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For manufacturers looking to transform their company’s services, differentiate to get ahead of competitors, and avoid the risk of falling behind in this fast-paced industry, product-as-a-service is an especially important strategic initiative in the face of current economic challenges. Consider this an informative guide for how you can achieve an effective service transformation.
The Growing Need for Service Transformation
The complications brought about by global disruptions in the supply chain, in economic growth, and in consumer demand have forced every industry to adjust and adapt its business models. At the same time, an explosion of available data has changed some of the fundamental nature of businesses, enabling a shift in how products are conceptualized and positioned. Part of this transformation involves an embrace of “as-a-service” (XaaS) revenue growth to monetize data while enabling better efficiencies and new revenue streams.
Fortune Business Insights reports that the global XaaS market size was valued at $349.71 billion USD in 2020 and at $419.02 billion USD in 2021. With a CAGR of 28.2% during the forecasted 2021–2028 period, the market is estimated to reach an incredible $2.384 trillion USD by 2028. Such explosive growth isn’t that surprising, as research has shown that servitization models provide a more steady competitive advantage but also new experiences, relationships, and organization evolvement. A services operations transformation, powered by innovation and digitalization, creates new opportunities for companies to systematically adapt and scale their business model.
It’s recognized that the adoption of servitization in manufacturing shifts the relationship between company and its customers from being merely transactional to something more like a partnership. This helps strengthen the relationship (and customer loyalty) as manufacturing customers are — at the end of the day — less concerned about specific products and more interested in achieving specific outcomes.
In simple terms, it’s less about being able to sell someone a pump, and more about selling them the ability to pump where and how they want at an optimized level. Not only can services and support provide this results-based outcome; it can also offer custom solutions based on a customer’s specific needs or budgets.
Advantages of Service Operations Transformation
While the benefits of PaaS might once have been considered nice to have, the advantages of a service transformation are increasingly harder to overlook as a market strategy. Here’s why manufacturing companies that haven’t yet transformed need to act now or risk falling behind.
- Services open new, regular revenue streams for businesses for a more predictable cash flow. This can include alternative payment models that better fit the needs of customers, making it more likely they’ll purchase a service contract. As a result, PaaS can produce greater amounts of revenue than traditional products.
- The data gathered from PaaS generates critical and valuable information on customer preferences, product usage, performance, and other metrics. This can be used to enhance customer service and inform product development.
- Open communication lines allow for a better and more direct connection to the customer. This allows the company to respond quickly to issues and speak more directly to customer concerns, increasing satisfaction and further building loyalty.
- Preventative maintenance capabilities enabled by PaaS works to improve uptime, offers more predictable downtime, and provides a level of guaranteed performance. This not only reduces customer frustration; it significantly reduces costs on upkeep and repair.
- The digitalization that makes PaaS possible also enables automated processes and contactless service, reducing the number of manual tasks and amount of travel for sales and technicians.
Overall, services are a great way for companies to expand their offerings to grow volume, add value, and gain shares. However, while more and more manufacturers realize that service transformation is part of the future of their business, many struggle to find the right path forward.
Challenges to Expect
The level of service required for PaaS is made possible through digitalization, largely thanks to the advancement of technologies such as cloud storage, machine-learning AI, and the internet of things (IoT) that allow for more points of information, more efficient data collection, and more ways to process and analyze that data. However, achieving a service operations transformation is more than just building infrastructure to support the same old product management and engineering.
An effective and successful PaaS offering requires new lines of thinking across all parts of the business, from operations and finance to engineering, sales, and marketing. Such a paradigm shift comes with the following challenges:
- Companies may lack the experience, capabilities, or resources to implement a service transformation properly. After all, they haven’t done it before, so they are unsure about how to start the process. Management will need to understand what’s required, and those steps will need to be communicated to all parts of the business.
- Established processes may be getting in the way of transitioning to a service model. A lack of infrastructure, or inadequate infrastructure, may make things inflexible and unscalable. Both front-office and back-office systems will need to support the service offerings.
- The new expectations and requirements of a PaaS offering can upend traditional work models and make things difficult to integrate with your employees. Businesses must understand what kind of training, knowledge, or resources sales, customer service, and field service workers will need. This can be further complicated when transitioning to a hybrid workplace and remote work capabilities.
- Customers will expect a seamless experience across all possible communication channels, so businesses need the capability to meet customers where they are and “right channel” them to the most appropriate service channel. This requires a centralized data platform and the removal of “silos” that isolate data.
From the top down, the business needs to address these challenges by being able to answer questions like:
- How will this offering serve the business as a whole?
- What is the right application for this technology?
- How will sales and marketing approach this “new” product offering?
- How will field service adapt?
Making a transition to PaaS models is more than figuring out the logistics; it also requires a shift in mindset. Here’s how you can get started.
Keys to Successful Service Transformation
Based on our research findings and industry experience, Hitachi Solutions has developed a pragmatic roadmap to help guide you on your service transformation journey. Here are seven crucial focus areas to consider when pivoting to/implementing a service transformation:
- Develop a data mindset. Your organization will need to embrace the increased amount of data and insights as new and differentiating features for your products. This will allow you to better monitor and optimize product performance.
- Assess which offerings will match the company’s strategic priorities. You’ll need to establish and balance short- and long-term key performance indicators (KPIs) to effectively measure the service transformation.
- Be agile, as flexibility and scalability are key assets for any modern business. Utilizing cloud-based technology and managed service software can ensure you’re getting regular updates and aren’t stuck with outdated systems.
- Incorporate an advanced AI system. While it’s true that more data drives better insights, it needs to be effectively collected, analyzed, and presented to be of use. AI, especially advanced machine learning, can provide predictive and proactive insights.
- You’ll need to design and develop new operating models that will properly support the service offerings, including multiple customizable options and features.
- Sell the process to your employees and get their buy-in for the transformation, which will make the process much easier. Then, develop an onboarding program that effectively informs and trains employees for their new responsibilities.
- Get the process started by finding the right partner who will provide the collaboration model that best fits your needs and will help you realize your objectives.
The Time Is Now: Your Service Transformation Roadmap
Hitachi Solutions understands the building blocks needed to start a Product as a Service journey and can help your manufacturing company with its service transformation. PaaS is just one element of an overall digital transformation, and our advisory team can help you understand where you are in the process and get you where you need to be.
Ready to get started? Reach out now.
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