Leveraging Digital Technologies for Servitization: A Capability Roadmap for OEMs

These transformations are interconnected, but when companies miss those synergies and run the transformations independently, they miss out on many potential benefits. Because each transformation requires significant time and investment, it’s a shame to see these opportunities pass by. 

Dr. Atanu Chaundhuri, the professor of Technology and Operations Management at Durham University Business School, joined our recent Product-as-a-Service broadcast to share exactly how technology can be leveraged to continue service-lead transformation. By combining these initiatives and seeing them as one continual movement towards success, companies can get the most out of their transformation efforts. 

Challenges of Adopting a Product-as-a-Service Model

Shifting towards servitization requires a complete overhaul of the status quo within your company. It is not an easy process or fix, and companies need to be aware of the challenges they may face. 

• Business Model Transformation – The PaaS model is an entirely different structure and set of priorities than has been used for years
• Cultural and Organizational Shift  – Your team will have to place value on different things in order to successfully provide PaaS
• Customer Acceptance and Education – Many customers are not used to doing business with manufacturers in this way. It may require some hand holding as they learn about the benefits, data ownership, and more
• Investment and Infrastructure – While these shifts will save money and create a circular economy in the long run, getting them started takes significant investment in tech and infrastructure
• Data Security and Privacy –  The amount of data needed to successfully run a PaaS business requires new solutions for privacy and data storage
• Risk and Uncertainty – As with any new technology, there is always the possibility that something will go wrong. Undergoing a large transformation leaves a company at risk during market shifts such as the pandemic and global recession  

Any successful push for this kind of transformation will need to be melded with digitization efforts. Only then will a team have the tools they need to overcome these challenges. 

Transforming From System Supply to Integrated Lifecycle Solutions

In order for a transformation of this magnitude to be successful, companies need to understand that they are fundamentally changing the make-up of their business. They will no longer be equipment manufacturers, but instead be providing a suite of services. 

As a one-stop service provider, your company will be responsible for all the things that go along with the equipment. There are several steps you can follow to make this shift pain-free. 

Increase Customer Centricity

 It’s important that you have a full understanding of what is important to your customers. What are their pain points? What causes a bottleneck in their operation? 

Conducting thorough research and genuinely caring about the things that affect their day-to-day will help you ensure nothing slips through the cracks later on. 

Integrate Complete Solutions

Rather than selling individual parts, you are going to be offering your customers total packages. This will take some work, as your customers have gotten used to a certain way of doing things. 

In order to bring them on board, you must ensure your backend is ready to sustain this kind of operation. Even if your business model and plan is perfect, if you can’t seamlessly deliver what you promise, you’re going to be in trouble. 

Contracting and Agreements

Chances are, your company hasn’t had to focus on the finer points and legality of long-term contracts. However, when you’re operating as a service, you need to be extremely clear about what exactly your customers can expect from you. 

These contracts don’t only lay out what you’re offering, they also make it clear who owns the equipment, and how decommission will play out. 

Project Management

If you are able to get your customers on board with the shift, and have shown them the potential benefits of the PaaS model, there is still the structural switch over to worry about. Many companies handle the project management for their customers to ensure the transformation happens smoothly and is fully integrated with their system. 

Customer Intelligence

With everything in place, you can start gathering data and using it to understand the effectiveness of all your equipment. This information can allow you to spot any variations in productivity and troubleshoot for your customers and yourself. 

Moving From Remote Diagnostics to Fully Digital Solutions

The concept of remote diagnostics and predictive maintenance has been around for a long time. Lots of companies have started to plan ahead and assess their equipment from afar. 

However, in order to truly embrace the PaaS model, you have to go above and beyond this. Truly digital models will include 

• Condition-Based Monitoring – Sensors can alert your team of any upcoming issues with the equipment
• Dynamic Planning of Maintenance – Data can help you effectively schedule engineers and inventory
• Control Room for Remote Diagnostics – You can have a handful of remote workers monitoring equipment and deploying field workers
• Autonomous Systems and AI – This tech can be used for training, keeping track of maintenance, and more 

These solutions connect digital and PaaS transformations, making both easier and more effective in the long-run. 

Developing End-to-End Operational Capabilities

Even with the perfect plan in place and all the right technology, if your team doesn’t have the communication and operational skills required to keep this kind of business running, you are going to fail. 

Beyond tech, your PaaS business will require

• Improved Communication – With a smaller, more specialized workforce, it’s vital that everyone on the team knows how to communicate with each other and customers 
• An Appropriate Pricing Model – There’s a lot that goes into the pricing of a full-service operation, and it will require more thought and planning than your previous model
• Analytics – The sheer amount of data that passes through a fully digitized system requires high-level analytics and data literacy
• Data Security – Data ownership and safety becomes imperative when working with as much detail as these systems require

Once these parameters are in place, you’ll be ready to launch your PaaS model and deliver superior service to your clients. 

Examples of Parallel Transformations

If you’re still on the fence about parallel transformations, there are countless success stories from companies of all sizes taking on the challenge. We can see the way that combining digital and PaaS transformations has helped other companies find lasting results. 

Caterpillar

Caterpillar began their digitization journey back in 2016 with an effort to connect all of their equipment. They now have over 1.2 million interconnected assets, and each new product is able to join this network. This gives them the ability to collect more data from customers and provide insights and superior service. 

In 2019, Caterpillar decided they would work towards increasing their service sales by $28 billion before 2026. To make this possible, they launched several initiatives

• Integrating their equipment with IoT 
• Launching an app that tracks data 
• Preparing their customers and team to preemptively handle maintenance 

All of this worked together to seamlessly link their digital and servitization efforts. 

TrakRap

For a smaller scale OEM, we can look to TrakRap’s transformation. They went from a company selling packaging systems to a PaaS company that charged customers per wrap. 

This shift required a lot of work on TrakRap’s part, so they partnered with Siemens to access high level computing within each of their machines. This reduced equipment downtime by 70%, and cut maintenance calls in half. 

In order to secure the capital for this kind of overhaul, they received some funding from Siemens that was easily recouped after the fact. 

Conclusion

While most companies would agree that the future is digital, and that Service-Based business models are finding a lot of success, few are willing to approach these as interconnected concepts. By seeing both digital and service-based transformations as a single project, B2B companies can make change faster and more effective.