for the Age of Smart Services
IF YOU’RE LIKE MANY PRODUCT-CENTRIC COMPANIES, YOU’RE SCRAMBLING TO GROW YOUR REVENUES FROM SERVICES
Scroll to access the full insight
Any industrial manufacturer that has not awakened to the fact that it must become a services business is in serious peril today. Sadly, there are many such businesses—companies that still think of themselves as builders of things and that state their gross margins, operating profits, and other measures of success solely in terms of “the product.” But even their more enlightened competitors, the ones who’ve begun to wrap valuable services around their products and, in some cases, profit directly from those services, are enjoying only a temporary advantage. They may be improving their customer relationships by taking on various burdens such as maintenane and replenishment of supplies, but that will get them only so far. A select group of companies is already upping the ante. Soon, it will not be enough for a company to offer services; it will have to provide “smart services.”
Smart services go beyond the kinds of upkeep and upgrades you may be bundling with your products, both in their value to customers and in their cost efficiency to you. to provide them, you must build intelligence— that is, awareness and connectivity—into the products themselves. And you must be prepared to act on what the products then reveal about their use.
WHAT MAKES SERVICE SMART?
Smart services are a wholly different animal from the service offerings of the past. To begin with, they are fundamentally preemptive rather than reactive or proactive. Pre-emptive means your actions are based upon hard field intelligence; you launch a preemptive strike to head off an undesirable event when you have real-world evidence that the even is in the offing.
For customers, smart services create an entirely new kind of value—the value of removing unpleasant surprises from their lives. Meanwhile, because the field intelligence makes product performance and customer behaviors visible as never before, manufacturers gin unprecedented R&D feedback and insight into their customers’ needs and can provide even greater ongoing value.
Finally, because it is impractical to deploy humans to gather and analyze the real-time field data required, smart services depend on “machine intelligence.” In a smart services environment, reliable and blindingly fast microprocessors do what they are very good a doing: digesting billions of data points, talking to one another about the data, controlling one another based upon the state of the data— all in a matter of nanoseconds. Humans cannot do this, nor should they; this incessant stream of business information should be invisible to people. At the same time, all this background activity gives managers and decision makers much more visibility into a business’s assets, costs, and liabilities—precisely when they need or want it.
FINDING YOUR SMART SERVICE OPPORTUNITIES
Thinking about the business opportunities associated with a networked product is a highly creative process. Often there are no cut-and-dried markets to identify and size. Rather, there are whole new markets that might develop as networked products are rolled out. To find your opportunities, start by looking at the lifecycle of your product. What are the activities the customer engages in to procure, own, use, and dispose of it? Next, check out the adjacencies. For each of the identified activities, what else is the customer close to or in contact with when performing the activity? And what other activities precede and follow the activities you’ve identified? Finally, once you’ve examined the possibilities offered by these various activities and adjacencies, bundle the most economically attractive elements into a total opportunity. Each of these steps bears further explanation.
Please fill out the form below ↓ to download the full HBR article. ↓