It’s been said that change is the easiest way to survive. The coronavirus pandemic has shaken global economies, challenged and disrupted supply chains, and forced many organizations into a period of reflection.
In many instances this has already led to change, not only in how people will work in the future, but also in how the industry will operate and build resilience against future disruptive threats.
What’s increasingly evident is the need to accelerate digital transformation in those organizations that have been slow to change. Deloitte says that businesses today need to “use technology and data to enable growth, decrease costs, and evolve to an insight-driven organization.” There’s nothing new in that statement, except that change has now been universally forced on everyone. And change will reshape how businesses operate in the new economy.
The crisis has accelerated the reliance on triage, forcing business-use cases where technology could just as easily be deployed, even though it traditionally might not have been the standard practice. For example, we’ve seen elements of triage in determining whether to use an external field service technician, internal employee, or digital workaround in areas such as field service maintenance and support. Understandably, service organizations have tended to send a human technician only if absolutely required, as they attempt to balance health and safety with the requirements of the job.
The crisis has also been a test bed for rapid change and deployment of digital tools, such as Zoom and Zinc for communication and collaboration, as well as the use of digital media to support online training internally and with customers. And it has forced businesses to make quick decisions, using data and technology to determine the optimum use of human resources.
If there’s any “good” to have come out of the global COVID-19 tragedy, it’s that it has driven the business case for digital transformation across just about every industry. Supporting this kind of ongoing innovation requires a baseline of data early on, to track and continue such digital transformation initiatives. The pandemic has been the ultimate digital accelerant, driving digital transformation faster in the last three months than in the previous 10 years.
Some areas have accelerated while others have been pushed aside. So where do they go from here? And which practices will shape the new economy as we move forward?
The prospect of economic uncertainty is now very real, so all organizations will be looking for operational as well as strategic advantages. As a recent Bain & Company report suggests, “big data and analytics change everything.” We’ve heard this many times before, of course, but today we’re seeing greater urgency. Organizations need to offer something different that can manage costs and resources more efficiently without impacting service quality.
The growing shift towards servitization models could see a dramatic acceleration in that direction. Using predictive maintenance, organizations are offering customers outcome-based service contracts, focusing on machine uptime and service delivery rather than the more traditional reactive approach.
The Bain & Company research report shows that leading European OEMs aim to more than double their share of revenue from advanced service models to 47% by 2024. Of the manufacturers surveyed, 100% say they plan to offer predictive maintenance by 2024. Ninety-five percent plan to provide remote maintenance, and 95% will offer operational efficiency services.
The challenge is: How do manufacturers do this quickly and efficiently? Each organization will be at different stages and have different skillsets. Contracts will be difficult to design and negotiate. Ensuring value and minimizing risk will be difficult. As Bain suggests, successful companies will address these challenges by doing four things well: “They understand what customers value most from machinery in a particular production setting. They also invest in analytics capabilities, develop pricing and contract management skills for a new service model, and focus early on scaling performance-based services across the organization.”
Advanced service contracts can be a big part of this effort, making it possible for organizations to remove complexity in how machines are supported and serviced. Of course, proper management of such contracts requires infrastructure as well as a change in how organizations build, market, sell and execute with end-to-end visibility.
Advanced contracts can be a “win-win scenario for equipment makers and their customers,” says Bain. “While improving efficiency and reliability for clients, performance-based contracts increase an OEM’s competitive edge, boost service revenue and grow its share of the service profit pool. And service relationships built on improving customer productivity increase loyalty.”
That’s an attractive proposition for now and the future, putting service teams at the center and creating resilience, should another pandemic or global disruptor be waiting around the corner.
Sumair Dutta is Industry Analyst and Senior Director of Global Customer Transformation at ServiceMax.