Changing the Game in Industrial Goods Through Digital Services

Changing the Game in Industrial Goods Through Digital Services

          
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Changing the Game in Industrial Goods Through Digital Services

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    Services have long been an attractive area of growth for industrial goods companies. Spare-parts, modernization, and maintenance services typically have higher margins and growth rates than do sales of new equipment. These services also promote customer loyalty and lead to future equipment sales.

    Digitization is now enabling service providers to reach a new level of performance and efficiency. Yet many original-equipment manufacturers (OEMs) and other service providers have been slow to make the transition to digital services. They doubt their ability to monetize digital services and recoup the investment. Digitization has two important benefits that are often underappreciated, however. It greatly reduces the cost of delivering services, and it facilitates closer, longer-term customer relationships that offer a variety of new service possibilities. We believe that taking these factors into account will change the calculation.

    For OEMs, digitization poses a threat as well as an opportunity. By shifting the locus of value creation from servicing equipment to managing information and equipment, digitization expands the universe of potential competitors. Digitally savvy companies could take over parts of the service business despite having little expertise in industrial goods—and perhaps eventually commoditize the hardware elements of the value chain. To maintain a competitive position and boost prospects for growth, manufacturers need to move quickly.

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