How to monetise advanced services

Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to generate and capture the new value.

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Introduction

Many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised and competition from lower cost alternatives arises.

At the same time, there are huge opportunities with new technologies, new value propositions and new business models.

One of the important trends is that value proposition and offerings become more data-driven and more service oriented. Services are becoming more pro-active, predictive and performance-based. New advanced services go beyond maintenance and availability of the equipment and move towards customers’ operations and processes. Potentially the products will even be offered as a service in the near future.

The problem

However, many manufacturers are still too product-driven and do not fully appreciate the value services can have for their clients and their own business. As a result, they are too slow in advancing their value proposition and their business model.
They hardly reap the benefits of the new opportunities:  the cost for new digital capabilities increase and  the revenues do not increase.

One scenario: In the continuous battle to win the (products and/or consumables) business of clients and to justify higher prices, many manufacturers have been adding a lot of services free of charge. For example, pre-sales consultancy, application support, extended warranty, discounted maintenance contracts and training of the users.
As a result, the overall costs to sell products have been increasing, while the prices and market-share may have been declining. This is not a sustainable approach any more.

Another scenario: Due to new (data) technology and customer expectations, business models and core business will shift. Manufacturers will develop and grow service and data capabilities with new, expanding teams. Cost-level and structure will change.
Without additional revenue-streams it will become impossible to continue this shift.

How to Monetise Services and thrive in a Disruptive World?

The capability to monetise services and data is mission-critical for sustainable performance and existence of manufacturing. We hear and read many tips and tricks about monetising services and data. But where to start?

Our research and experience shows 4 critical steps which are the foundation to monetise services and data and make the difference between success and failure to thrive in a disruptive world with new value propositions:

• Solve bigger customer problems to monetise services and data
• Better Articulate the value you offer
• Remove obstacles for clients to use your new offerings
• Build internal momentum for monetisation

We will further discuss these three steps in following articles.

The essence

In today’s rapidly changing industries with new digital technologies, manufacturers are investing in developing new digital capabilities and solutions. With this, the operating cost increase.

Without generating additional revenues to cover these investments and additional cost, manufacturers get stuck with declining margins.

Manufacturers that are better at solving bigger customer problems, in articulating the value for customers and staff, making it easier for clients to adopt the new solutions they offer and have higher momentum for change, also outperform their competitors in generating revenue streams and in strategically differentiating themselves from their competitors.