Accelerate servitization with product as a service

The first part of this series was about how servitization can help B2B companies become leaders of their industries. And there’s no time to waste—our recent survey found 89% of executives agreed that “business reinvention is required to be successful in today’s context.” Now we’re discussing how companies can accelerate their servitization journey. The key is to leverage product as a service (PaaS) business architecture and transform at scale.

By Maxence Tilliette, Brett Humphrey, Arnendu Bose and Shalini Gopikumar

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Companies need to leverage product as a service business architecture and transform at scale to accelerate their servitization journey. 

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Servitization enables B2B companies to focus on superior customer service and making desired customer outcomes a reality. Many companies across the world understand the value of servitization. Yet few are able to overcome the “scale chasm” and fully integrate it into the product and service portfolio.

To help jumpstart the servitization journey, we developed a PaaS Business Architecture framework. Based on our many years of experience working with PaaS, the framework helps companies pivot wisely to this new business model.

The six building blocks of servitization

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The framework features six key building blocks. Together, they enable companies to sustainably adopt PaaS and in turn enable servitization.

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The first thing B2B companies should consider is what their medium and long-term business objectives are. From there, they can define and align their PaaS strategy with overarching business goals. The strategy should clearly identify outcomes and value to be achieved for the organization, their customers, suppliers and other stakeholders in the overall value chain.

Next, companies should clearly articulate “What’s in it for the customers?” by keeping customers at the heart of the Servitization strategy. B2B companies must understand customer value goes beyond changes in the financial relationship between seller and buyer (CAPEX to OPEX). And they need to help customers realize meaningful business outcomes, operational targets and cost savings.

It’s important to carefully evaluate key models when pivoting to PaaS. The benefits of PaaS can be immense when done right. Companies can garner greater market share while reinforcing existing segments of the market. Identify any potential short- and long-term impact the PaaS model may have on existing revenue streams so they can be offset by new PaaS-based annuity revenues. Make sure to consider which product portfolio, business lines, and customers can be added to the PaaS model, and when.

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How can servitization help B2B companies become leaders of their industries?

READ PART ONE OF THE SERIES

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Companies should be aware that not every product will be suitable for as-a-service enablement. That’s why it’s a good idea to avoid one-size-fits-all strategies for any product portfolio. A detailed feasibility analysis of the complete portfolio will help identify products where PaaS is the right strategy.

Caterpillar Inc., the world’s largest construction equipment manufacturer, is a good example of a company with a robust PaaS strategy. Caterpillar has been selling product-augmented services for a few decades now. But in the past few years, the manufacturer has further crystallized its product services strategy to be more customer outcome and value-focused. In 2019, Caterpillar announced its goal to achieve Machinery, Energy and Transportation (ME&T) service sales of $28B by 2026.

With its strategy, Caterpillar is expanding its after-market offerings through flexible product purchasing terms and service-integrated product solutions. These leverage digital capabilities to track performance and outcomes. For instance, Caterpillar products with telematics and the internet of things (IoT) feature advanced connected equipment services. The Cat® App, launched in 2019, tracks critical machine operating data from the field for proactive asset services.

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The next step is to analyze and rewire existing capabilities across marketing, sales, channels and customer service. This is done to enable the servitization of products. The pivot to PaaS requires a complete overhaul of marketing and branding strategy. This will help customers to see the outcome-based pivot as a key differentiator and a win-win for every stakeholder.

Companies can then redefine the sales strategy and approach and the need to rethink how services, rather than products, will be sold to customers. And they must train and incentivize frontline sales executives on the new product-service portfolio. Performance targets and KPIs should also be revisited.

Dealer and distribution networks will have to be reconfigured with the service-orientated operating model. KPIs and incentives should be realigned, and all channel partners must be trained in the new PaaS model. They’ll also need access to the appropriate technology infrastructure to execute the new model.

Finally, sales messages should change to emphasize the value of the new servitization model. Companies should ensure their message is aligned with both explicit and intrinsic customer needs and desires. For example, HP Printers deployed PaaS to capitalize on the true needs of its customers. Most inkjet printer owners have experienced the frustration of a printer cartridge running out of ink mid-print. To eliminate this inconvenience, HP launched the Instant Ink subscription model. Its monthly printing plans (light, occasional, moderate and frequent) are based on the number of pages customers print rather than the amount of ink used. And registered printers automatically alert HP whenever a cartridge is running out of ink so the company can immediately send a replacement directly to the customer.

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The third building block is one of the most important—service delivery and operations. Unlike the traditional product-centric model, PaaS requires OEM organizations to own the asset across the entire product lifecycle, from product design to retirement. Significant changes must be made to the service delivery approach across the product lifecycle.

The pivot to PaaS calls for a complete reimagining of crucial internal processes, operations and delivery systems. OEMs must ensure that products are smart and connected to emit the right data set for monitoring and tracking performance metrics. A strong digital and technological framework is needed to remotely collect product usage and performance data. This data will be used to generate insights and enable automated predictive and prescriptive actions.

The goal is to enable optimum product availability and usage for customers. The product and its underlying technological framework and cloud ecosystem must support over-the-air updates to push new features and product upgrades. The final component to include is a unified service portal for customers. This should provide product services such as asset maintenance services, spare parts management, product upgrades and so on.

The above considerations call for significant change in terms of product support functions, e.g. order and supply chain management, maintenance services and field force management.

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The post-sales customer engagement model is an important part of PaaS architecture and should reflect the “always-on” approach to engagement. More frequent customer touchpoints can create more engagement and elicit regular feedback. This helps ensure customers stay happy with the overall experience. And newly connected products provide real-time analytics for product performance to help predict or prevent issues and further improve the customer experience. Companies should focus on:

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B2B organizations don’t have to overhaul their entire current IT architecture to enable PaaS. Instead, they can incrementally add components to existing systems and products that enable PaaS. Interoperability is an important aspect of establishing IT systems and designing products—the ability to exchange data between products and associated systems is the key to connectedness. This, in turn, is a vital component of superior product services.

An amalgamation of several digital capabilities is needed to enable PaaS. This will include smart connected products, IoT framework and communication gateways hosted on AI-powered cloud platforms to enable multiple digital microservices to be rolled out. We see many industrial companies are partnering with leading cloud platform providers such as Microsoft, Amazon, Google and Tencent to develop the building blocks of the PaaS architecture (as shown in the diagram above) to enable Servitization.

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The final building block is a robust service performance monitoring framework. Companies must monitor service performance in real-time or near real-time and report insights to key stakeholders. This is to provide optimum PaaS offerings and ensure that the outcome-linked compensation happens effectively. This new business model requires companies to manage data collected from smart connected products, extract actionable insights and undertake appropriate service monitoring and controlling.

We recommend that companies work with their ecosystem partners to make sure the right KPIs and SLAs are established. This ensures optimum performance reporting. For example, ABB introduced the ABB Ability™ Smart Sensor technology for mounted bearings to enable remote maintenance checks 24/7 for all customers. In addition, ABB’s industrial Internet of Things (IIoT) Ability platform and dashboard helps customers monitor asset and equipment performance. Several key metrics, including uptime and speed, are monitored jointly by ABB and its customers with metrics customized based on customer needs.

Hit the road with the PaaS operating model

Adopting PaaS takes time, effort and requires both top-down and bottom-up commitment in the organization. A carefully considered business architecture is the secret to amplify success and growth through servitization. There is no shortcut to this end state but embedding digital capabilities into the new PaaS business architecture in an integrated manner will help companies achieve their goals seamlessly and efficiently. In our next blog, we will discuss how digital service platforms will help orchestrate a Servitization and PaaS model in a seamlessly integrated manner.

Maxence Tilliette, Arnendu Bose and Shalini Gopikumar and Brett Humphrey

Maxence is a Managing Director at Accenture and the Global Lead for the Product As-a-Service Enablement offering in Industry X. Get in contact with him on LinkedIn. 

Arnendu is a Managing Director within Accenture’s Industry X practice. He has 17+ years of industry and consulting experience focusing on Industry X, Supply Chain Management, Customer Service and Experience Management. Start a conversation with him on LinkedIn.

Shalini is a Manager within Accenture’s Industry X practice. She has 8+ years of experience supporting global clients in the field of Business Model and Operating Model Redesign, Intelligent Automation and Servitization for the past decade. Meet her on LinkedIn. 

Brett is a Managing Director within Accenture’s Technology practice – Industry X team. He has 20+ years of technology and consulting experience as founder and CEO of a software consulting firm for almost 20 years. Brett's focus within Industry X is in the areas of aaS enablement, and platform and software engineering. Get in touch with him on LinkedIn. 

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Acknowledgments

The authors of the article thank the following for providing valuable insights:

Scott Pharr is a Senior Managing Director within Accenture’s Strategy & Consulting practice and leads the Industry programs and NA business for Global Capability Network. Scott has 25+ years of experience driving operational productivity through organizational change, business transformation and solution integration. Meet him on LinkedIn.

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