Internet of Things
In the age of IoT, companies are manufacturing smart, connected products, driving service efficiency, and optimizing customer processes that drive improvements for both themselves and their customers. However, before you can begin focusing on customer outcomes and understanding the systems your solution is in by leveraging analytics, you need to create the right B4B offer types that follow the Remote Services Continuum and connect with your sales initiatives to create profitable growth.
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The Remote Services Continuum.
The Remote Services Continuum.
One TSIA member, a machine manufacturer, increased their customer install base under contract, with the addition of remote service contracts. To realize this:
The support center was also able to leverage remote services to create significant improvements in efficiency and customer satisfaction by improving time to diagnose by 50% and reducing mean time to repair by 25%. So far, they're off to a great start!
Smart, connected products can also be part of an integrated system, or even a complex ecosystem. In this world, a machine needs to support M2M (machine to machine) communication, as well as communicate with the system it has been embedded in by your customer. This means that interoperability of products with all kinds of systems is a minimum requirement for today's products.
Within the traditional sell and ship model, the strong reliance on product-attached services often results in commoditization of your traditional support and maintenance contracts. Is there some low-hanging fruit that can be gathered from insights created by analytics and the connectedness?
Some (big) accounts are building their own ecosystem, and most customers will be part of one or several of these ecosystems. The main players are building the capabilities and platforms (e.g. GE and Siemens) or providing the technology (e.g. Trimble Navigation) to run platforms and allow their customers to build up their system. Success will be determined by your ability to have open and flexible interfaces as part of the relevant systems. Additional capabilities also need to be acquired to offer remote and analytics services inside of those systems or to use those platforms for your purposes. To provide, run, monitor, and service integrated systems, suppliers need a critical mass to scale the investments. So, it is critical to capture as much value as possible from the data created with your products, but also determining which third-party equipment you can capture and leverage for data-driven services.
It is also important to provide differentiated maintenance and support contracts, from "basic" up to "premium" support. The premium support level can include high-end remote and analytics services, and no one can do that for your products better than you can. If you need help making a case for this, TSIA Field Services benchmarks show that FS pacesetter margins are 24% higher than the average margin of industrial equipment manufacturers. What are the high gross margin practices? A few of the pacesetter practices that drive this improvement are:
TSIA recently benchmarked the maintenance and support business of industrial equipment manufacturers. One key finding is that the support attach rate, defined as a support contract is sold with the initial product deal, is 20% lower for industrial equipment companies than the global hardware benchmark of our service revenue generation discipline. Increasing the initial attach rate is another opportunity to realize stable, profitable, and predictable revenue streams.
Some pacesetter practices that enable improved performance include:
To push the initial attach rate with one of these two options is a minor investment compared to the incremental increase in stable and reliable revenues. TSIA even provides a handy tool, TSIA's ROI Calculator, which allows you to do the math and calculate the return of an incremental increase in the support attach rate.
With an increasing volume of contracts, we recommend professionalizing the renewals of the contracts, which are crucial to minimize the attrition rate, and opens up the opportunity for upsell to higher contract levels. If you'd like to learn more about increasing your install base of maintenance and support contracts, you can download the abridged version of this study. If you are interested in the full readout, contact us to participate in this benchmark.
In a connected world, contracts will get more complex to cover the impact of the systems in which your equipment is embedded, which will challenge sales and offer management. Understanding the business outcome of your customers will help you overcome this challenge.
On the other side, you have more strategic opportunities to offer higher-level services like adoption services (consulting, machine upgrades, process optimization, etc.) and managed services (asset management, third-party maintenance, and repair, etc.).
In your offer development process, you need to be careful not to spend too much time on features and services your customer doesn't need, which will be the topic of our next post in this series. Stay tuned!
Read more posts in the “Intro to IoT” series:
Post Date: July 9, 2015
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