It’s time to get serious about servitization
As consumers we are now used to the as-a-service model in our everyday lives. When was the last time you bought a CD, or DVD? Personally, I can’t remember because my whole family stream everything! My sons and I even get my razor blades and shaving cream as-a-service. I still seem to be paying for everything, but that is a different story!
This concept of selling an outcome as a service is commonly known as “servitization” and is increasingly expanding from strictly a consumer model to a broader business context where the capital expense of buying a piece of equipment is often a barrier to customers. It is often far more attractive to have access the same piece of equipment but pay monthly based on say, hours of usage, or throughput.
So, although very different to media streaming, manufacturers are finding ways of getting closer to their customers with new business models that create an ongoing relationship based on a monthly transaction monetarized by such things as usage, throughput, uptime or utilization, rather than a one-time transaction or sale.
Servitization requires smarter products
To enable servitization, equipment manufacturers need to design and manufacture smarter products that can capture the information required to bill the customer. They also need to be able to ensure the equipment is always working and have the data available to predict that maintenance is required (before it breaks down). This is enabled by embedded IOT enabled sensors to capture the pertinent information such as usage, throughput and equipment performance to drive the as-a-service business process.
By having this digital twin of the equipment, both the manufacturer and customer can monitor the performance and leverage machine learning algorithms to identify how, when and how well it is being used. This ensures that you know when it requires maintenance or replacement and can and charge the correct amount each billing cycle.
The Business value of servitization
It is clear that when you turn services into a growing, vibrant part of your business, you can open new sources of revenue and margin while simultaneously staving off commoditization and making sustainability a differentiator.
If, like me, the customer is a family of 5 that uses the washing machine every day, they pay more than a single person who uses the washing machine once a week. But the common denominator is that whenever the washing machine is needed, it must be working at peak performance.
Reinvent service models to grow revenue
This new service offering requires outcome-based contracts that include performance measures (number of wash cycles), service level agreements (100% availability).
In an effort to build an immersive customer experience, an app could be provided that tells the consumer how far the specific wash is through its wash cycle, provides an alert to let them know it has finished, as well as information about how many wash cycles have been run, what are the carbon footprint, and how the machine is performing.
This information is also leverages by the manufacturer and a third-party maintenance organization to manage the end-to-end service lifecycle by integrating all aspects of service from installation management, warranty, service ticketing, field service, in-house repairs, billing, and finance.
The plan is also to reduce the overall environmental impact of the machine by tracking energy and water consumption, as well as the circular economy of machines by managing de-commissioning and maximize re-cycling of parts for re-use.
Deliver service precision to reduce costs and improve customer experience
The data available about the machine helps the manufacturer and service partner to rethink service management operations by leveraging AI enabled advanced scheduling to prioritize engagements, improve resource utilization, and reduce travel times.
When a service technician is sent to repair a machine, they have all the necessary parts, the repair information at their fingertips on a mobile device and can even be walked through the repair leveraging augmented reality glasses.
Revolutionize equipment ROI by increasing performance and extending equipment life
With improved visibility from IOT sensors designed into the washing machine, the manufacturer can now continuously monitor the performance of all equipment being used at customers. This enables them to monitor health, and track performance against service level agreements (SLAs).
They can also leverage the data from across all machines and use artificial intelligence algorithms to identify trends and predict risk of failure. They can then propose preventative maintenance approaches to reduce breakdowns and increase customer service. This information can also be fed back into the R&D teams to design out any common issues in the next iteration of the machine.
Now that is a full cycle washing service.
It is clear that the as-a-service business model is here to stay both in our personal lives, and increasingly, in our business lives.
To discover how to plot your route toward service management excellence, download a recent Copperberg whitepaper, “Finding servitization success through service management transformation”.
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