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Today many organizations and consumers seek to acquire ongoing services from their suppliers, rather than a one-time product purchase. The term product as a service has come into vogue, but the concept is not really new. Office managers may remember the days when copy machines had meters in the office that allowed companies to pay for what they wanted -- copies -- and not for the machine itself. The monthly bills from Xerox required no service contracts or ownership.
Another element of today's product as a service model is the idea of remote monitoring and operations. The Department of Defense, which is notorious for having huge long-term service bills, has been moving major equipment expenditures to what they call performance-based logistics or power by the hour . Some aviation products have moved to programs that track and charge based on flying hours. But these are challenging migrations since firms need to know not only what services cost today, but how they can beat past performance to ensure they make a fair profit from these models.
With the Internet of Things tidal wave, location-based-services and other technologies much richer in sources of information, manufacturers can remotely monitor equipment and services (via software upgrades, for example, or with predictive methods to help avoid failures). They can also gain intelligence about the environments in which their products operate and use that information to improve product design and user operating experience.
Like all business models there are several product as a service flavors -- traditional product purchase with warranty, the lease/usage model, and having a third-party service provider assume management of the product over the life of the product. Since most readers are familiar with the first model, which involves field service and warranty management, let's focus on the latter two business models.
These approaches to product as a service change the revenue model drastically, as well as product design, logistics, installation, ongoing service, recovery and resale if needed. To design and manage this new environment, companies need to make a radical change in their information systems.
Is there an app for that?
Here are some of the technologies required to shift to a product as a service strategy.
Custom apps. Many firms have already made this change by directly linking their products to their performance monitoring and/or customer call center. There are many underlying considerations, including Wi-Fi availability and/or cellular performance to ensure that when the app calls, a person -- or machine -- picks up.
The network. As mentioned above, connectivity is key. Thus, most of the major telco carriers, mobile device, Internet service and equipment companies are early adopters of IoT technology. Their role (at a minimum) is to provide the necessary network infrastructure.
Embedded technology. The landscape of available devices is littered with point solutions including sensors, RFID, cellular devices, continuous monitoring devices and so on. Whether you design your own systems or have partners to do this, consider an integrated approach. What needs to be monitored, how will that information be communicated (wired or wirelessly), what standards and protocol will the data require? If operation is remote, will the power source ensure continuity? Products and systems also need to be designed, or redesigned, to assure bi-directional communication for transmitting instructions and software upgrades.
Cloud vs. local/distributed intelligence. How will intelligence be distributed between products, the environment they operate in (the customer's site) and the monitoring and control systems? Not all data needs to be shipped back to the management system.
Performance and monitoring analytics. With analytics, form needs to follow function. Since each product and the environment in which it operates may be different, a great deal of thought needs to go into this area. What is the data and what thresholds need to be set to signal good or bad performance?
Modifications to contract, billing systems. Selling products and then selling services is a model many firms rely on to ensure cash flow continuity and product profitability. With product as a service, the pricing model changes. Costing, product price basis, subscription models and so on need to be thought through. Warranty models may also change, since you may be agreeing to certain outcomes and performance levels. Third-party service companies need to scrutinize their agreement with the product companies, since being between the customer and the product company can be risky without forethought. Service lifecycle software. With the product as a service model, data collection across the life of the product is essential. Analyzing failure should be important no matter who owns the product, but when you are the product or service owner you eat all the cost (and recovery).
Customer experience models. Customer experience is often overlooked when developing a product as a service model. Usability is as important as performance uptime, especially when you consider products like ATMs, airport kiosks and so on. Design considerations should encompass usability as well as flexibility to support modifications, upgrades and serviceability.
Platforms by industry for IoT/product as a service. There are a growing number of platforms on the market that can support the product as a service model. Major PLM and manufacturing vendors have been expanding their PLM/CAD/CAM offerings to include service and manufacturing from design through end-of-life. Cloud ERP vendors offer manufacturing-centric products and services, and a new breed of entrepreneurs are leveraging IoT and analytics to create new products and services. The technology market will start to evolve as these companies work with customers who are considering or migrating to these models.
Why product as a service will require an overhaul of business processes
Will the product as a service trend take hold among manufacturers?
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