Industry Trend Forget about products: Service is a growing business model

Editor: Stefanie Michel

While Industry 4.0 is starting to have an impact on products and processes, one change to how we do business has not yet fully developed its potential. A survey reveals that the opportunities offered by service-oriented business models are still little used.

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According to IFS, manufacturing companies can greatly increase their turnover by offering services.
According to IFS, manufacturing companies can greatly increase their turnover by offering services.
(Source: © alphaspirit –

The ERP specialist IFS sees three developments that will have an impact on 2018: The Internet of Things (IoT) and 3D printing will grow, and to an increasing degree services will become guarantors of turnover. But how will these developments propel digitalisation?

  • The IoT will be an integral part of product design: Until now, manufacturing companies have applied IoT technology mainly as an addition. Ready products were fitted with sensors to transmit information from the periphery of plants, machines and devices. This will change because more and more manufacturing enterprises will use the possibilities of the IoT from the very start and make it an integral part of product design.
  • Servitisation is picking up speed: In times where there is no struggle over markets, diversification and customer loyalty will become increasingly important for manufacturing companies. The way forward for these companies is opened by servitisation, in other words, the addition of services to their products and even the realisation of complete service-oriented business models. A few manufacturing enterprises are already successfully using digitalisation technologies to “servitise” their offers. They include a machine manufacturer who no longer sells his clients machines, but operating time; or a furniture-maker who has added cloud-based services to his consultancy products. Models like this will spread widely in 2018, so that in a few years’ time most manufacturing companies will generate more than half of their turnover through services.
  • 3D printing will reach adulthood: 3D printing, too, will enter a more mature phase in 2018 and begin to unfold its potential. Until now, this technology has only been used to a small extent in production. Its broad application has been hindered by time-consuming pre and post-processing and by the relatively small capacity of 3D printers. These obstacles will gradually be eliminated. For example, Stratasys has developed a solution that combines three printers in a single stack. The solution is highly scaleable and can produce 1,500-2,000 components per day.

All in all, the manufacturing industry is a digitally mature sector and is availing itself of the opportunities of the smart factory. This is revealed by a worldwide, cross-sector digital change survey conducted by IFS, the global business software provider. Its results, released in June 2017, clearly show that 83% of the survey participants belonging to the manufacturing sector rate their company’s digital maturity to be among the top three levels on a scale of one to five. Not one of the surveyed production enterprises considers itself on the lowest level. However, in an international comparison, considerable differences become apparent. Whereas in North America, 55% of companies see themselves on the top two levels of the maturity scale, in the EMEA region, which includes Europe, only 29% see themselves at these levels.

The self-appraisal of the world’s manufacturing industry regarding investments in digitalisation is less positive than with digital maturity. Although 84% of the companies consider their budgets “sufficient” or “conducive,” which seems positive at first, these are the lowest values compared to the other sectors examined in the survey.

Global manufacturing companies name big data and analytics as the most important areas for investing in digitalisation. Nevertheless, only 26% of them currently take advantage of data analyses to speed up innovation. 58% admit that they have only just started to use data analyses, but they offer no competitive advantages yet.

The biggest opportunity for the manufacturing industry in digitalisation is the smart factory – the intelligent, self-organising factory. Many production enterprises seem to be on the right track here. Over half of world-wide respondents (55%) claim they have already converted to smart manufacturing; in Germany, the figure is only slightly less at 50%. Another 26% of respondents (in Germany, 30%) want to take the step towards a smart factory over the next two years.

On the other hand, the sector is not yet so far advanced regarding a further major opportunity offered by digitalisation: “Servitisation“. Many companies, especially in Germany, are still hesitating to implement service-oriented business models. Only 24.7% of the surveyed manufacturing companies around the world say that they have firmly established servitisation and that it is reaping dividends; in Germany, this figure is 30%. With 43.3% of the surveyed companies, servitisation is only just beginning and receives reasonable attention and support from the management; in Germany, this applies to only 20% of cases. All in all, these figures mean that slightly less than a third of the world’s manufacturing companies still need to derive value-added opportunities from servitisation. In Germany, this applies to as much as half of them (50%).

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