Service-oriented product strategy is #1 capability needed to grow service revenue profitably.
IDC Manufacturing Insights today announced the availability of a new report, “Business Strategy: Modernizing the Service Chain with Smart Technology,” which evaluates smart technology investments by manufacturers in discrete, process and life sciences industries, and highlights specific areas of spending and motivating factors in after sales service.
IDC Manufacturing Insights research shows over the next 3 years, manufacturers increasingly plan to use service as a competitive differentiator and aim to grow business through product service innovation and value-added services for existing products. The application of smart technologies, such as sensors and data acquisition systems, along with ubiquitous connectivity and data analytics, can provide efficiencies and cost reduction, as well as a means for long-term, profitable revenue and customer “stickiness.” The research shows that manufacturers are taking steps to capitalize on these technologies for superior service of customer-owned assets.
Key highlights include:
- Over 70% of manufacturers are evaluating, planning, or implementing smart technologies for maintenance and optimization of their own assets and their customers’ assets.
- Over the next 12 months, manufacturers will leverage smart technologies to generate a larger percentage of after-sales service revenue through content-aware applications and services, such as monitoring equipment for consumables replenishment and location-based services as well as instrumented platforms for remote diagnostics and condition-based maintenance (CBM) of customers’ equipment.
- Of the companies that have already invested in smart technologies, notably one quarter are investing from 25% to 49% of their IT budgets, while two-thirds still spend under 25%.
“Tremendous demands are being placed on manufacturers’ service organizations to deliver higher profits and innovative service revenue models” said Sheila Brennan, Smart Services and Aftermarket Strategies’ program manager at IDC Manufacturing Insights.
“However, most companies are not equipped to deliver these, and have not adequately prepared for the organizational transformation and investment required to go from a product-centric to a service-centric organization.”
“Modernizing the service supply chain with smart technology, leveraging corporate IT expertise and initiatives — Big data/analytics, cloud, mobile and social — as well as strong executive support will be necessary to realize service revenue and profitability goals.”
At the same time, executives should not underestimate the complexity involved with such implementations or in accurately forecasting future service capacity needs to meet niche market demands.