There’s a theme in today’s highly competitive product manufacturing world: the fact that people no longer want to actually buy products. And though that may seem counterintuitive to the business model of actually making “things” for sale, it’s not the product that’s unwanted, it’s the business model that’s unwanted.
Now, in our new twenty-first century economy, the thought of actually buying things is quickly becoming an old-school idea—a relic of the past century when the concept of ownership was important and the natural order. However, though the need for products has not diminished, the way we consume them is about to change forever. The reasoning?
Customers want to use your products and enjoy the capabilities they provide for their expected lifetime, but they don’t want to have to maintain them or be responsible for them. They certainly don’t want to pay in full upfront for them, they want and expect service over the products’ lifetime. In other words, they want to buy the service, not the asset.
Customers want a life-altering experience when it comes to products. And though I don’t mean that in an existential way, customers today do want a product experience that releases them from the trappings of ownership, leaving nothing but long-term benefit: a life-long, use experience where the simplicity of product-as-a-service becomes the true prize. The funny part is that your own product can also become a life-altering experience for you if you embrace the new business model.
The challenge to this new economic model for manufacturers, however, is that the journey is going to be tough—not from a technical point of view (I will address that shortly)—as it addresses the fact that today to be successful one needs to move away from a business model that is over a hundred years old. For enterprise-level manufacturing especially, the glacial speeds at which things usually change will have to be met with a never-before-seen fervor and enthusiasm to drive the needed change before the lights go out. So, how does this happen?
The willingness to admit to change is the first step: realizing that the comfort-zoned business model is no longer viable will start the journey to a far more lucrative future. Do this and the rest simply becomes process planning and the adoption of new technology.
As for the technology, the ecosystem that governs manufacturing is going to drastically change. First, the new concept of digital transformation must be addressed. This relates to the new social collective consciousness enabled by mobility that compares known companies to companies far outside one’s own vertical market.
For example, if a person can download the Uber app and can order a ride within minutes, they now fully expect that they should be able to download a similar app from a manufacturer and order a product-as-a-service just as easily. And though that sounds downright crazy given that those are two polar opposite businesses and business models, it doesn’t change the fact that the customer demand is there. And whether that’s B2B or B2C, manufacturers are going to have to vastly modernize the customer experience to create a true product-as-a-service model.
From ordering, to upgrades and, of course, to service (my favorite topic)—all roads will lead to a world where digital transformation delivers the desired life-altering experience. So, piled on top of the ever-present need to still develop manufacturing capabilities to make quality products as efficiently as possible, now manufacturers will need to also connect that technological ecosystem to a more servitized and subscription-based business model.
However, technology is a fickle mistress even for those who are considered advanced for their time. Manufacturing businesses today, even the ones that are well into in their servitization journey, are still dominated by processes, systems, and organizational structures that were designed and built to sell products, not service after-sale for the lifetime of the product.. The sad reality is, you can’t run a company effectively in the subscription-based economy with systems, processes and organizational attributes built for making and selling widgets in the 1970s.
This is where investment in technology and people becomes the recipe for success. With the focus and investment firmly pointed at aftermarket models, the refusal to make do with the same information systems like ERPs and MRPs used for 1970s manufacturing is not an option. With the new subscription-based model the service team will no longer be considered a necessary evil or cost, but rather the essence of the sale: we will sell service, not equipment. Even so, by circumventing these old paradigms this approach positively impacts the business processes, data and skills available to the aftermarket business—increasing competitiveness with much closer and trusting customer relations.
The reality is that it’s no longer sufficient on its own to ensure survival and growth in a subscription economy where 92% of value on a subscriber model for a B2B or B2C business comes after the initial sale. And, it’s because of this that the important nature of additional aftermarket capabilities are the new critical must-have. Revolutionizing your old processes while adding to the once-forgotten service teams that will now represent the linchpin in the product-as-a-service model, is what lights the path ahead.
The choice is always yours: willingly change and follow the illuminated path to success and create your own life-altering experience … or remain as-is and stay on the wrong side of change.