From commoditization to servitization: Transforming your business to compete in the new age of field service with IoT

Originally Posted November 7, 2016 by Colin Masson - Director, Manufacturing Industry Solutions, Microsoft Cloud & Enterprise Group

In the past, manufacturers naturally focused on sales of their products, such as drills or aircraft engines, as standalone offerings. Servicing those products was considered a cost center for those businesses—an expensive, back-end operation required when products failed in the field.

Today, the manufacturing landscape has shifted, and servicing now opens the door to better customer outcomes, decreased operational costs and even potential new revenues for manufacturers, as well as an opportunity to differentiate from competitors. As formerly offline tools become connected, and service moves from reactive to predictive, we see the manufacturing sector is moving towards services as a core business model. According to a study of field service organizations by the Aberdeen Group, 26 percent of respondents have been able to generate new service-driven revenue streams [1].

Moving from standalone products to services creates a win-win situation for manufacturing organizations and their customers: Organizations can rely on recurring revenue and customers benefit from greater reliability and lower risk. This evolution is known as servitization, which covers the bundling of goods, services, support and knowledge [2]. Let’s take a look at how the shift from being “product-based” to “service-based” is enabling a range of benefits.

Continuous interaction for better customer relationships

In the past, once an product was sold, customers wouldn’t hear from companies except when it was time for an upgrade or replacement [2]. Now, thanks to technologies like the cloud, and rapid, scalable and cost effective deployment of remote monitoring solutions, products can be constantly connected to advanced analytics and rich dashboards, giving the manufacturer ongoing visibility into performance.

This rise in connected devices is what enables ongoing interaction between customers, assets and service organizations. That same study by Aberdeen found that 54 percent of respondents credit the IoT with enabling the creation of new offerings [1]. By tapping into real-time data from products in the field, manufacturers are better equipped to preemptively service equipment before failures occur. Better yet, monitoring product performance enables manufacturers to improve future products and services based on changing customer needs [3]. As manufacturers continually improve products and services to maximize performance and productivity, customers stand to reap the benefits of this customer-manufacturer dynamic.

Manufacturers leading the way with innovative services

Many forward-thinking companies are already using IoT, the cloud and advanced analytics to identify and create new service lines. The more they are able to create this contrast between themselves and their competitors, the more of the market they will capture. Consequently, companies that do not leverage technologies like remote monitoring, the cloud or IoT are more likely to fall behind as customers have no shortage of choices. Any manufacturer offering services that more closely align to customers’ overall business goals makes for an easy choice.

Microsoft has a number of customers already seeing transformational results, such as:

Disrupting the industry with connected aircraft services

Rolls-Royce is an industry leader in the airlines market, credited for its innovative engines-as-a-service model first introduced in the mid-1990s. Rolls-Royce offers a broad range of service solutions, including its industry-leading TotalCare? services, focused on keeping its customers’ engines generating maximum value for them. TotalCare, allows airlines to pay for the time they were able to fly their planes rather than for repairs. Under TotalCare, Rolls-Royce assumes the risk and responsibility for engine maintenance, providing engine health monitoring, overhauls and other service options. Rolls-Royce and Microsoft are now taking TotalCare digital, by collecting and aggregrating data on engine health, fuel usage and other data points using Azure IoT Suite, and uncovering new insights using Cortana Intelligence Suite. This will enable Rolls-Royce to proactively provide recommendations on aircraft efficiency and maintenance to their customers—decreasing fuel usage and flight disruptions, and saving millions of dollars per year.

Gaining visibility into remote equipment status

Rockwell Automation, a manufacturer serving the petroleum industry, wanted to gain a better view of their global petroleum supply chain, from harvesting, processing and final product delivery. The lack of insight into the chain made it difficult to help customers see potential issues, address failures proactively, or maintain appropriate levels of products across locations. By collecting sensor data from remote equipment with Azure IoT Suite, Rockwell was able to capture real-time information on equipment performance and health factors such as pressure, temperature and flow rates. They were able to drive better visibility in to possible problems and automate service actions for customers. All of this resulted in a reduction in costly downtime and kept gas deliveries on time to ensure availability at the pump.

Arming field technicians with actionable guidance

Lack of insight and unpredicted elevator failures led to costly downtime for thyssenkrupp Elevator. They wanted to better monitor and service their 1.1 million elevators installed around the globe. By connecting sensors embedded in their elevators to the Microsoft cloud, they were able to create a new service line, MAX, described as “thyssenkrupp’s game-changing service for their elevator business unit that leverages the predictive maintenance capabilities of Azure IoT.” thyssenkrupp plans to further reduce maintenance costs and elevator downtime by arming their 24,000 elevator service technicians with the ability to identify problems and triage a service call ahead of a visit. Initial field trials by thyssenkrupp have shown that a service maintenance intervention can be done up to four times faster than before by using HoloLens. Today, thyssenkrupp offers elevators as a service, adding recurring revenue while keeping people and cities moving, and making their customers happy with reduced maintenance costs.

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Rolls-Royce, Rockwell Automation and thyssenkrupp all changed their approach to service, and as a result, created new value they could deliver to their customers. The shift to service-based approaches will continue to raise the bar for product differentiation and help companies capture more business against their competitors. Leading manufacturers are joining the growing list of businesses that are engaging customers in an ongoing basis through servitization, and they are benefiting from more contract renewals for increased revenue [4].

Microsoft is helping manufacturers better serve their customers to help them compete in the new age of servitization. Learn how you can expand your services and enhance customer relationships with Dynamics 365 for Field Service, and our IoT Connected Field Service capabilities.

For more information about how Microsoft IoT can transform your business, visit www.InternetofYourThings.com.

1 Aston University Research

2 Aberdeen, State of Field Service Market

3 Aberdeen, “Evolution of Smart Service”, 2015

4 Aberdeen, “Service Revenue: Unearth an untapped stream of dollars”