The introduction of advanced connectivity and the Internet of Things has opened the door for innovation within the manufacturing sphere. Continual streams of data make monitoring the success of products simple and effective.
Author Nick Saraev
Photo: Freepik
While the core idea of Products as a Service has been around for a while, this advancement in technology makes the model not only viable but cost-effective and streamlined. Now, manufacturers of all sizes have the opportunity to pursue this service model of product distribution to increase customer satisfaction, grow their business, and increase their competitive edge.
This shift has the power to revolutionize the manufacturing industry as we know it, but it requires thinking differently about design, development, and distribution. The change may be challenging, but the results are worth it.
What is PaaS?
Products as a Service, or servitization, refers to a shift in focus from product ownership to using a service instead. This approach de-emphasizes the sale of physical goods and refocuses on the outcome that customers are after.
For example, if a theatre was looking to upgrade its seats, it could work with a PaaS company to have comfortable, high-tech seats brought in. A traditional company would sell them the chairs and be finished.
On the other hand, a PaaS company would sell the theatre the outcome of comfortable, innovative seating. The chairs themselves would still be owned by the company, so they would be responsible for upkeep. They would be in contact with the theatre to help with any issues that arise, and may even come in to upgrade the chairs should they become dated.
A shift to PaaS means focusing on a long-term relationship with the customer. As they are essentially renting the product, the quality must remain high.
Servitization in Manufacturing
Manufacturing is a perfect domain for PaaS, as many large companies look to reduce costs and risk while improving customer service. The PaaS model provides manufacturers with a steady revenue stream, which is beneficial for both the manufacturer and the customer.
They can avoid investing in large purchases or long-term rentals, and the company can provide better service. Because B2B manufacturing in particular has always relied on relationships, providing customers with an engaging, tailored, and long-term connection makes perfect sense.
When a manufacturer continues to own a product even as it is being used and eventually discarded, they are far more likely to invest in finding ways those products can fit into the circular economy. When outdated or damaged models have parts that can be reused, the company will cut costs and become more sustainable.
Pros and Cons of the PaaS Model
There are several reasons that a shift towards servitization is desirable for both the manufacturer and their customers.
Anyone buying the service will have a lower up-front cost, and be able to upgrade or shift their “subscription” as time goes on. The hassle of maintenance is taken care of, and they know that the company they work with is invested in them long-term.
This model also eliminates the fear of outdated products, as the customer knows they can simply renew with an updated offering once their subscription comes to an end.
A manufacturer shifting to a PaaS model can expect to see far more long-term profitability as a one-time purchase transforms into a weekly, monthly, or yearly subscription. They’ll be far more engaged with their customers, and be able to use the real-time data from each product to make improvements.
When you include the sustainability aspect, as well as the increased customization for customers, PaaS paints a compelling picture. However, not everything is as simple as it seems.
The shift to a PaaS model is a logistically complex process and one that requires considerable foresight. Manufacturers have to plan for customer service, extra technical support, data security, and management. They might also have to contend with competition from other subscription services, as well as the possibility of product piracy.
The transition will take serious resources to adapt well, and it’s certainly something that has to be done right the first time. As with any new technology, these investments are risky and require careful research and planning.
It’s up to each manufacturer whether this model fits their unique business needs. The risks are there, to be sure, but the rewards can be monumental.
How To Start With PaaS
The road to a successfully integrated PaaS system is winding and long, but there are a few signposts that can get you started.
Focus on the Customer
This may seem like a no-brainer, but ensuring that your transition to the PaaS model meets the needs of your customers is essential. You’ll need to have an in-depth understanding of how your customers purchase and use the products you offer, and then develop a long-term strategy to meet their needs on a PaaS basis.
Your customers may be wary of the shift, so it’s important to have a clear picture of how you’ll be adding value to their experience. Remember, this entire change hinges on customer service.
Do Your Research
PaaS entails a long-term commitment and will likely result in significant changes throughout your processes and operations. Before you make the jump to a PaaS model, it’s important to study the impact that this could have and prepare accordingly.
Do your research on what startups and incumbents in the sector are doing with PaaS, and how successful they have been. You may find that some aspects of their implementations are worth adopting, while others may not be suitable for you.
Implementation
Once you have a good idea of how to proceed, it’s time to roll out your PaaS strategy. It is recommended that you start small, perhaps with one product or service— this will help you identify any potential pitfalls early on in the model.
At every step, make sure you solicit feedback from customers to ensure that you are tailoring your plan to their needs. As you start offering more products as part of a subscription service, make sure that these plans are easy to understand and provide real value for customers.
The Bottom Line
Manufacturers can benefit in the long run from adopting a products-as-a-service model. This type of model encourages long-term customer relationships and allows manufacturers to remain agile and competitive.
Although this shift may seem overwhelming, embracing it can generate increased customer satisfaction and lead to improved product success. Change can be difficult, but it is essential for businesses that want to stay competitive in today’s digital world.
