Article
Service Innovations in China's Industrial Machinery Sector
The report draws upon the findings from a survey with 198 machinery manufacturers and interviews with a handful of senior executives on their companies' service innovation efforts in order to gain a clear picture on where service innovation stands in most of the manufacturing companies in China. As the users of industrial machines become more solution-driven, manufacturers can no longer satisfy them with a single product. There is an increasing demand for the solution, which blends in the concepts of "product" and "services" and turns into a total solution addressing the users' needs. The industrial machinery industry in China has a strong momentum to develop new service offerings but everything is still at an early stage of service transformation.
Summary of key findings and recommendations
- The role of "service" in the industrial machinery sector is starting to change, transitioning from being a complement to a product to being a differentiator, but has not yet reached the role as a profit center.
- A majority of the industrial machinery companies in China views services as the extension of a product. Most service innovations are derived from the product instead of the users' needs. There is a white space for industrial machinery companies to recognize their clients' needs and value proposition, and to coordinate the relevant parties in the value chain to create win-win solutions for their clients.
- In a complex marketplace, users demand professional, customized, and all-inclusive solutions but it is hard for any manufacturer to meet all the expectations. However, for most of the industrial machinery manufacturers we surveyed, their service innovations are coming from internal department. To a certain extent, they underestimate the benefits and synergies that external resources could bring in the service innovation process.
- According to the survey results, most industrial machinery manufacturers in China have established certain mechanisms for service innovation, but failed to build in the financial forecasting and evaluation models into the system. Without the emphasis on evaluation and change management, service innovations may be disrupted due to the lack of sustainable funding and the proven value to the companies.
- To successfully carry out service innovations in the manufacturing industry, companies need to develop three critical competencies: service coverage, service development, and service process management. Service coverage refers to the company's ability to provide various services to existing clients to maintain the relationship in the purchasing cycle. Service development focuses on the company's ability to capture the service opportunities, develop new service offerings, and push the new services to the market. Service process management refers to the company's ability to deliver the services while continue to innovate with new service offerings.
(Simplified Chinese version only)