In my IoT blog series I wrote with Vele Galovski, we introduced the remote services continuum as a framework to help companies navigate the industry transformation through IoT/smart services and focus on customer outcomes. In this post, I’ll be using examples from Michelin to discuss how services designed to help customers maximize their usage of technical capabilities (Adoption Services) as well as services designed to deliver specific business outcomes (Outcome Services) are rapidly emerging.
Tires-as-a-Service
The tire industry is highly competitive, and products are facing commoditization. Michelin, with their long tradition in providing information services for drivers, published the first “Michelin Guide” in 1900, and the first Michelin map in 1908. Now, they’re using their product capabilities to help customers use fuel more efficiently by creating EFFIFUEL™.
Sensors inside vehicles collect data, like fuel consumption, tire pressure, temperature, speed, and location. This data is then stored and collected in a cloud solution to be analyzed by Michelin experts, who provide recommendations and training in eco-driving techniques. This service has delivered fuel savings of 1.5 liters per 100 kilometers. Michelin doesn’t provide the results in an automatic report, but instead prefers to preserve the human touch in order to retain a personal customer relationship. These are Analytics Services, which help customers to adopt and optimize their usage of an asset.
There’s No Outcome Services Without Adoption Services
Analytics are increasing the knowledge about products and lifetime depending on their usage, such as driving style and driven distance. Without this knowledge, Michelin would not be able to offer tires as an outcome, or in this case as Product-as-a-Service, on a per-mile-driven basis.
Michelin created a pillar with more reliable and more stable revenue streams in addition to the highly competitive world of selling tires. This helps their customer save on costs and improve their cash flow.
Identifying Customer Outcomes
Every year, TSIA asks members about their top services business challenges. Through this analysis, we’ve learned that the top service business challenge for equipment manufacturers is creating (new) service offers.
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Source: Thomas Lah, J.B. Wood: The Outcome-Based Services Portfolio (2013)
To create Adoption and Outcome Services, you first need to understand your customers’ primary goals and desired outcome. Outcomes do not always have a dollar value, but can be about availability, fast response time, compliance and security, or quality improvement, just to name a few.
Next, you’ll need to find out what it will take to help your customer reach this outcome; which financial and operational KPIs need to be improved, which practices will help, which stakeholders are involved, which technology is needed, and which capabilities are required to make the transition?
Service executives and their teams need to get more involved in the whole product lifecycle starting with R&D. The information that can be learned in the field about products and their usage is extremely valuable for the continued improvement of products and service enhancements. Unfortunately, knowing how to leverage this data is currently a major weakness of most equipment manufacturers.
Knowing How to Ask the Right Questions
Let’s assume you are delivering equipment in a manufacturing environment and you want to offer Adoption and/or Outcome Services. In this scenario, you must be able to answer the following questions:
- Connectedness: Do you collect data from your equipment automatically? Can you transmit machine or product data to a central location and store the data?
- Monitor: Do you have real-time visibility into the performance of your equipment and processes? Can you remotely monitor your equipment and processes from anywhere, any time?
- Analyze: Can you analyze operations and deliver information electronically to the right person for response to an issue? Can you analyze collected data to identify trends in operational processes that can be improved?
Next, the capabilities to connect, monitor, and analyze are preconditions to offering Adoption Services.
- Predict: Does your current customer-supplier relationship allow for pro-active actions to predict impact and adjust machine operations and procedures using real-time data from multiple sources?
- Optimize: Do you perform scenario planning for real-time decisions to achieve optimal outcomes leveraging big data analytics? Does your customer expect you to take action?
In order to offer outcomes and create a win-win scenario and a satisfying relationship, you need a high level of trust and the willingness of the customer to accept actions and advice from the supplier. In the future, it will likely be a major challenge to correctly identify the prospective customers you'll want to offer outcome services to.