Product-as-a-Service (PaaS) - a profitable, alternative business model for the manufacturing industry.

I am aware of, that the thought of not selling a product and remaining the owner sounds revolutionary in particular because we have nurtured our traditional sales channels over decades – however, - as I see it - the revolution actually “only” takes place in our heads. It is our mindset and the pressure to deliver growth and healthy, economic results, that may hinder us to use the product as a platform for delivering additional services to the customers.

Nevertheless, companies like John Deere (agriculture industry) and Rolls Royce (aircraft industry) have shown that, PaaS can improve significantly:

-???????your customer satisfaction.

-???????your growth in the value chain & economic system around your product

-???????a manufacturer's revenue with recurring revenue.

-???????making cash flow more steady and predictable.

-???????a manufacturer’s contribution to circular economy.

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How can you so start to consider seriously a Product-as-a-Service business model. Here are my Top 3 considerations:

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1.?????Go in customers shoes…..

…. and check your value chain.

How does the use of your product make the business and personal life of your customers easier? The PaaS model offers a wide variation of opportunities to deliver additional value to your customers. E.g. a subscription might guarantee certain outcomes, such as hours of uptime. It might also specify the maintenance and repair services the manufacturer will provide. ??

Check also whether you are in control of the value chain? Or do rather other players control your value chain?

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2.?????Look into Growth Drivers / Growth Providers

IoT, sensor technology, data analytics, personal mobile devices and cloud computing are PaaS enabler, that give you a much better insight into product use / customer behavior, that you can use in order to develop new services and business lines.

And these enablers do not necessarily go along with high investment. In contrast - make a calculation of e.g. all the different bonuses you pay to distributors, that pressure your margin or all the expenditure for marketing, branding, influencers…. without that you gain any better insight why customers “really” buy your product.

I have myself been pressured to pay e.g. a “marriage bonus” only because two distributors merged – sometimes it is absurd, what we seriously need to consider in order to maintain our traditional sales channel.

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3.?????Embrace the opportunity to participate in circular economy

Imagine you keep the owner of the product – would you then not tend to improve the quality of your product and ensure longer durability? And would you then not use technologies or material, that are easier to disassemble and can be re-used again?

Take also into consideration, that the need for aftermarket service extends throughout the product’s lifecycle and the revenue can actually be higher than the earnings of selling the product.

All in all you have a great opportunity to convert your business into a circular economy, thus making your cash-flow more sustainable with recurring revenue.