A New Era in Machine Design & Delivery
In manufacturing, few things are as important as uptime. According to a recent survey from ITIC, when downtime occurs, it lasts an average of four hours. And 95% of businesses reported that a single hour of downtime cost over $100,000, with more than 50% saying it exceeds $300,000 per hour. The result is more than just lost revenue, it’s angry customers and damage to your professional reputation.
Downtime is the devil for all manufacturers, but particularly for manufacturers of industrial machinery since the failure of their products can ripple through their customers’ supply chains. Their industrial customers look to them for reliability, which gives them predictability. In the world of industrial machine design, the goal is for products to work 99.9% of the time—a bar that’s almost unimaginable for consumer products.
Evolving to an Equipment-as-a-Service Model
One way to combat downtime in manufacturing is for industrial machinery manufacturers to adopt equipment-as-a-service (EaaS) as a business model. Instead of selling a one-off product, EaaS means manufacturers provide personalized machines that they customize, install, and maintain.
The idea of value-added service isn’t new. Industries like aerospace and energy have long practiced concepts and programs like preventative maintenance based on data. But EaaS is spreading from niche to normal, and industrial machinery manufacturers looking to keep up with the changing landscape and increased customer demands would do well to take notice.
How Does Equipment-as-a-Service Work?
In the last decade, the industrial internet of things (IIoT) has sprung up as an extension of the regular internet of things (IoT). Like IoT, IIoT utilizes smart sensors and actuators, and networks them together with your business’s industrial applications. The recent explosion in IIOT connected machinery has created opportunities for industrial machinery manufacturers to collect real-time data and explore new actionable strategies to prevent downtime and boost efficiency. What do these sensors monitor? Just about everything—from temperature and humidity levels to water leak detection to motor vibration irregularity.
There are many competing cloud platforms for industrial IoT, like Siemens Mindsphere, Microsoft Azure, and IBM Watson. The in-field usage data you collect from your connected industrial machinery allows you to head off problems before they occur, with the added bonus of providing insights that can improve your future machine design.
In this model, your customers purchase a subscription from you rather than a product. It’s much like a lease or rental, with a set, predictable monthly or annual cost. And while that cost is higher than the plain purchase price, the total cost of ownership goes down, since you handle all maintenance and repairs—before they happen. The customer, in turn, doesn’t have to worry about breakdowns, broken promises, or damaged reputations. In a sense, they’re renting uptime.
The Benefits of Equipment-as-a-Service
Managing and mitigating risk is an important part of thriving in an ever-changing industry, and service-based businesses are resilient businesses. If you’re simply selling products and the sales drop, everything drops. But by adding subscription service plans to your business, you spread out your risk profile and gain protection against inevitable periods when sales stagnate. That makes EaaS models growth drivers—both for revenue and profitability.
In addition to mitigating risk, EaaS boosts your relationship and trust level with customers. Your customers don’t just buy products from you anymore, they rely on you as a partner in their success. That’s a game-changer.
EaaS also gives you access to more data. In addition to the data from your own machine design and production, you get access to data about how your customers use your products, how the machines function under what conditions, as well as what problems arise when and why.
In our current era of digital transformation, that’s data that you can use in a variety of ways to drive better business outcomes. You can use machine learning to identify deeper performance patterns across customers and use cases. You can simulate performance on future models. And you can even use AI and algorithmic problem-solving to improve future machine designs.
How to Implement Equipment-as-a-Service for Machine Design
It’s one thing to believe in the power of EaaS. It’s another to actually implement it.
For machine manufacturers ready to make the leap, the first thing to remember is to take it in steps. Incremental and steady is the way to go. Altering your business is a gradual process that requires patience and care.
If you don’t already, start by offering aftermarket spare parts. If you’re currently doing that, move to the break-fix repair model, in which your company installs the replacement parts, ensuring that it’s done correctly. But this is still reactive—the customer only pays when something goes wrong, and it can leave your customers with downtime. If you already offer break-fix services, you should be considering a jump to annual maintenance contracts.
Any kind of transition is only going to work if your team is on board, however. Your company’s culture must align with your business goals and identity. If your business was just selling products, that cultivates transactional interactions with customers. To move to a more relational one, you may have to shift your team’s mindset and the culture of the workplace. Check-in with your employees individually, listen to their concerns and make sure they are ready to change. Remember: new tools and technologies and processes don’t do anything without the people behind them.
Organizationally, your company may need to invest in new call centers, new information systems, or new accounting practices. The goal must be to consistently provide top-tier customer service. That’s how business relationships deepen.
From a Machine Design Business to a Data Business
Every day, new digital-native companies are popping up that utilize EaaS. The established order is facing disruption and challenge from a new generation of manufacturing innovators. Industrial manufacturers need to adapt and evolve to remain competitive. Offering equipment-as-a-service means you can respond to changing customer needs and help you develop a greater understanding of how to deliver value to your customers.
The machine design industry faces challenges that other manufacturers don’t. But the latest digital tools and digitized processes are opening new possibilities for how companies can connect to customers, suppliers, and each other. They’re also creating new ways to design and make machinery. Whether it’s running new kinds of simulation in a digital playground before ever manufacturing your design, or creating new, automated ways to configure, customize, and visualize your products, or changing your business model to offer equipment-as-a-service, it’s your data that drives the digital transformation. Every business is a data business today.