new markets, and improves the competitiveness of the firm’s solutions.
Marketplace for ADAS
ZF Group’s ADAS venture has created a marketplace for ADAS datasets and a transformation marketplace, so data generated in one vehicle program can be applied to another.
Value Proposition
These marketplaces offer an attractive value proposition since they accelerate customers’ ADAS function development and reduce validation costs.
“Our recommendation to customers is don’t try to collect data about power semiconductors by yourself. We have that information already because we process more data from these semiconductors than anyone on the planet. By providing data-as-a-service, we can help customers accelerate their activities.”
– Daniel Scharfen, Infineon Technologies
“Our recommendation to customers is don’t try to collect data about power semiconductors by yourself. We have that information already because we process more data from these semiconductors than anyone on the planet. By providing data-as-a-service, we can help customers accelerate their activities.”
– Daniel Scharfen, Infineon Technologies
Implementation
Since servitization impacts the entire organization, taking a holistic approach to implementation is essential.
Servitization affects company strategy, sales, the product team, marketing, engineering, field service, customer support, finance, and more. Organizations must think about these initiatives holistically, and should evaluate servitization deployments using the three elements of ideal innovation:
1
Customer desirability
It is essential that companies develop services that customers want and value. Co-creation with trusted customers is one way to identify marketable digital services.
2
Delivery feasibility
Consider how big a leap servitization will be within the organization from several perspectives—process, organizational structure, responsibilities, culture and technology.
3
Business viability
Evaluate whether the transformation will be profitable and think holistically in near-term digital services revenue and also systemic improvement in customer understanding and loyalty.
Support & Sustainability
Companies need to generate support for digital service initiatives and then ensure their long-term sustainability.
In a traditional company, new projects are based on the accuracy of sales forecasting. That information, however, is unavailable for digital startups. When ZF Group starts a digital business, it develops a hypothesis based on customer problems, market needs, pricing, and synergies within the company. This approach makes the new venture transparent and understandable to everyone in the organization. Bridging that gap is key to generating internal support.
Once a digital service shows potential, it must be incorporated into traditional product roadmaps to ensure that it remains funded and is sustainable over time. Folding digital features into product roadmaps is a focus area for ZF Group in the coming year.
Getting Started
To get started with servitization, manufacturers must understand their customers, conduct benchmarking, and monetize their install bases.
The panelists offered three recommendations for both companies that want to start and those that want to expand their digital services:
“There’s a tsunami on the horizon. If manufacturing companies aren’t leaning into the digital transformation around servitization, they risk being consumed. History has shown in industry after industry that the unimaginable can happen. Don’t get commoditized. Think big, but take small steps to pursue that vision.”
– Randy Cox, Siemens Advanta
“There’s a tsunami on the horizon. If manufacturing companies aren’t leaning into the digital transformation around servitization, they risk being consumed. History has shown in industry after industry that the unimaginable can happen. Don’t get commoditized. Think big, but take small steps to pursue that vision.”
– Randy Cox, Siemens Advanta
Additional Resources
Webinar Executive Summary
Explore trends and leading practices associated with Connected Machine and Servitization. Read the full summary of our roundtable!
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View White PaperServitization Infographic
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