Digitalisation as a growth driver in after-sales service

A new lease on life for machine manufacturing

The service business offers great potential for both machine and plant manufacturers: whilst the profit margins in the field of new equipment often remain in the low single-digits, the margins for service are often over 30 percent. In the future, digital services in particular will become increasingly important in machine manufacturing. Based on a number of successful projects, this Deloitte whitepaper answers the questions of how machine and plant manufactures can concretely use digital services and whether a subscription model is the right option for monetisation.

Service digititalisation as a critical factor

In times of economic uncertainty, machine and plant manufacturing service plays an important role in stabilising sales and profits. Although the vast financial potential of a well-positioned service area has long been known, many companies are still not fully taking advantage of this. The main reason is the strong focus of many manufacturers on producing new machinery. This is where most of the investment are made and normally the primary focus of management.

Embracing digitalisation will enable manufacturing companies to make the shift to service and open-up new opportunities including:

• Significantly improve and expand service offerings,

• Broaden targeted customer and machine knowledge,

• Introduce new service business models and

• Increase efficiency of service delivery

Everyone talks about new business models, such as subscription models, whereby customers pay an outcome-based fee rather than making a one-off purchase. Such models are already being developed in individual companies from the pilot phase to that of important revenue drivers. However, many machine and plant manufacturers have not yet clearly defined what their digital service strategy should look like and whether subscription models make any sense for them.

Five key factors for the success of digital services

When it comes to digital services in manufacturing, the "cards are being reshuffled". Software providers, previously only used as suppliers at a maximum, are now becoming serious competitors. In many cases, digital service providers do not need their own installed base; the data analysis sometimes replaces the in-depth knowledge of a system. For this reason, Deloitte has identified five success factors to help machine and plant manufacturers operate successfully in this new business area.

The Deloitte approach: combining analog and digital services

Offering digital services or introducing subscription models needs to be part of a comprehensive service strategy. Only when the overall strategy is consistently geared towards the customer can the individual elements make a meaningful contribution. For this reason, the Deloitte’s service cascade offers a structured approach to developing a holistic service strategy and implementing it successfully in practice.

With all of the new possibilities that digitisation offers us, the answer to a crucial question remains at the forefront of our approach: How can companies intelligently combine traditional and digital technologies to create demonstrable added value for their customers?

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