Servitization in Industrial Automation. Dale Hopkinson Senior Presales Consultant Gemalto

Transcription

1 Servitization in Industrial Automation Dale Hopkinson Senior Presales Consultant Gemalto

2 Agenda Business Evolution Drivers of Servitization Top Servitization Business Models Current Situation Predictions Examples Business Impact Main Takeaways

3 Business Evolution Companies are evolving from a product centric to a service/software centric approach Product Centric Service Centric Strategy Objectives Product Focus Customer Focus Value Proposition Innovative Technology Customer Experience Financial Model Transaction Value Lifetime Value

4 Drivers of Servitization Customers want more from the companies that provide them with business-critical machines and equipment. They are looking for these products to be surrounded by intelligence that enables them to maintain or increase their value. Luciano Cunha Global VP Sales & Marketing, TO-Increase

5 Drivers of Servitization Customer Demands Value Added Services Innovative Business Models Shift from CAPEX to OPEX Lower Capital Expenditure Budgets Servitization Drivers Hardware Commoditization Low Profit Margins No/Low Strategic Differentiation Strategic Opportunity Differentiation Innovation Access to untapped markets

6 Benefits of Servitization Customer Lock-in Competition Lockout Financial Stability Compete Better Retention Business and Service through Authorized Channels Predictability Sell to Untapped Markets Growth Learning Optimize Software & Services Differentiate based on Value Recurring Revenue Sell in Mid-Sized Organizations Increase value Proposition in Existing Markets

7 Top Emerging Servitization Business Model Types Pay-per-use or subscription based pricing Preventive maintenance (PM) and OEM parts enforcement Ownership lock-in via software re-licensing

8 Business Model #1 Pay-per-use / Subscription based pricing

9 Pay-Per-Use Business Model: Current Situation 80% 80% of respondents DO NOT currently offer power-by-the-hour pricing models, or anything similar Source: 2016 Annual Manufacturing Report

10 Pay-Per-Use Business Model: Current Situation 7% are planning the implementation Around 7% of surveyed said that pay-per-use is already part of their business model Almost 48% said that pay-per-use could be part of their business model in the future Source: McKinsey & Company and the VDMA 2016

11 Pay-Per-Use Business Model: Prediction Emerging pay-per-use model to disrupt industrial automation equipment sales Pay-per-use to grow exponentially

12 Pay-Per-Use Business Model: Examples It will be possible to order manufacturing processes and capacities at the click of a mouse. In manufacturing as a service, the systems themselves are not purchased. It is merely the performance of the machine that is paid for. What applies to complete production systems will, in the future, also hold true for individual elements within a manufacturing facility for robots, for example. On the basis of pay-per-use models, it will not be the machine itself that is purchased, but its output. Hello Industrie 4.0 we go digital Manufacturer Unmanned surface robot in the ocean. Its Wave Glider robot collects and communicates real-time ocean data to help solve some of the world s greatest challenges Offering: a data subscription model. Wave Glider can provide access to an array of sensors anywhere in the ocean at a day rate of ~$2,000; hiring an ocean-rated research vessel to collect the same data might cost 10x to 50x more Financial results: the company reported low double digit revenue in 2011 when sold hardware and breakeven between $30-$50mm in sales in 2013 after launching the subscription model

13 Pay-Per-Use Business Model: Business Impact Access Provide your customers access to high cost equipment they could not afford Secure Predictive Revenue Accurately develop and execute strategic plans. Servitization Drivers Differentiation Differentiate yourself in a commoditized market Optimize Inventory Levels

14 Business Model #2 Preventive Maintenance & OEM Parts Enforcement

15 PM & OEM Parts Enforcement: Current Situation 76% 76% of manufacturing facilities follow a preventive maintenance strategy Source: The Plant Engineering 2016 Maintenance Study

16 PM & OEM Parts Enforcement: Current Situation To safely operate robots, some government authorities have implemented safety regulations. For example, the U.S. Department of Labor requires sites that use robots to: Establish and enforce a lock-out procedure for preventive maintenance or repair operations Follow the robot manufacturer's preventive maintenance schedule rigorously Establish a periodic check of all safety-critical equipment and connections

17 PM & OEM Parts Enforcement: Current Situation Only few have effective Preventive Maintenance Companies delay or stall their Preventive Maintenance programs for many reasons: A big order comes in and it s all hands on deck to fulfill it Limited professional personal to cater to customer needs Maintenance activities are undocumented Maintenance staff and contractors are not trained properly

18 PM & OEM Parts Enforcement: Prediction In light of increased failure with PM programs, more and more manufacturers will start embracing the preventive maintenance enforcement business model We expect this trend to grow over the next 2-3 years

19 PM & OEM Parts Enforcement: Examples WARNING NOTICE: Order UV Lamp Replacement UV Lamp > 2000 hrs. NOTICE: Order UV Lamp Replacement UV Lamp > 2000 hrs. The first warning to replace the 3D printer s UV lamp will show up when the lamp has been in operation for 2000 hours. If the 3D printer is being run in economy mode you may continue until the second warning at 2980 hours. NOTICE: Replace UV Lamp Soon UV Lamp > 2980 hrs. The second warning appears at 2980 hours. The UV lamp is approaching end of life and should be replaced immediately. NOTICE: Replace UV Lamp Now UV Lamp > 3000 hrs. UV lamp-usage time exceeded Replace UV lamp (refer to User s Manual) then restart timer. Time is up! At 3000 hours the UV lamp is out of life. The final warning will flash and then the 3D printer will shut down for good. The printer will not turn on until the UV lamp has been replaced.

20 PM & OEM Parts Enforcement: Business Impact Avoiding Lawsuits Avoid potential lawsuits over equipment defects due to improper maintenance Ensure Predictive Revenue Lock customers into maintenance, parts, and consumabled ecosystem Servitization Drivers Prevent Unplanned Downtime Save your customers from unplanned downtime Efficient Machines Parts, service and software from the OEM are optimized and will ensure longevity and effiency

21 Business Model #3 Ownership lock-in via software re-licensing

22 Software re-licensing: Current Situation Secondary equipment market for old and refurbished IA equipment with embedded software is quite vast Unlimited transfer of ownership When equipment is sold or refurbished for a different customer, there is no new license generation, causing missed revenue opportunity for the manufacturers

23 Software re-licensing: Prediction More and more IA vendors will be locking their software to a specific serial number and customer This enables new recurring revenue when the equipment is decommissioned and sold by its original owner to a different customer

24 Software re-licensing : Examples All Cisco equipment is registered with Cisco at the time of purchase both in direct and indirect sales Each piece of Cisco equipment includes embedded software that is licensed to the original purchaser only and is not transferable Each subsequent transfer must relicense that software in order to be legitimate

25 Software re-licensing: Business Impact Customer Relationship Capture secondary owner as your new customer New Recurring Revenue Recurring replacemement parts and consumables revenue Servitization Drivers Warranty & Support Generate Revenue by offering new customer full warranty and service. Customer Benefit New customer is able to purchase at a lower assurance

26 Enabling Servitization The evolution of technology is driving Servitization forward at a fast pace making it a standard INTELLIGENT DEVICES Business Transformation REAL-TIME DATA SOFTWARE CONNECTIVITY

27 Main Takeaways Servitization completely redefines the traditional manufacturing business model Servitization presents new recurring revenues opportunities Pay-as-you-go business models Preventive maintenance service & replacement parts Software relicensing contracts Servitization drives competitiveness in a commoditized market Servitization improves customer experience and creates stronger customer-centric solutions

28 Thank You

29 Dale Hopkinson Senior Presales Consultant Gemalto Chicago, Illinois USA +1 (443)