Your “As-A-Service” Business Model will Fail

Considering a move to an “as-a-service” business model? Why wouldn’t you? There are indications that those who move from product-centric thinking to “as-a-service” customer-centric thinking have reaped rewards. They are the innovators, disrupting their industries, and being rewarded with growth and increased revenue.

For manufacturers who live and die by their brand and quality, it is clear making these digital investments is paying off. According to IDC¹, the financial impact is 1.3% higher revenue growth, and higher profit growth, 2.3%, whereas their non-digital counterparts have -3.1% revenue growth and -2.1% profit growth.  

However, the road is bumpy for those companies that have made the move from a product-centric to a customer-centric model. Why? The scope and complexity of the changes required to transform can be daunting. Just think of it, your processes and technology investments were designed to engineer, manufacture, and ship products out the door. The service part? You need more than an “800” number, a manual, and, hopefully, a distributor network to deal with the customer after that. Fragmented to say the least.

So let’s take stock of some of the pitfalls manufacturers, like you, may encounter that can result in the failure of your “as a service” business model.

Lack of process agility

The only thing constant is change, and as Peter Drucker stated, “The best way to predict your future is to create it.”  In order to move toward a customer-centric business model, you need to re-think how you do business in the first place.  It begins with thinking about how you will provide a service to a customer that for years has been purchasing product and maintaining it on their own―this requires new business processes and workflows. 

Therefore, the first objective is to answer the question, “how easily and quickly can I change my processes?” This is where the strategy of wanting to do something, faces the reality of getting that strategy done.  Most systems you have today are not flexible enough to change, or are too costly to transform to the way you “think” things should be done. 

You must be prepared to accept that the way you design your new customer-centric business model may not be right the first time. In addition, since market conditions and customer requirements may vary, your processes must be adaptable to support many “as-a-service” models, by industry or even customer to customer.  If at first you don’t develop the right processes, you can continue to iterate on them to build the capability that is able to support your needs. This is how you will differentiate and compete.

Product quality issues

The bottom line here is to understand whether your products are ready for a shift in business models. Are you comfortable and ready to support your own quality issues? After all, they affect the profitability of your service agreements, and customer satisfaction. 

It used to be that, when it came to quality issues, the stress was on the customer. It was up to them to fix what wasn’t working, maybe with some limited manufacturing support. If what they ordered wasn’t working, they would have to source again or rely on a fragmented, slow return process. Now the onus is on the manufacturer, with agreed upon service levels, coupled with guaranteed uptime. Now is not the time to see if the products you previously sold are up to the task of guaranteed service.

The best products, obviously, are those of high quality, but if quality is still a goal you are striving for, you may need to have additional products on-hand to swap with failing ones – which is an expensive proposition. The good news is, that if you are working toward higher reliability products, customer-centric business models open the door to influence next generation product innovations. Why? Because you have a more direct access in visibility to how your products are performing in the field. Creating this strong connection to the field will help improve the service level agreements and differentiate from your competitors.

Inability to access and use data

A critical part of being able to support your service levels is getting visibility into the performance of the assets you are managing. By the way, I am not just talking about the smart connectivity that everyone espouses these days. This real-time data is of value, but only when put into context (more on this later). Have you thought about the history? Most think this history is created out in the field as the product is maintained, this is partly true, but there is also a vast amount of critical information that has been generated in the design and manufacturing phase of the product’s creation.

Let’s face it most data is locked in legacy systems or in the minds of those maintaining assets for years. But it can be of great value in your “as-a-service” business model. Thinking you will have all the answers by generating more data is not the solution, the ability to connect into rich sources of existing information while generating new sources and continuing to connect with them through a Digital Thread, is the way to go.

Inaccuracies in asset configuration

If you’re not ready, you will waste your workforce’s time at the expense of profits. If you are new to the maintenance game or expect to provide more complex maintenance services at a scale, you may be in for a big surprise. Each of the products you intend to provide as-a-service, will end up having a unique service life all its own.

Therefore, it’s important to understand the individual context of each product you support. We are now at the point where I mentioned “more on that later.” Most organizations are focusing on the shiny new technologies they think they need now to support their as-a-service models, Internet of Things, Big Data, Predictive Analytics, and/or Digital Twin visualization. 

It will really get old and expensive to keep sending out crews to meet your service level agreements only to find out you have the wrong part, or right part and wrong tool or maintenance crew. Your existing maintenance tools will lack the flexibility required to reconfigure themselves to adapt to the various service levels you are moving towards. This means you will be missing the automation required to track and change the unique as serviced configuration as products are repaired. If you have a global reach and your assets reach the thousands, then a Digital Twin enhanced maintenance management application will be of paramount importance.  

Lack of the right targeted investment

Managing new levels of support for the products you now own, and where the customer essentially rents based on their needs, will result in new investments in software and hardware.  These targeted investments should focus on the ability to monitor the status of equipment, manage the work required to keep assets running, and measuring your ability to adhere to agreed upon levels of support. Whereas, you may have had a top notch warranty service process and system before, you now require a maintenance management system to understand where your assets are, by customer, what maintenance has been performed, what maintenance may be required in the future, and the resulting costs associated with supporting these assets. 

Scheduling work is key. Once you understand and can manage the product’s individual configuration, the likelier you are that you will be sending out the right people, parts and tools to support the asset. Not scheduling the right work at the right time can often be one of the highest expenses in maintaining an asset. 

Getting this insight results in another benefit. You will be able to get an intimate understanding of how customers are using your products, enabling more informed discussions on how you can support them in the future, with product upgrades and services. This keeps the customer in your hands, and out of your competitor’s. 

What to do about it!

Moving from product-centric to customer-centric as-a-service models is a journey that requires Digital Transformation projects focused on systems and processes. Instead of selling assets and providing warranty service, you are now deploying, monitoring, maintaining, and upgrading them based on customer feedback and changing requirements. There will be a learning curve, as you are developing steps that you won’t initially have competence in, requiring a new way of thinking. 

As requirements will inevitably change, success depends on your business being flexible enough to pivot. This requires technology and applications that are continuously customizable, on the fly. Any rigidity inherent in the technology choices made will expose flaws in your service levels―and customers will notice. The easier it is to do business with you and be kept in the loop on status―the higher level of retention and trust you will gain―not to mention increased revenues and margin.

For those looking to avoid the common pitfalls of customer-centric business models, focus must turn to a platform, with apps that can evolve as you do by adding capabilities based on the specific needs that will assuredly emerge as your customer-centric business models evolve. Only Aras, provides a platform with application functionality, connectivity, and change and configuration management that can evolve with you no matter what direction or how much your business changes―from your product innovations to changing business conditions.

¹ IDC, DX Reinvention – The Race to the Future Enterprise, Doc # DR2019_GS4_MW, Mar 2019

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