The service revolution of the manufacturing industry – moving from reactive to proactive service business enabled by iot
An executive summary of Noventum’s new publication, co-created with the participants of Noventum’s Service Innovation Programme and the Aston Centre for Servitization Research and Practice...
Looking at the industry trends, it appears that IoT, Industry 4.0 and product digitalisation will substantially affect competition, profitability, and the structure in many industries - as did the previous wave of Internet-enabled IT.
To be prepared and to define their strategy, companies must understand how smart, connected products impact industry and their service organisations, as well as the way companies do business. Service business is an essential part of most new business models that companies are implementing. Within the service business, it appears that Customer Business Related Services are driving the growth, while Product Related Services will shrink, if not managed very differently than today.
The major trends that appear to drive the development of advanced services are the;
- Growing demand for Customer Business Related Services
- Customers wanting to ‘’consume’’ technology, instead of ‘’owning’’ it
- Increasing importance of Brands
- Growing need for Customer Experience Design
- Increasing globalisation
- Implications of the Internet of Things (IoT)
- Companies recognizing the need to capitalize on Industry 4.0; and
- Companies requiring to develop Big Data Analytics capabilities
These industry trends are affecting the way manufacturers have to compete, it will impact their profitability, and it will change the structure in many industries.
In order to increase revenue from advanced services, companies face (amongst many) four top challenges:
- How to manage the consistency of service delivery across regions and geographies in order to deliver a consistent customer experience, increase productivity and optimise the service delivery.
- How to adapt sales skills, methodologies, systems, measurements and incentives to move from a product selling to a consultative sales approach and so support the sales of advanced services.
- How to manage the development of a new services offering so that the value proposition to customers is improved and new services are brought to market faster than the competition can do it.
- A model was developed that shows how most companies follow a similar path of evolutionary steps to reach a state in which the most valuable, fast growing and most profitable services are being sold and delivered. It is very difficult for companies to skip a step, as the capabilities of any of the previous steps are needed to be successful in the next.
Noventum’s new book elaborates in detail on the required changes and the capabilities that a service business must develop in order to go from a reactive to a pro-active service business. As the maturity of your service organisation develops, the type of services you offer evolves.
And by differentiating yourself based on your brand, you can provide more value to your customers, while allowing for bigger margins.
The main areas to address for running a successful business are:
- Customer Journey
- Customer Value Perception
- Business model
- Company Value Management
- Service Propositions
- Marketing & Sales Model
- Delivery Model
- Knowledge Management
- Technology Management
- People Management
- Customer experience management
Generally, the participating companies felt they had a reasonable understanding about the mega-trend of manufacturing digitalisation and the service opportunities it represents, but had not yet transformed this into a sound strategy, roadmap and execution. If they had, they had actually just started.
At the end of one of Noventum’s Service Innovation Projects, titled “From a Reactive to a Proactive Service Business”, a workshop was facilitated, titled ‘Challenges and barriers of implementing advanced services’.
All participants were asked to indicate their main challenges in moving forward to a more service centric (or even customer centric) company value proposition.
Then challenges were categorised by themes. The three biggest themes were:
- Skills, in particular sales skills
- Company culture and
- Organisational buy in, in particular winning the support of the corporate executive board
Participants felt that the market and customers are (or seem to be) able to accept the service transformation. Most of the challenges to overcome are internal. Many companies have begun to make real progress, accelerating their pace of change, while slow-moving competitors fall further behind.
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