How OEMs can take Advantage of Service-led Business Models

Today we are going to look at how Original Equipment Manufacturers (OEMs) can use service-led business models to improve service levels and generate new sources of income, using innovations such as IIoT (Industrial Internet of Things) and the cloud. By using digital technologies OEMs can capitalise on predictive maintenance by increasing efficiencies and reducing costs. In this model, revenue is increased by reducing unplanned downtime by monitoring machines and components and predicting failures.

The first question to ask is how does a service-led business model differ from traditional business models and what do they look like?

SERVICE-LED BUSINESS MODEL

A traditional business model creates its strategy at an organisational level. That means that it is the business strategy that informs the development of products and services. Products are only explored and progressed if they fit the underlying plan of the business. This business model has been the mainstay of strategic thinking for many years. However, whether it is the best solution for all businesses is debatable, and many in the sector now favour a service-led model.

The service-led business model is the reverse of a traditional strategy. This means that it is customer-facing products and services that form the basis for the development of strategy. The organisational infrastructure is there simply to support those services effectively. The shape and structure of the organisation is therefore adaptable to suit the needs of the products.

CONNECTIVITY AND THE CLOUD

With modern technology, it is now much easier for businesses to access data, which can be used to facilitate their business model. Technology such as embedded PCs, HMIs and advanced IIoT gateways in conjunction with technologies such as cloud and edge computing allows for operational data from specific machines to be delivered in real-time to the cloud for smarter decision making.

PREDICTIVE MAINTENANCE

Predictive maintenance tools can be used by OEMs to determine the condition of parts used by their customers. Therefore, they can predict when to repair or maintain components that are in use. OEMs can therefore create a new service in which predictive maintenance is undertaken. This is beneficial for the customer in that they can reduce unplanned downtime in their production line, making their business more efficient. It is also beneficial for the OEM as they can create streams of revenue and increase profits

A service-led business model is a great way for OEMs to generate more income and diversify their revenue. It also leads to improved customer satisfaction as this model enables OEMs to be more sensitive to their needs. As a result of a service-driven model, OEMs are more agile in the market, and can respond to market changes faster, enabling them to stay competitive.

WANT TO KNOW MORE?

If you would like to learn more about how connectivity and cloud technologies can enable service-led business models, contact us here.