The need for service transformation
The expectations of industrial companies’ customers are changing. Customers want to know the answer to questions like: How can I augment the lifecycle of my existing assets? How can I make my assets more flexible to address increasing requirements for speed and personalization? How can I get the product but only pay for the value of services I receive? They are less interested in buying a product than an outcome and increasingly find value in services and support. As a result, services have become a critical means for companies to differentiate themselves as well as stabilize cash flow, lower volatility and enhance resilience.
We surveyed 748 industrial service business executives from across 14 countries to investigate the best service management approaches that can be applied to successfully transform and grow your future service business. The research revealed a stronger focus on service-driven business models has also helped industrial companies better balance pre- and post-COVID-19 economic challenges. With remote services in demand, those with a strong market position in digital-driven services flourished. More than 60% of respondents said their service business accelerated during the pandemic.
Even before COVID-19 hit, industrial equipment companies knew that service transformation could help differentiate their businesses in the marketplace, but many struggled to find the right path.
Pivoting approaches for service transformation
Industrial companies stand at a pivot point in developing their services business. Looking at their financial data, we grouped the companies into four categories based on their service management maturity levels—Champions, Leaders, Strivers and Traditionalists. Most successful industrial companies identified in our research are careful to pivot in a way that balances core and new offerings.
What’s causing industrial equipment companies the most difficulty as they attempt to pivot?
Focus areas for a successful service transformation
Based on our research findings, we concluded that a successful, value-oriented service transformation needs to consider the following focus areas seen in Champions and Leaders.
Change is here, are you ready?
We believe that services will contribute up to 60% or as much as two-thirds of overall revenue for industrial companies in the next five to 10 years. The exact figure will vary depending on industry segment and company maturity, as well as how successfully a company travels along the roadmap and implements the entire pivot.
Companies need to act now and prepare for the road ahead. Those that can keep up with or even outpace the current Champions by transforming their business, have the potential to deliver what services customers want while significantly improving their profitability and resilience in an uncertain business climate.
Read our research to find out what your peers are doing and what you need to do to transform your service business.