3 Steps to Overcome Common Obstacles for Successful Servitization

3 Steps to Overcome Common Obstacles for Successful Servitization

Transform how you innovate & thrive during disruption

Posts by Jan van Veen
Servitization, outcome-based services and product-as-a-service are hot topics. However, we see little examples in the industrial sectors. Too often, there is a gap between the theoretical framework and the real practice. Here are 3 critical steps to boost the success of your servitization journey.
You can also watch the video

Summary

We hear a lot about servitization, outcome-based services and product-as-a-service business models. However, we see little examples in the industrial sectors. Many manufacturers face serious challenges while developing and launching new service offerings:

  • Clients do not see the value, have many objections and are not ready for it
  • Lack of strategic support to invest in necessary capabilities and to develop their business model

3 of the root causes are:

  • The gap between academic terms like servitization, outcome-based services and product-as-a-service and the practice is not being closed yet
  • Poor definition of the critical business problems of clients which will be solved with the new offering
  • The impact on the manufacturer’s business is not clear yet

In this article I share some of the best practices for designing advanced offerings which will help you to overcome these challenges:

  • Build deeper and broader insights in your clients business challenges and pain points
  • Focus on specific customer segment, based on their needs
  • Approach your business models more holistic

The Problem

Just as an increasing number of manufacturing companies, you may be looking for ways to thrive during disruptive change in your industry. This is an exciting journey of enhancing your business models with digital solutions and advanced services.

Some of the major trends that make this mission critical for your future success are:

  • Digital technologies
  • Digitalisation of clients’ operation
  • New emerging business models
  • Shifts in the value chain / ecosystem

The vision behind these innovations is:

  • Develop advanced services and solutions to develop new and recurring revenue streams and increase long-term differentiation.
  • Develop better performing and more efficient predictive maintenance services.
  • Meet a broader scope of (latent) customer needs, beyond availability and condition of equipment like operational performance solutions.

Most service leaders and innovators, solution providers, academics and consultants use broad and abstract concepts to describe their vision, strategy, innovations and new offerings with container words like:

  • Servitization
  • Advanced services
  • Outcome-based services
  • Remote services

I often hear from service leaders and innovation teams that they struggle with challenges like:

  • Clients do not see the value of the new offering or solution
  • Clients see many obstacles and risks
  • Clients are not willing to pay more for the new solutions
  • Clients are not ready for the new solutions
  • Lack of support from strategic stakeholders and other functions in their organisation

In essence, all boils down to the following 3 problems:

  • The new solutions and services do not solve (new) critical business problem of the clients. The value or impact is not clear (other than potentially lower prices for the maintenance services).
  • It is not clear how these services contribute to the overall business challenges and vision of the company as a whole.
  • The service vision is too abstract for internal stakeholders to understand and endorse. Words like servitization, outcome-based services, remote services and product-as-a-service are too theoretical and do not clearly articulate a vision and strategy.

 

 

This is pretty frustrating, isn’t it?

The Solution

In this article I share critical frameworks which many service teams miss in their service innovation strategies. These are:

  • Build deeper and broader insights in your clients business challenges and pain points
  • Focus on specific customer segment, based on their needs
  • Approach your business models more holistic

Build deeper and broader insights in your clients business challenges and pain points

To be truly outside-in and customer driven, you need to have a deep insight in the challenges and problems your clients are facing in their business. Deep customer insights should:

  • Go beyond their requirements about uptime and maintenance of their assets
  • Cover a time window of 3-7 years
  • Be thought provoking eye-openers for your clients

You and your colleagues already have most information at hand. It is a matter of turning this information and knowledge into a compelling customer story, for irresistible advanced services.

You can read more about this in “Build a Strong Customer Story in 7 Steps and Launch Irresistible Advanced Services

 

Focus on specific customer segment, based on their needs

One size does not fit all. Different clients have different visions and strategies, different challenges and therefore different needs. When defining the (latent) customer needs for today and the near future, it is crucial to have some sort of segmentation of your important clients based on their (future) needs.

This segmentation will help you to develop a robust strategy which defines which customer segments you will target, with which new service offerings and which business models you will develop.

There are many ways to segment clients based on their needs, largely depending on the specific industry. I will share two generic patterns for customer segmentation which can be useful for you to take as a starting point. They are based on segmentations of innovative and successful manufacturers and service leaders.

Two often used patterns for customer segmentation are:

  • Maturity – Willingness to outsource of a business
  • Maturity – Complexity of a business

This could be a useful pattern in industries where many of your (potential) clients tend to do most functions themselves instead of outsourcing the activities (like maintenance of equipment).

Along the vertical axis you can separate segments based on the maturity of their core capabilities and processes.

For example, in the industry of metalworkers this could be:

  1. Traditional craftsmen
    The entrepreneurs personally (together with their employees) manufacture the metal products themselves, love part of the manual work and working with their machines and tools. This is their pride. Little of the activities are put into structured processes.
  2. High tech workshops
    The entrepreneurs have invested in state-of-the-art tools to improve quality, consistency and efficiency. Their main focus is still on the technical side of the profession. Probably there is more structure in the workflow and processes, predominantly organised from a technical point of view. From a more economical point of view, the structure is not efficient yet.
  3. Lean manufacturers
    The entrepreneurs have a more economic view (or hired an operations director with economic competencies) and are working on efficient processes, workflow and organisation. They follow lean-six-sigma or similar approaches to optimise human resources, capital investment and materials.
  4. Value chain optimisers
    These entrepreneurs have a broader scope and are looking to their added value in the entire value chain, partnerships, vertical integration or specialisation. They may also develop more advanced value propositions to their clients like inventory management and delivery of the components they manufacture in small packages in the production line of their clients.

This is a very brief description. You should probably also look into functions like sales, marketing, engineering, internal logistics, inventory management, tools management, financial management, human resources management etcetera. You get the picture.

Along the horizontal axis you can segment your market into clients that tend to do as much as possible themselves versus clients that outsource many functions which are not part of their core-process. Clients in the first category probably have various dedicated departments, competence centres or teams for functions like process optimization and maintenance.

 

This pattern could be useful if you have clients with different types of operations with different levels of complexity.

The vertical axis is the same as in the “Maturity – Willingness to outsource” pattern.

Along the horizontal axis you segment your market into clients that have short and simple value chains versus clients with longer and more complex value chains. For example, again in the industry of metalworkers this could be:

  1. Jobbers or workshops that fulfil specific tasks like welding, cutting, bending, drilling etcetera and that manufacture intermediate components or semi-finished products
  2. Component manufacturers which perform several tasks to manufacture components, like engine blocks for the automotive industry
  3. Product manufactures, which manufacture complex products
  4. Machine manufacturers

Whatever pattern you use with these segmentations, you now have 4 (or more) segments in a logical structure. For each segment you can:

  • Find a descriptive name
  • Further describe their specific needs
  • Define their characteristics to recognise them

For each segment you should:

  • Decide whether you want to serve them or not. Or at least define which segments have your focus
  • Develop a customer insight or customer story
  • Develop specific messages to use in your marketing, sales and service delivery
  • Develop and map specific services, offerings and delivery models
  • Develop a specific commercial approach

When you are still in the early stages of developing advanced new service offerings, it often pays to focus on one specific segment first.

    Worksheet to build your customer story

    This worksheet will help you and your teams to capture all relevant ideas and knowledge and to structure this into a compelling and strong customer insight.

    With this insight you can:

    • Validate the insight with other colleagues
    • Validate the insight with your best clients
    • Specificy a customer research
    • Brief your marketing teams to prepare compelling marketing and sales messages

     

    Approach your business models more holistic

    As soon as your advanced services go beyond the maintenance and the condition of the equipment your company manufactures and sells, you will be reconfiguring or extending the business model of your company as a whole. This means, you need to have a strategic dialogue and innovation process with strategic stakeholders.

    To make this a fruitful and coherent process, you should avoid a discussion about product versus services. It starts with:

    • A shared concern about developments in the industry
    • The threats and opportunities for your business as a whole
    • A vision about the future state of your entire business and what needs to change to achieve this

    This will result in a few strategic priorities, one of which (hopefully) is services innovation.

    Now I would like two share two useful frameworks that help to take the development of the business models to a more holistic – company wide – level:

    • Generic types of business models for products and services
    • Types of service value propositions

    Note that these frameworks are not limited to services or products alone. They address the overall value proposition, which can be a combination of products, software, data and services.

    In the matrix above, you can describe changes of your business model along two aspects.

    Along the vertical axis, you differentiate value propositions:

    • From stand-alone offerings (like single products or services)
    • To comprehensive and integrative solutions which cover a broad scope of needs and solutions

    Along the horizontal axis, you differentiate highly standardised offerings from highly customised offerings.

    This results in 4 types of business models, which I will further describe with document printers as an example: 

    • Product Business Model
      • Only printers, probably including service contracts
      • A wide portfolio of different models to choose from
      • Additional equipment for folding documents, putting them in envelopes etcetera
      • Getting the printer for free and paying for the ink only
      • Predictive and remote maintenance
      • Cloud storage solutions and Microsoft Office 365 still fit in this model, even though you pay a small fee per month
      • Retail banking 
    • Project Business Model
      • An assessment of the entire business, to define how many printers, which type and where
      • Connecting the printers to the network, configuring security systems
      • Designing, building and commissioning an entire print room for high volume printing and mailing of documents
      • Designing more effective and efficient processes
    • Solution Business Model
      • Taking over the entire print room from clients, which could still be at your clients’ locations
      • Connecting the Salary Administration system to the print room to print all salary slips at the end of the month, put them in envelopes, and send them to the postal services
    • Platform Business Model
      In the printer industry the example may become a bit theoretical, anyway.
      • An online platform where clients can upload templates, designs and lists of destinations and pay for the job. The platform will split this in smaller jobs for various connected and certified print facilities across the world and process the financial transaction. (I am not sure if this kind of service ever existed).
      • In the Additive Manufacturing sector, we do see initiatives in this direction to allow manufactures to print metal spare parts anywhere in the world close to the customer
      • Other examples of today are Apples Appstore, iTunes, Spotify, Amazon, Uber and Airbnb.

     

    This framework will help you to better articulate the kind of value and related business models you are aiming for.

    In this framework you can define your value proposition along the horizonal axis based on the scope of the services. There are several ways to add value to your clients (deliver outcome if you like). I will use the commercial truck industry as an example:

    • Better products
      For example, improve fuel efficiency of the truck and engines.
    • Better availability
      Your services can maintain and improve the availability and condition of the equipment. This could be quite advanced with real time data, smart diagnostics predictive analytics or supported self-help offerings using AR.
      For example, predictive maintenance to improve availability (and maybe also improve fuel consumption).
    • Better application or use
      Your services can drive the output or performance of the equipment you delivered to clients by improving the use, configurations, settings and ongoing optimization tactics. These services can be onetime projects or ongoing support.
      For example: Reduce fuel consumption by improving the driving behaviour of truck drivers.
    • Better processes
      Your services can also concentrate on the overall processes and operation.
      For example: Reduce fuel consumption (and other cost) by improving the route planning, combining jobs, choosing the right vehicles for each job etcetera.

    Along the vertical axis you can separate your offerings in

    • Effort based offerings
      You promise to do certain activities for which your clients pays, regardless of the result of the activities. It remains the responsibility and risk of your clients to manage the overall performance and take the right decisions.
    • Performance based offerings
      You promise your clients a certain result and get a fee depending on this result. In the example of commercial trucks, this could be:
      • Guaranteed uptime and availability of the truck of 99% and penalties if the performance is below 99%
      • A fee per percent-point of reduction of fuel consumption
      • A fee per transportation job

     

      Assess your Innovation power

      This Scorecard How to Navigate Disruption will help you and your teams to assess the capabilities and practices of your business to innovate beyond business-as-usual and navigate disruption in your industry.

       

        How to use these frameworks?

        Map your current business model(s) in one or more of the matrixes described above. Also map a few scenarios for the envisioned business model(s).

        This will help you and your stakeholders to have a more structured and neutral discussion about the major trends in the market, technology and competitive landscape as well as in what direction your value propositions and business models should develop. Any choice will have an impact on engineering, manufacturing, software development, marketing & sales and services.

         

        What is at stake?

        If manufactures cannot successfully adjust their business model, they run a serious risk of falling behind existing and new competitors.

        Clients are developing more and more digital capabilities in all their functions. As a result, they will have other needs for services and solutions.

        This is an important opportunity for manufacturers to grow their relevance for their clients and grow their business.

        But it is also a unique opportunity for digital native service providers and system integrators, which offer remarkable and complete solutions to the (new) problems of your clients. They are your new competitors.

         

        Benefits

        If you use these frameworks and embed them in your service vision, your innovation strategy as well as in your dialogue with strategic stakeholders, you can develop the:

        • Shared concern for the business as a whole
        • The strategic priorities for the business as a whole, one of which will be services
        • Shared vision for the business as a whole, which includes services
        • A specific shared concern for the services business unity
        • The strategic priorities for the services business unit
        • A shared vision for the services business unit

         

         

        Rome was not built in one day

         

         

        It is an iterative journey. It takes time and work. The frameworks above will help you to facilitate and structure this journey.

        Manufacturers and service leaders with successful advanced services have used these kinds of frameworks for a long time and still are. This allowed them to achieve quick, continuous and more radical innovations and thrive in disruptive times.

         

        Conclusion

        For quite a few service leaders, the journey of service innovation is a tough one. Their clients do not see the value of new advanced offerings, they do not want to pay for them, and internal stakeholders do not provide the necessary support.

        Some of the key reasons are: 

        • The critical business issues of the clients are not clear and are not addressed with the new offerings
        • The business value of the new offerings and business models are not clear
        • The envisioned business model(s) are not clearly described

         

        Litmus proof

        I would like to challenge you with the following questions.

        Can you describe your services vision and strategy in concrete words? Without using words like:

        • Advanced services
        • Servitization
        • Product-as-a-Service
        • Remote services
        • AR, AI, IoT

        Does your services vision start with a description of:

        • Major trends in the industry of your clients
        • How challenges and priorities of your clients are changing
        • How that will change their needs

         

        Recommendation

        If you want to be leading the transition of your business and industry, I would recommend the following:

        • Define a clear shared concern with your strategic stakeholders:
        • Together with your strategic stakeholders, consider various options for developing the business model(s) and assess how these business models would help your business to thrive.
        • Agree on the innovation strategy and next steps.
        • Iterate!

         

        Learn more from like-minded peers

        Is disruption and radical innovation one of your challenges?

        You are not alone.
        It is a hot topics in the moreMomentum Community as well.

        Don't re-invent the wheel.
        Lead the transformation in your business and industry.

        You can also watch the video

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        Thrive during disruptive change

        OUR VISION and MISSION

        Many manufacturers struggle to escape from business-as-usual. They fall behind competition and lose from new entrants in their industries. This is pretty frustrating.

        moreMomentum has a methodology that helps manufacturers to transform the way they innovate and change so they will thrive during disruptive change.

        Accelerate digital service innovation – during downturn or crisis

        Accelerate digital service innovation – during downturn or crisis

        Transform how you innovate & thrive during disruption

        Posts by Jan van Veen
        The biggest mistake we can make is being stuck in business-as-usual and operational thinking. The big opportunity is to fast track digital innovation.
        You can also watch the video

        Summary

        In the last weeks, I spoke with many service leaders in the moreMomentum Services Community and others about the impact of Covid-19 on their service business.

        We recognise three categories of service business. Those who are;

        1. Still in fire-fighting mode, trying to mitigate the direct impact of Covid-19 in a reactive and ad-hoc way
        2. Establishing new routines to cope with the ongoing impact of Covid-19 and new service delivery models with digital tools
        3. Moving on to a more strategic view, looking at what the mid-term and longer-term impact will be on their industry, clients, value offerings and business models

        Together with the service leaders who are moving to a more strategic view (category 3 above), we believe; 

        • the biggest mistake we can make is being stuck in business-as-usual and operational thinking
        • the big opportunity is to fast track digital services innovation now and thrive during the accelerating digital transformation 

         

        Why accelerate digital service innovation now, during a crisis?

        As always when things get rough, the gap between the leaders/winners and laggards/losers increases. And with Covid-19 and potentially an upcoming economic downturn, it will be rough. There is more to lose and more to win. 

        innovation during crisis and economic recession

        What are the stakes;

        • As we move to more remote services and predictive maintenance, it becomes critical to better articulate the value and monetise these services to avoid a drop in revenue. This will not only impact your operating or delivery model. It will also require a shift in your;
          • Value proposition
          • Earnings model
          • Business model
          • Sales model
        • The customer needs and expectations of your clients will change. As they become more digital, they will change the way they optimise the performance of their operations and processes
        • Competition from outside your industry will increase. Digital native system integrators and IT companies will provide predictive analytics and digital performance solutions to your client too

        It is exciting to have these opportunities. And it can be pretty frustrating to be slow and stuck in business-as-usual and see others reaping the benefits of these opportunities.

        Here is the real problem

         

        During an economic downturn, too many companies go into a survival mode and wait for better times. The focus is on reducing cost and delaying investments. For sure, rigorous cash flow management is important during a crisis. 

        But;

        • Reducing cost is not the only way to survive an economic recession. There are also opportunities to improve revenues
        • You do not want to suffer from the recession after the recession. Good innovation is not a matter of investing more and increasing risks.  On the contrary!!

        The real problem is that old common practices to innovate and manage your business do not work anymore. These were perfectly fine in a stable and predictive world.

        Today, our world is rapidly changing and unpredictable. Which is why the old common practices to innovate and manage your business lead to 5 common mistakes which hold your teams and organisation back.

        The real problem is that old common practices to innovate and manage your organisation were perfectly fine a stable and predictive world. But in a rapidly changing and unpredictable world, they do not work anymore.
        They lead to 5 common mistakes which hold your teams and organisation back.

         

        5 common mistakes from old practices to innovate

         

         

         

        The good news is

        It is a choice to be a leader or a laggard. And you are not alone!

        Leading innovators in all industries have transformed the way they innovate and manage their business. These are not the companies with the largest innovation/R&D budgets, on the contrary. Their success comes from their effective and efficient innovation practices and strategies.

        We have developed the Momentum Flywheel, based on the habits and practices of these leading innovators in various industries.

        It is a choice to be a leader or laggard. And you are not alone!

        Momentum Flywheel

         

        Do you want to;

        • Gain knowledge about these best practices and frameworks?
        • Translate this to relevant and valuable and actionable strategies?
        • Increase momentum for execution?
        • Close the “knowing-doing-gap”?
        • Without reinventing the wheel?

        We at moreMomentum are here to work with you and your like-minded peers to share and develop best practices on all elements of this Momentum Flywheel. 

        In the moreMomentum Services Community, service leaders and innovators are dedicated to drive the shift to (digital) services business models for the business and to thrive in today’s rapidly transforming industries. Together, they leverage their collective knowledge and experience to boost their businesses and their professional development. 

        moreMomentum Services Community Products

        A few examples of activities in the moreMomentum Community are;

         

        The benefits of improving your innovation capabilities now

        Today, while we are still coping with Covid-19, a potential economic recession and accelerating market disruption, it is mission-critical to adapt and innovate beyond-business-as-usual to survive and thrive.

        In general, you will see, just as the leading innovators,

        • A wealth of opportunities
        • Change that energises your teams
        • And good breakthrough innovations

        Without jeopardising your business. And without high investments.

        More specifically, for 2020 and 2021, you will;

        • Better adapt to the mid-term impact of Covid-19, which will last longer than a few months
        • Secure your revenue stream, while shifting to more remote services
        • Increase your value for clients for the mid-term and longer-term
        • Grow your revenue and margins
        • Increase long term customer loyalty
        • Lead the accelerating digital transformation and growth
        • Be amongst the leading winners of your industry


        Leaving others wondering how you did it!


        So, you are invited to join the leaders.

        Or book a discovery call

         

        Learn more from like-minded peers

        Is disruption and radical innovation one of your challenges?

        You are not alone.
        It is a hot topics in the moreMomentum Community as well.

        Don't re-invent the wheel.
        Lead the transformation in your business and industry.

        You can also watch the video

        Related Articles

        Build a Strong Customer Story in 7 Steps

        Many service innovations fail because they do not have a substantial and desired impact for clients. Often, customer insights and value propositions are limited to a description of features and benefits, without considering the outcomes clients desire.

        Diversify your innovation to boost growth

        Leading manufacturers cover a scope of innovations, searching for opportunities to improve the value they promise their clients, how they deliver the value and how they capture part of the value.

        Upcoming events

        Stay up to date

        Receive the latest insights and updates from our articles, interviews with your peers and ongoing research into best practices.

        If you liked this article, you may also like the following articles, on the same topic.

        Why it is important to monetise services

        Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to generate and capture the new value.

        Solve Bigger Customer Problems to Monetise Services and Data

        A common mistake is to solve small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

        Better Articulate the Value to Monetise Services and Data

        Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

        How to have all employees discover the future

        Leading companies have a strong habit of continuously discovering new opportunities and challenges.All employees discover the future with an open mind

        Case Study: Creating a revolution

        Jan van Veen interviews a VP of Service Marketing of a global manufacturer of mining and oil&gas equipment, that has grown through advanced services.

        How to Empower Employees to Take Ownership and Execute Innovation and Change

        Leading and innovative companies have decentralised their decision-making to empower employees to take ownership. They innovate better and are less vulnerable for threats.

        How Dialogue Builds Confidence for Innovation and Change

        Winning and dynamic manufacturers empower employees to drive continuous innovation and change with an open and forward-looking dialogue.

        Panel discussion: How to transform your field service into a profit centre?

        Success depends on the level of collaboration and support from all stakeholders.The name of the game is establishing a shared concern and goal first.

        Panel discussion: Drive service revenue and growth with personalised services

        New technologies offer great opportunities to improve customer experience and perceived value. When done in a differentiating way, this can drive revenue.

        Case Study: How Engineers transformed themselves into Brand Ambassadors at Mars Drinks UK

        How Ashly Weller at Mars Drinks Services successfully enabled their service engineers to drive and sustain change and become proud brand ambassadors.

        Stay up to date

        Receive the latest insights and updates from our articles, interviews with your peers and ongoing research into best practices.

        Thrive during disruptive change

        OUR VISION and MISSION

        Many manufacturers struggle to escape from business-as-usual. They fall behind competition and lose from new entrants in their industries. This is pretty frustrating.

        moreMomentum has a methodology that helps manufacturers to transform the way they innovate and change so they will thrive during disruptive change.

        Build a Strong Customer Story in 7 Steps

        Build a Strong Customer Story in 7 Steps

        Transform how you innovate & thrive during disruption

        Posts by Jan van Veen
        Many service innovations fail because they do not have a substantial and desired impact for clients. Often, customer insights and value propositions are limited to a description of features and benefits, without considering the outcomes clients desire.
        You can also watch the video

        Summary

        The best practice is to have a compelling customer story and vision as a starting point. This customer story illustrates the challenges, common mistakes and best ways clients should solve these mistakes. Based on this insight, you can develop irresistible new advances services and compelling marketing and sales messages, even if you have limited resources.

        Do you still see that many ideas and new advanced services do not hit the nail on the head?

        • The pain points your teams discuss with their clients do not hit their nerves
        • Your clients are not eager to use the new services
        • Let alone that they are willing to pay extra for these services

         Even though you already did;

        • Voice of the customer projects
        • Customer journey mapping
        • Customer feedback like NPS
        • Develop a set of features and benefits, for example by using the value proposition canvas

         

        The good news is

         

        You are not alone.
        And it does not have to be like this.

         In this article, I describe 7 practical steps to build a compelling customer story. These are the best practices applied by leading manufacturers to successfully develop and commercialise irresistible advanced services.

        Here is the problem

        Your clients do not recognise which of their essential problems you are solving or how your services are offering a better solution. They do not see the positive impact they will get from your offerings.

         And often, this problem is a bigger game than just higher uptime of equipment.

        The Solution

        You and your colleagues already have most information at hand. It is a matter of turning this information and knowledge into a compelling customer story, for irresistible advanced services.

        The elements of a customer story

        Customer Story and Insights - Structure

        Note: problems can be about threats and risk to overcome as well as limitations to pursue new opportunities.

        For every customer segment, you should be able to describe the bigger picture;

        • The relevant trends which have an impact on the business and lives of your clients.
        • The ultimate fear for your clients, caused by 3-4 dominant problems.
        • 3-7 common mistakes your clients make, which cause the 3-4 dominant problems
        • Related to each common mistake, your vision or the best practices to solve this common mistake
        • The ultimate prise your clients will get, with 3-4 benefits

        You can use this customer story in many ways;

        • A pitch to your CEO or your client of 1 minute
        • A presentation of 5-10 minutes
        • 7-12 articles of 700 words each
        • Source of insights to develop new advanced services
        • Source for the marketing team to develop marketing and sales messages and marketing collateral

        Be aware of the common pitfall

        This customer story is all about your clients, not your company, products and services.

        I have done quite a few workshops and masterclasses to develop a customer story. In the beginning of these workshops, pretty much every team struggles to focus on the customer. The pitfall is to be stuck in;

        • Use of your equipment
        • Maintenance of your equipment
        • Performance of your equipment
        • Performance of your services

        Although these insights are useful for many improvement processes and initiatives, they do not contribute to developing and commercialising irresistible advanced services.

        On the contrary, these insights increase biases and keep your innovations being stuck in business-as-usual.

        Getting started

        The following 7 steps take you through each element of the customer story.

        Ideally, you form a small team to work on the 7 steps.

        Step 1: Define the niche/segment

        A customer insight or story should always be specific for a group of clients with the same characteristics that are relevant to the same challenges and needs they have.

        This could be a particular customer segment or your ideal client.

         At first, it can be challenging to define the specific customer segment. This is not a problem. In that case, just move on to the next steps. In step 3 and 4, you will notice that a lot of the customer problems are not relevant to all clients and how you could segment your clients into a few groups. By then, you can jump back to step 1 and iterate.

        Worksheet to build your customer story

        This worksheet will help you and your teams to capture all relevant ideas and knowledge and to structure this into a compelling and strong customer insight.

        With this insight you can:

        • Validate the insight with other colleagues
        • Validate the insight with your best clients
        • Specificy a customer research
        • Brief your marketing teams to prepare compelling marketing and sales messages

         

        Step 2: List 100 customer problems

        Having this customer segment in mind, start listing all the business problems you know or think they encounter or will encounter. If you do not have a clear definition and choice of a customer segment yet, just start with 1 or 2 relevant clients in mind.

        The objective is to build a long list of problems, at least 100. Use the following tactics to keep the flow of new problems going and to ensure you have a broad and open perspective;

        • Do not evaluate yet. Just write the ideas. Consider it a brainstorming practice.
        • Build on problems you have already listed and think of 4 directions to reframe (see the picture below)

        Reframing customer problems

        • Consider different stakeholders in the business, including the CEO and the field engineer

        Broader scope for customer insights

        • Address challenges and problems your clients will or may encounter in the next 3-7 years too
        • Also consider external stakeholders of your clients, like their clients, other vendors, partners and distributors
        • And again, avoid topics which are related to your products, services and organisation.

        Step 3: Cluster to 7-10 main problems

        Now start grouping all similar or related problems. You can do this in a spreadsheet. If you are doing this in a workshop with several people, you may want to work with post-it notes.

        You will probably see that there are different ways of clustering. That is perfectly fine. See what makes the most sense.

        Now, it is also an excellent time to evaluate if the customer segment you chose, still makes sense. Or, in case you did not select a particular segment, see if you can recognise some sort of segmentation. If so, you can iterate the process so far and start with step 1 again.

        Step 4: Further group to 3-4 dominant problems

        7 to 10 problems is a lot to memorise and to help to build and communicate a clear message. The magical number is 3. 4 is okay too. If you have more than 4, you will notice that colleagues and clients will not memorise all of them after a conversation.

        So, the next step is to further reduce the main problems into 3 or 4 dominant problems.

        Summarise these 3-4 dominant problems into one single ultimate fear, like “adapt or die” or “hard work for less financial results, with no perspective for better times”.

        Step 5: Define the 3-7 common mistakes

        Next step is to identify the 3-7 common mistakes you see your clients make that prevent them from solving the 3-4 dominant problems. These common mistakes are “wrong” thinking, actions and practices of your clients.

        For example, if one of the dominant problems is “too high operational cost”, one of the common mistakes related to this dominant problem could be that your clients have a “lack of understanding of their cost drivers and cost structure”.

        You may find some inspiration in the list of 100+ customer problems you identified in step 1.

        Step 6: Define the 3-7 solutions for your clients

        Now define your vision of how your clients should solve each of the 3-7 common mistakes. This is not about your solution or offering yet; you will cover that in one of the next steps.

        This is a relatively easy step. In essence, each solution is the opposite of a mistake. Further building on the example in the previous step, your view on the clients’ solution could be that they should “establish cost management practices”. They should gather and analyse data and step by step build a structure of their costs and cost drivers so they can monitor and manage their costs.

        Step 7: Define the benefits and outcome for your clients

        Finally, describe the 3-4 key benefits and the ultimate outcome for your clients if they address the 3-7 common mistakes and apply the 3-7 customer solutions you have specified.

        The 3-4 benefits are the opposite of the 3-4 dominant problems, maybe structured slightly different. And the ultimate outcome is the opposite of the ultimate fear.

        Next steps after this

        At this point, you already have a tremendously valuable insight, just using the information and knowledge you already have.

        Next steps to make this insight and your customer story rock-solid, are

        • Get feedback and additional ideas from
          • Colleagues in various functions (sales, marketing, R&D, other countries)
          • Partners, vendors
          • Distributor or dealers
        • Process the new information and update your customer story
        • Build variations of the customer story for the most important customer segments
        • Get feedback from your clients through open and in-depth conversations
        • At some point, you may want to initiate a customer research based on the insights in your customer story to validate and expand the insights
        • Adjust the wording and messaging to make your customer story more compelling and attractive for external and internal use.

        The benefit

        Now you have a robust and in-depth insight into your clients’ needs for today and the future which offers you an “unfair” competitive advantage. You can now;

        • Improve existing service offerings
        • Boost the innovation of advanced service offerings
        • Improve your marketing and sales messages and marketing collateral
        • Advance the conversations all customer-facing colleagues have with their clients
        • Improve your Customer Success practices

        Conclusion

        You are sitting on gold.

        You and your colleagues already have a massive amount of information and knowledge about your clients. You can turn that into actionable and compelling customer insights and a customer story to boost;

        • Development of your services
        • Engagement with your clients
        • Commercial success of your service business

        You can build a substantial competitive advantage, even if you do not have the budget and resources for intensive customer and market research.

        All this requires is to;

        Be open to new perspectives

        It is not about convincing your clients of the value of your services, but about letting them convince you what they need.

        Final question for reflection

        Which 3 common mistakes do you make when developing and using customer insights for service innovation?

         

         

        Learn more from like-minded peers

        Is disruption and radical innovation one of your challenges?

        You are not alone.
        It is a hot topics in the moreMomentum Community as well.

        Don't re-invent the wheel.
        Lead the transformation in your business and industry.

        You can also watch the video

        Related Articles

        Build a Strong Customer Story in 7 Steps

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        Diversify your innovation to boost growth

        Leading manufacturers cover a scope of innovations, searching for opportunities to improve the value they promise their clients, how they deliver the value and how they capture part of the value.

        Upcoming events

        Stay up to date

        Receive the latest insights and updates from our articles, interviews with your peers and ongoing research into best practices.

        If you liked this article, you may also like the following articles, on the same topic.

        Why it is important to monetise services

        Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to generate and capture the new value.

        Solve Bigger Customer Problems to Monetise Services and Data

        A common mistake is to solve small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

        Better Articulate the Value to Monetise Services and Data

        Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

        How to have all employees discover the future

        Leading companies have a strong habit of continuously discovering new opportunities and challenges.All employees discover the future with an open mind

        Case Study: Creating a revolution

        Jan van Veen interviews a VP of Service Marketing of a global manufacturer of mining and oil&gas equipment, that has grown through advanced services.

        How to Empower Employees to Take Ownership and Execute Innovation and Change

        Leading and innovative companies have decentralised their decision-making to empower employees to take ownership. They innovate better and are less vulnerable for threats.

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        Panel discussion: How to transform your field service into a profit centre?

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        Stay up to date

        Receive the latest insights and updates from our articles, interviews with your peers and ongoing research into best practices.

        Thrive during disruptive change

        OUR VISION and MISSION

        Many manufacturers struggle to escape from business-as-usual. They fall behind competition and lose from new entrants in their industries. This is pretty frustrating.

        moreMomentum has a methodology that helps manufacturers to transform the way they innovate and change so they will thrive during disruptive change.

        Build Your Advanced Service Sales Model

        Build Your Advanced Service Sales Model

        Transform how you innovate & thrive during disruption

        Posts by Jan van Veen
        Common transactional sales models do not work for advanced services and solutions with a recurring revenue model. Build your advanced sales model.
        You can also watch the video

        Summary

        Many manufacturers struggle to commercialise their new and advanced services. Selling advanced services is not only challenging for manufacturers, but also for their clients.

        Clients are increasingly focussed on outcome and results. Traditional and transactional sales models do not work for advanced services.

        Why do you need to innovate your sales model?

        Commercialising new and more advanced service offerings – like predictive maintenance, operational excellence and consultancy services – is a hot topic amongst service leaders of manufacturing companies. It is often discussed during the meetings of the moreMomentum Community and the Field Service News Think Tank.

        Many manufacturers struggle to effectively commercialise their new, advanced services. Clients seem to be not interested, do not want to pay for the new services and are not buying them. Maybe a few early adopters do engage, but further growth stagnates.

        The result is that these manufacturers;

        • Miss important opportunities to increase their value for clients and for growth
        • Fail to innovate their services, their value proposition and ultimately their business model
        • Lose the trust and engagement of stakeholders and employees for further service innovation

        Do you recognise this in your business?

        The Problem: Transactional and product-oriented sales models do not work for advanced services

        Often, I see discussions and interventions focus on sales skills, product versus service sales and mindset of the salespeople. However, the problem and solution lays way beyond the skills and mindset of the salespeople.

        One of the key problems is that manufacturers (and actually many traditional service companies) have a rather transactional and product/service-oriented sales model. The main focus is which products and services to sell to clients, that is; generating leads, converting them into sales opportunities and getting the contract. After this, they sell a service contract and the client is left alone. Sales teams re-engage with their clients once there is a new sales opportunity, or it is time to renew the contract.

        I see manufacturers trying to sell their new service offering with many arguments about the great features and benefits. Not recognising that it may be quite a leap jump for their clients to engage with this new offering.

        Advanced Sales Model - GapClients need to overcome several challenges and obstacles before they engage with the new advanced services:

        • Which problem does it actually solve?
        • How big is the potential improvement from using these new services?
        • Will this service really help? What are the alternatives?
        • Are you the most credible provider of the service?
        • Can you deliver?
        • What else needs to change? At what cost? Is that feasible?
        • What do other companies do?

        Solution: Advance your service sales model

        If you recognise this problem, then the following sales model can help you to increase the commercial success of your new advanced service offerings and upcoming service innovations.

        The Principle

        The core principle of this sales model is building and maintaining an ongoing partnership with your clients. The main focus is “which (other) customer problems to solve and how” instead of “which products and services to sell to clients”.

        The key concepts of the Advanced Service Sales Model are;

        1. Provide your clients a journey, from an easy start all the way to a full fledge contract
        2. Offer a broad portfolio of solutions to critical problems or “jobs-to-do” of your clients
        3. Have a strong impact on your clients results and make this impact visible for your clients

        The Advanced Service Sales Model

        The Advanced Service Sales Model is based on the sales practices of companies with recurring revenue business models. For them, the first contract with a client hardly generates revenue but is the start of a growth-journey. Examples are providers of subscription-based software solutions (SaaS) and also Caterpillar with its data-driven solutions to help their clients achieve operational excellence.

         

        With this sales model you will have a continuous and iterative process of building insights leading to the next level commitment of your client (left circle of the diagram) and building customer success (at the right circle of the diagram).

        In this article, I will further elaborate on the 4 most important differences compared to common transactional sales models

        • Provoke and educate your clients
        • Offer your clients a transcending ladder of offerings
        • Drive customer success
        • Account management for growth

        Provoke & Educate

        Today are exciting times to survive and thrive with the many (disruptive) changes and big challenges. Not only for you as a manufacturer, but also for your clients. New trends like social media, big data, connectivity, cloud, artificial intelligence and augmenter reality will change the way your clients will work. They have to advance their processes, people, assets and IT in all of their functions like operations, sales and innovation.

        The opportunity here is to help your clients to change their perspectives (provoke) on these trends, their strengths, weaknesses, opportunities and threats and re-define their priorities.

        You can do this with provoking content and insights like;

        • Analyst reports about trends and challenges
        • Research reports about best practices
        • Benchmark reports

        Once your clients have become more aware of these challenges and opportunities, they will need to develop their insights in various strategies and types of solutions. Now you have the opportunity to be your clients’ main source of these insights (educate). Be aware that this is NOT about your products, services or solutions but about your vision on how your clients should solve the challenges and pursue the opportunities.

        You can do this with insightful content like;

        • Comparison of alternative strategies
        • Expert guides
        • Case study articles
        • Practical tools for clients to solve a small portion of their challenge

        You can provide the provocative and educational insights via;

        • Reports
        • Articles on your website, social media and other media
        • Workshops and seminars with (potential) clients
        • Keynote presentations at industry conferences
        • Sharing your insights and vision in any conversation with the right stakeholders

        Two examples you should check out are;

        • Zuora
          They create cloud-based software on a subscription basis that enables any company in any industry to successfully launch, manage, and transform into a subscription business.
          Their website is quite insightful.
          Some time ago I found a sales slide deck of them, which you can view on this PowerPoint file
        • Caterpillar
          Read on their website about their ongoing endeavour to help their clients achieve operational excellence on

        SCORECARD ON MONETISING SERVICES AND DATA

        This Scorecard will help you and your teams to assess your current performance in Monetising Services and Data and identify your important areas for improvement.

        Transcending Offerings Ladders

        The more innovative your new, advanced services are for you and your clients, the more challenges there will be for your client to fully adapt and embrace them.

        Advanced Sales Model - Stepping Stones

        You will want to make the first and each following step for your clients to engage to the next level manageable, by providing them a journey. From the first step to the full-fledge solution you will help your clients to step-by-step;

        • Become more aware of the challenges and opportunities
        • Better understand the solution and build a vision
        • Assess the potential and priority
        • Appreciate the type of service you are recommending
        • Building trust in your capability to deliver
        • Building trust in their own capability to adapt

        The journey you offer to your clients could for example consist of the following steps;

        1. Public workshop
        2. Quick assessment / benchmark
        3. Deeper assessment / benchmark
        4. Strategy workshop for decision makers
        5. Education workshop for stakeholders
        6. Pilot with limited scope

        Caterpillar offers their clients the following steps to start using more data from their equipment;

        1. Data will be captured by default
        2. Free access to the data, providing some, but limited value to clients
        3. Access to a basic dashboard of current status of assets
        4. Dashboard extended with trends
        5. Dashboard with alerts

        Customer success

        More than ever before, clients expect a positive impact on their success from the equipment, services and solutions they buy. For many solutions, clients can fairly easy stop using your service and switch to another provider if the impact is not visible.

        Regardless of the product or service you offer is, it becomes increasingly critical to drive customer success. This basically involves two aspects;

        • Enrich your offerings with elements which enable your clients to drive their success. This could be elements like;
          • Easy onboarding
          • Training of user
          • User support to remove obstacles to use
          • Change management
        • Ensure the impact of your offerings is clearly visible to your clients, for example by;
          • Feedback from users
          • Performance reports
          • Performance dashboards

        Account Management for Growth

        The ongoing flow through the two cycles needs to be managed together with your client to continuously take your partnership to the next level and maintain a solid basis.

        This requires to continuously;

        • Review challenges and pain points of your clients
        • Review and monitor results and progress of your clients
        • Assess new or other challenges and opportunities you can solve for your clients
        • Decide on the next commercial step in your new sales model

        Advanced Service Sales Model - Growth strategies

        Basically, there are 4 different and concurrent strategies to grow your position with your clients;

        • Renewal of the existing contracts.
          This can be an automatic renewal for the next period, but also an opportunity to renew for a longer contract period and in that way to secure a higher retention rate.
        • Reselling the same offering to other entities of your client’s organisation, for example other divisions or regional operating units.
          This requires building new relationships in your client’s organisation. This will not require a lot of provocation and education of your new contacts.
        • Upsell new offerings to your existing contacts. It can be the next stepping stone in your client’s journey as well as a solution to a complete new other type of problem of your client.
          Probably there will be little provocation involved, as it is the natural next step of the journey you are offering, but it will require additional education.
        • Cross-selling new offerings to new stakeholders in your client’s organisation. This can involve starting from scratch with building awareness through provocation and education with new contacts in your client’s organisation.

        Each of these four strategies require different processes, content, skills and will probably involve different teams in your organisation.

        Where to start

        It may seem quit daunting to develop your sales model in this direction.

        But actually, it is not that difficult, as long as you see it as a step-by-step journey.

        I recommend the following action plan;

        1. Review the customer problem your new service will solve.
          Make sure it includes the critical obstacles for your clients to adapt your new service
        2. Enrich your offering to a full and remarkable solution for this problem, so that it addresses all sub-problems and obstacles for your clients
        3. Decompose your offering into sub-offerings or steppingstones which all provide a visible value to a specific sub-problem
        4. Describe the journey for your clients by putting the sub-offerings in a logical order
        5. Make a brochure for each sub-offering, including a price
        6. Start selling the first step to your clients

        It may seem quit daunting to develop your sales model in this direction.

        To support you in this journey;

        Conclusion

        As you start offering more advanced solutions and services to your clients, you will need to establish advanced sales models as well. These new sales models are focussed on better understanding and solving more customer problems (instead of selling more products and services to your clients).

        This involves an ongoing cycle of provoking and educating your clients, driving customer success and making your impact very visible to your client, so they are ready to take the next step.

        This requires;

        • A rich portfolio of offerings which offer you client an easy journey with several steppingstones
        • Adequate content to provoke and educate your clients
        • New skills, processes and tools
        • New teams for service marketing, account management, onboarding, customer success etcetera

        Manufactures who develop their sales models this way see;

        • Higher revenues from advanced services
        • Easier adoption of their new services and solutions by their clients
        • Higher customer satisfaction and loyalty
        • Higher customer retention and revenue per client

        Learn more from like-minded peers

        Is disruption and radical innovation one of your challenges?

        You are not alone.
        It is a hot topics in the moreMomentum Community as well.

        Don't re-invent the wheel.
        Lead the transformation in your business and industry.

        You can also watch the video

        Related Articles

        Build a Strong Customer Story in 7 Steps

        Many service innovations fail because they do not have a substantial and desired impact for clients. Often, customer insights and value propositions are limited to a description of features and benefits, without considering the outcomes clients desire.

        Diversify your innovation to boost growth

        Leading manufacturers cover a scope of innovations, searching for opportunities to improve the value they promise their clients, how they deliver the value and how they capture part of the value.

        Upcoming events

        Stay up to date

        Receive the latest insights and updates from our articles, interviews with your peers and ongoing research into best practices.

        If you liked this article, you may also like the following articles, on the same topic.

        Why it is important to monetise services

        Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to generate and capture the new value.

        Solve Bigger Customer Problems to Monetise Services and Data

        A common mistake is to solve small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

        Better Articulate the Value to Monetise Services and Data

        Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

        Panel discussion: How to transform your field service into a profit centre?

        Success depends on the level of collaboration and support from all stakeholders.The name of the game is establishing a shared concern and goal first.

        Panel discussion: Drive service revenue and growth with personalised services

        New technologies offer great opportunities to improve customer experience and perceived value. When done in a differentiating way, this can drive revenue.

        Remove Obstacles for your Clients to use your New Offerings and Monetise your Services and Data

        If your clients fear or experience too many obstacles to use your new offerings, they will not see your offering as a viable and valuable solution. This will block your commercial success.

        Build Internal Momentum to Monetise Services and Data

        Launching new advanced services is innovating your business model. This requires internal momentum to monetise these services and data-driven solutions.

        Build Your Advanced Service Sales Model

        Common transactional sales models do not work for advanced services and solutions with a recurring revenue model. Build your advanced sales model.

        Stay up to date

        Receive the latest insights and updates from our articles, interviews with your peers and ongoing research into best practices.

        Thrive during disruptive change

        OUR VISION and MISSION

        Many manufacturers struggle to escape from business-as-usual. They fall behind competition and lose from new entrants in their industries. This is pretty frustrating.

        moreMomentum has a methodology that helps manufacturers to transform the way they innovate and change so they will thrive during disruptive change.

        Diversify your innovation to boost growth

        Diversify your innovation to boost growth

        Transform how you innovate & thrive during disruption

        Posts by Jan van Veen
        Leading manufacturers cover a scope of innovations, searching for opportunities to improve the value they promise their clients, how they deliver the value and how they capture part of the value.
        You can also watch the video

        Summary

        Manufacturers with a narrow innovation focus miss many opportunities, see more innovations fail, often see that competitors do exactly the same thing and struggle to turn their innovations into growing revenues and margins.

        Leading and successful manufacturers cover a much wider scope of innovations than those that stagnate and fall behind competition. They actively search for opportunities to improve the value they promise their clients, how they deliver the value and how they capture part of the value.

        They find and launch more innovations for growth.

        Sounds like a good recipe, doesn’t it?

        The Problem: Too narrow innovation

        Many manufacturers have a too narrow focus on their innovations. Their dominant focus is on improving features and functionality of the products they sell. An increasing portion of the manufacturers also improve their services, but are still focusing on break-fix and maintenance services.

        There are major disadvantages of the narrow innovation focus;

        • Companies miss many opportunities to better serve their clients and grow their business
        • Most innovations are not a complete solution, miss crucial aspects and therefore fail
        • If clients do appreciate the new value, they often have the buying power to benefit from this new value without paying more for it
        • For competitors it is easy to recognise the innovations and do exactly the same (or better), hence, commoditise the new capabilities and value even before the investment is earned back

        As a result, they not only fall behind competition. In today’s rapidly changing industries, they ultimately run the risk of be pushed down the “food chain”, stagnate or even become obsolete.

        This is pretty frustrating, but does not have to be like that. 

        HOW MANY MANUFACTURERS STRUGGLE TO GROW WITH IOT

        A common struggle is to drive growth and monetise new remote capabilities.

        Most manufacturers focus predominantly on predictive maintenance, remote diagnostics and remote resolution. The aim is to increase the value they offer to clients by improving uptime of their equipment and the resolution time if a failure occurs.

        They encounter the following typical challenges;

        • Uptime is already quite high, so there is not much room for improving the value for clients. If uptime is already 95%, how much value will it bring your client to increase uptime to 96-97%?
        • Clients recognize that you will be able to deliver maintenance services at a lower cost, so they may actually expect to pay less, not more.
        • Competitors are working on exactly the same, so there is no opportunity to differentiate
        • Clients fear a myriad of IoT networks, platforms and having their data flow to external parties. Every brand and manufacturer they work with is asking for the same.
          Clients start looking for a common infrastructure and services from neutral service providers.

        As a result, manufacturers invest a lot, see little value coming in return and see a declining interest for business innovation from senior stakeholders in their company.

        Solution: Search along 21 innovation tracks

        Leading and innovative manufacturers have a pretty broad range of areas in which they innovate for growth. They are more open to new domains, new business models and new perspectives which enables them to adapt and thrive in rapidly changing industries.

        In our research, we have identified 21 innovation tracks for growth, spread over 3 clusters. You can thrive in today’s disruptive world and achieve sustainable growth by widening your scope of innovation along these 21 tracks and by making strong and coherent combinations in each innovation.

        Just like the leading innovators, make it a habit to embed these 21 tracks firmly in your innovation strategy;

        • Actively search for growth opportunities
        • Along 21 innovation tracks
        • And enrich each innovation idea by combining a few innovation tracks

        If you want a more in-depth description of the 21 innovation tracks, you can download the Job-aid 21 innovation tracks to thrive during disruption. This includes a description of the innovation tracks and a template assessment sheet to assess your current portfolio of innovation projects and ideas.

         

        Assess How Diverse and Rich your Business is

        This Job-Aid 21 Innovation Tracks to Diversify your Business Innovation will help you and your teams to increase awareness of the big opportunities they have to boost innovation and to assess how diverse and rich their innovation is at the moment.

        This will help you to boost growth and thrive in today’s disruption.

        The 3 clusters of the 21 tracks are;

        1. The value you promise to clients
          Which problems or needs do you solve for which customer segments?
          Your growth opportunities are in solving more or other problems of your existing clients and expanding the market you serve.
          Alternatively, instead of expanding on scope and market, you could also specialise more in a specific niche of customer segments and needs and become the market leader in that niche.
          This cluster of innovation tracks also includes developing your brand to better articulate and expose the value you provide.
        2. How you deliver the value
          Which activities and capabilities do you need to deliver the promised value to your clients?
          Your growth opportunities are in building and improving the capabilities to deliver the value in an effective, efficient and consistent way, so clients get and see the value.
        3. How you capture part of the value
          Which portion of the value you create and deliver do you capture? So how and how much are you being paid for the value you deliver?
          This involves your pricing model, earnings model and your position in the value chain.

        How Apple became invincible

        Apples success cannot only be attributed to fashionable phones and great apps. Apple maintains a pretty wide scope of innovations and makes strong combinations of the 21 tracks which enables them to;

        • Launch desirable and irresistible products, apps and services
        • Offer tangible and intangible value
        • Have many revenue streams, including from app-builders
        • Maintain a unique position compared to competitors

        A few examples of how the various tracks are embedded in their strategy;

        • There was a latent need of easy availability of tools and information and easy access to music (track 1). A lot was already available for the techies, but not for the mass market until Apple made this easy and readily available (track 2).
          Various manufacturers have offered something similar before, but Apple made it a commercial success by learning from the previous attempts of others what was needed for success (track 8)
        • Apple developed an ecosystem of products and services with seamless integration as well as the Appstore (track 7). Other app-developers can offer their apps in the Appstore as well (track 15), but have to comply with Apple’s requirements. They also need to pay part of their license fees to Apple (track 19). As the app-builders are replaceable and the Apple eco-system is not, Apple can afford to ask pretty significant fees (track 21 and 18).
        • Apple’s brands is far beyond “great products”. It is much more about lifestyle, ease, fashion and desire (track 11 and 12)

        Successful and innovative companies always have these three clusters – value promise, value delivery and value capture – aligned and integrated. To achieve this, they;

        • Actively search for innovation ideas and growth opportunities along all of the 21 innovation tracks spread over the 3 clusters
        • Maintain a healthy and balanced portfolio of innovations covering all 21 innovation tracks
        • Enrich each innovation project to cover multiple tracks
        • Avoid as much as possible to have an innovation initiative which only covers one of the innovation tracks

        As a result, they have

        • Higher growth rates
        • Higher profit margins
        • Clients which are fans
        • More innovations which are a success

        Leaving their competitors wondering how they did this.

          Back to IoT – the opportunity

          Once you have the sensors in your equipment, the infrastructure for connectivity and data and the capabilities to turn data into valuable insights, there are many opportunities to enrich your innovations and business model and hence dramatically improve the potential for your clients and your own business.

          To mention only a few;

          • Your clients are on a journey of becoming more digital and data driven in many of their processes. This is a challenge with many unknown domains, unanswered questions and uncertainties.
            How can you identify these new needs (track 1) and reduce the complexity and uncertainty for your clients (track 2)?
          • With the data and intelligence you develop on the back of these data, you can help your clients to reduce usage of energy and materials, improve efficiency and productivity, develop their products and shift their core business (track 6).
            This could start with assessment and benchmarking services, evolve in consulting and training services and further grow into business outsourcing services.
            For example, Fresenius does not only sell the instruments for kidney dialyses, but also runs entire kidney dialyses departments in hospitals, including the staff treating the patients.
          • Part of this journey is also advancing your brand from being a product manufacturer to a solutions provider and being known for what problems you solve. (track 11 and 12).
            For example, Caterpillar helps clients achieve operational excellence through advanced services covering asset management, project planning, fuel consumption etcetera.
          • Particularly for component manufacturers, you have the opportunity to develop unique intellectual property with which you can improve the overall performance of bigger systems of OEM’s. This will make you less replaceable and increase your ability to secure your margins from the OEM (track 21 and 18) – like Intel Inside.
            Maybe you can even do business with the end-client buying assets from the OEM (track 19). An example is how Rolls Royce does not sell its airplane engines to the airplane builders (OEMs) but to the users of the airplanes.
          • For most innovations, you will need to develop new capabilities, processes, competencies and tools to deliver these new values in an efficient way (track 14).
          • As your business becomes more focussed on outcome and starts building more recurring revenues, you will need to develop your sales model as well (track 20), with more emphasis on onboarding, driving and demonstrating customer success, improving customer life time value and step-by-step growing the business with your clients by upselling and cross-selling

          Conclusion

          For sustainable success in today’s rapidly changing world, there is no single silver bullet. A great product or great service will not bring much value.

          To thrive in these disruptive times, you need diversity in your business innovation with initiatives in different innovation tracks as well as initiatives with a rich and coherent set of innovation tracks.

          That way, you will launch innovations which;

          • Provide clients a complete, remarkable and desirable solution
          • Are hard to replace by other actors in the value chain, like OEM’s or system integrators
          • Cannot be easily copied by competitors
          • Your clients will love to pay for

          If you want to take your business innovation to the next level, I would like to recommend you and your team to;

          • Assess your portfolio of innovation projects along the 21 innovation tracks. How well are the 21 tracks covered?
          • Enrich each innovation idea and project by adding a few more innovation tracks to it.

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          Many manufacturers struggle to escape from business-as-usual. They fall behind competition and lose from new entrants in their industries. This is pretty frustrating.

          moreMomentum has a methodology that helps manufacturers to transform the way they innovate and change so they will thrive during disruptive change.