“The digital transformation is more than making equipment smart, connecting to the cloud, and collecting data. It is the key to reducing service delivery costs, optimizing customer processes, and delivering better customer outcomes.”
If your company sells any type of physical asset, commoditization will drain your economic moat (here are the four warning signs). Many of the successful tactics employed to refill that moat revolve around effective data capture and using that data to improve customer outcomes. As a first step to filling that moat, my last post provided an overview of how the Internet of Things works for equipment manufacturers along with some key definitions.
Incorporating sensor technology and edge devices into the product development process, thoughtfully using edge computing to enable real time decisions and actions, and identifying the critical data to collect that will enable future revenue growth opportunities will all have a dramatic impact on how your company will operate in the future. In 2015, TSIA developed a framework called the “Remote Services Continuum” to help you navigate this disruption.
The Remote Services Continuum
Many organizations start their digital transformation the same way that they have traditionally approached their business, with a singular focus on the product. As a result, the beginning and end of an IoT initiative is exclusively focused on improving product performance and reducing service delivery costs. However, there is so much more that can be accomplished if organizations expand their definition of what a product is. The Remote Services Continuum has three steps that show how the data collected from smart, connected products can ultimately be used to deliver more business value than the physical component itself.
By understanding each of the three steps and the data required to improve customer outcomes, product development teams can incorporate the right sensors, edge devices, and embedded diagnostics to begin building the data set that will inform future service offers. Here is a brief description of each of the three steps.
Step 1 – Service Efficiency: Objective is to reduce service delivery costs and improve responsiveness to service incidents
The main activity is implementing smart, connected products that enable the capture and analysis of key component performance, including temperature, vibration, fan/motor RPM, voltage, etc. The analysis of this data enable the monitoring of critical components to understand failure rates, incorporating self-diagnostics, and phone home capabilities when a product fails.
This step typically results in disproportionate value for the supplier, leaving a customer wanting more in return for providing access to the data that was generated on their location.
Step 2 – Process Optimization: Objective is to improve product utilization and enable value-added service.
In this step, equipment manufacturers use data for remote resolve/self-healing /proactive services that predict faults and disruptions by comparing to normal operations and noting any anomalies. This also includes the ability to provide service regardless of location. Analytics are used to identify new features and value-added services that help customers achieve and maintain a higher level of operation, moving from reactive service level agreements to proactively resolved tickets and incidents.
The data generated across a supplier’s entire install base is incredibly more valuable than the data from one customer installation. Benchmarking performance and providing suggestions to improve a customer’s utilization and throughput are value-added service opportunities that supplier’s can charge a premium for.
Step 3 – Customer Outcomes: Objective is to integrate information, people, and processes to improve a customer’s business results.
The final step in the Remote Services Continuum is the ultimate goal of your customers. It requires your organization to work directly with customers to help them improve their business outcomes. This requires a deep understanding of exactly what they want to accomplish and how your offers can help, proving their value.
Helping customers achieve best in class operational performance is accomplished through the combination of multiple products embedded in systems, platforms, or ecosystems that are integrated with each other and 3rd party data to guarantee improved customer outcomes. This integration will enable suppliers to do work that was previously done by customers, partners, or not at all.
What Does This Mean for Equipment Manufacturers?
You can get more detail on each step of the Remote Services Continuum here:
- Webinar: Monetizing in an IoT World
- Webinar: The Digital Transformation of Hardware Companies
- It’s All About the Outcome
In future posts, I will also go into more detail on each step of the Remote Services Continuum, share examples, and identify new capabilities required at each step. As you begin to consider how your company will respond to opportunities posed by services in the age of IoT, there are a few thoughts I would like to leave you with:
- Smart, connected products will deliver more business value than the traditional physical component.
- Traditional products are being commoditized impacting your revenue and profitability.
- The company that offers solutions with the greatest impact on customer outcomes will capture disproportionate value.
- Customers will continue to insist on suppliers taking more responsibility. Someone will fill the white space, whether its current competitors, new entrants, or you!
Service organizations must develop new organizational capabilities that will help lead their companies to success in the age of IoT, and the time to start developing those capabilities is now.