Traditionally, manufacturers have focused on selling their products in one-time transactions, often bundled with a warranty to repair or replace it, or a service contract to maintain it. But as we’ve seen in previous articles, this is no longer enough to differentiate a company and help it grow profitably. There is a thirst for greater value like never before. Customers seek this value through the ability to interact with the products they buy and increasingly expect those products to improve over time. Take Tesla for example, where the car you drive will actually perform better several years after the day you bought it thanks to software updates While the physical appearance and performance of products can differentiate a company, no business model transformation can be complete without the addition of this “Product-as-a-Service” concept.
This new business model fuses physical products, sensors and some form of platform to capture and analyse data in order to develop a range of insight-based, value add services. Think of Zipcar for instance, where customers subscribe to the experience of access to transport, without the overhead of ownership. The data that Zipcar captures can help the company continually increase its value proposition of convenience and flexibility. UK robotics firm, Automata, is another company leading the charge here. By supplying robotic arms to the market via a subscriptions-based model, customers not only benefit from a much lower cost base, but also a piece of equipment that is constantly being monitored to ensure it can stay up and running 24/7. Automata is using this performance data to inform customers of how each robotic arm is being used on the factory floor, enabling the team to offer a more personalised customer service, fix faults remotely and create recurring revenue and long-term relationships as a result.
For companies with a service mentality, this type of business model can enable powerful differentiation in the market. Insight into usage can be ploughed straight back into the design enabling more manufacturers to continuously adapt their products based on direct customer feedback. Updates can be made quickly, or suppliers can inform their customers if they are over or under utilising equipment and adjust pricing plans accordingly if needed.
While the benefits of offering this business model are plentiful, the market must be made more aware of what’s possible. The technology is available at a low-price point, yet more education is needed if this Product-as-a-Service model is to be adopted on a mass scale. One way to do this is to work with local universities and bring students into the business. This would enable manufacturing companies to challenge their traditional thinking, bring in fresh ideas and explore new business models more readily. Suppliers must also consider how they position Product-as-a-Service to their customer base to secure their buy-in, ensuring the benefits are clearly communicated to the market.
Britain is on the cusp of a fourth Industrial Revolution and transforming physical products into services is just one small part of this. But with the nation’s heritage in design, engineering and innovation, coupled with its booming service industries, British manufacturers are uniquely positioned to cater to this new demand and shake up the European market.
