Central question: How to monetise Services and IoT
Many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.
One of the important trends is that value proposition and offerings become more data-driven and more service oriented. However, many manufacturers are product-driven businesses which do not fully appreciate the value service has for their customers and own business.
So, one of the central questions is: How to Monetise Services and IoT in order to Grow in a Disruptive World? The capability to monetising service and IoT is mission-critical for sustainable performance and existence of manufacturing:
In a series of articles, we cover 3 critical steps which make the difference between success and failure in monetising services and IoT:
- Solve bigger customer problems, which is all about creating significantly more value for customers.
- Articulate the value
- Build internal momentum for monetisation
Common mistakes in the industry
One of the common mistakes is focussing on only the small problems of customers and making small incremental improvements of the services or solutions. These are typically the standard logical next step improvement most of the competitors bring to the market as well. These are necessary improvements – adding features to your solutions - to sustain your market position. However, there is a big chance they will not bring any growth or opportunities to monetise. Just think of the new features car-manufacturers add to their new models. And our weekly updates on our computers and office-software, without paying more.
Another common mistake is focussing too much on availability and the use of the equipment. In most situations, the real extra value is having a broader impact of the value creation process of our clients. In most industries, the purchase, financing and maintenance of equipments is a small portion of the overall budget.
How some truck manufacturers solved this
For example, while the sales of trucks were shrinking dramatically, leading truck manufacturers like MAN, DAF and Scania discovered that discounting the trucks did not have much impact. One of the big challenges for truck operators was reducing fuel consumption. The leading truck manufacturers took this challenge beyond aero-dynamics and engine efficiency and developed data-driven services to reduce fuel consumption by improving the way truck-drivers drove the trucks.
Discovering the bigger customer problems
So, the ideal practice is to either:
- Solve the bigger customer problems in a significantly better or more efficient way for clients
- Or to solve new big problems of our clients
Before developing the new services and solutions, it is crucial to have a deep understanding of the challenges and problems of your clients. The following activities will prevent any bias from long standing experience and business as usual:
- Reframe addressable customer needs with your team and colleagues who are involved. The aim is to have a broader view and scope on customer’s needs. Explicitly ban any type of objections against the idea of servicing those needs.
Focus on so-called actual “jobs-to-do” of your clients and where they are struggling or could do much better. For example, improving uptime may not be that relevant for clients with low utilisation rate. Whether you will do customer research with professional agencies or not, it’s always good if various colleagues have frequent open conversations with different stakeholders, discussing views on the industry, trends, challenges et cetera. Just sharing the following simple diagram during such conversations are helpful for you, your colleagues and clients to keep the dialogue open.
- Explore how they are solving these problems and jobs and which (types of) suppliers are helping them now.
- Also explore the needs and challenges of the customers of your customers.
- This will give a lot more insight on customer needs. Next is to explore is which needs you could and should be addressing now and in the future. With these insights you can extend and enhance your vision, strategise and roadmap for innovating your services and generating new revenue streams
Manufacturers which are better in solving bigger customer problems, better articulating the value for customers and staff and have higher momentum for change and monetisation see that they generate more new revenue streams and differentiate more – in the eyes of their customers - from their competitors. They perform better and have more resources to keep innovating their business and hence grow in our disruptive world.
Give monetisation of services and IoT an Impulse
If you want to accelerate the monetisation of your (new) services and IoT, join our upcoming Impulse Sessions on “How to Monetise Service and IoT”. These are full day interactive meetings with like-minded peers, during which we will exchange experience, insights and challenges.
Great offerings and solutions won’t sell themselves.
It’s the various colleagues together that drive the value perception and sell the solutions, because they are eager and passionate to perform, learn, develop and make new things happen. Without encountering unnecessary obstacles which reduce confidence and maintain internal conflicts of interest.