Every generation is confronted with its own innovations and radical market disruptions that completely shake-up businesses, industries, economies and transform livelihoods. Original equipment manufacturers (OEMs) are now in the thick of one of these periods of significant disruption thanks to servitization,and being forced out of their comfort zones.
Servitization – where companies shift from strictly selling new products to selling the outcome a product delivers – and change go hand-in-hand. And change -- especially for an industry like manufacturing that has remained relatively unaltered -- can certainly be unsettling.
Among the biggest points of worry for OEMs is how exactly they are going to manage the new burdens of maximizing product uptime, while simultaneously generating revenue and margins from their after-sales service businesses. For decades, manufacturing has centered on a simple formula: an end-user purchases a piece of equipment, the equipment needs maintenance or repairs, and then the end-user shoulders the associated hassles and costs. In the servitization-centered economy, however, the responsibility of managing equipment has now fallen squarely on OEMs. They are now expected to conduct proactive maintenance to ensure the maximum amount of uptime is being generated from each piece of machinery.
This means that OEMs are having to overhaul their entire business logic and operations to cope with these new expectations and demands. Below are three key things OEMs need to do as they shift to a servitization-centered business model:
- Invest early. The best way to cope with servitization is to commit and invest early. Even if it’s a small step, early investment can go along long way. For example, consider doing a “beta rollout” by communicating your new goals with a small subset of dealers or distribution centers. From there, you can test and refine your strategies before launching more broadly. This is a big change, so it won’t just happen overnight, but by investing early, manufacturers will afford their organizations a longer runway to iron out any kinks.
- Make training a priority. Employees are a company’s number one asset, so to cut corners by expediting training not only shortchanges businesses preparedness for this shift to servitization, but also undercuts employees’ chances of being successful. Taking the time to provide thorough training upfront will help the entire organization get acclimated and will allow employees to find their feet and hit the ground running with minimal to no pressure.
- Analyze customer behavior. The customer is the biggest priority in the servitization era. Therefore, the best way to deliver the amazing results is to constantly collect and analyze customer feedback and data. This will help business better tailor their service needs and keep customers both happy and loyal.
Disruption can be challenging, but it can also be very exciting and provides a significant area of opportunity. Of course, any sort of major shift in strategy and operations can always be daunting. But servitization offers OEMs a whole new chance to modernize and succeed, and those who jump in early stand to see some very interesting opportunities crop up that others who stand pat will simply miss.