Service organizations play a vital role in helping the industry run smoothly, reliably and profitably. However, customers could benefit from better value and more sustainable operations by changing focus. Instead of the traditional approach of paying for maintenance, repair and replacement, they can adopt outcome-based models for guaranteed uptime or energy savings.
Adopting this business model requires a radical rethinking of the usual relationship between customer and service partner. In particular, it is essential to establish a collaborative partnership made possible by digital solutions.
Connectivity is key
The advent of digital connectivity provides the infrastructure that makes it possible to offer a guarantee of availability, performance or even energy efficiency. The pandemic has led to a drastic change in the way services are delivered, as in many cases it was simply not possible to send a team of engineers on site. Industrial customers have shown great interest in ways to make their operations more robust and reliable. Essentially, they want to hedge against the risk of a similar crisis. The implementation of remote services is the solution, as it allows remote assistance for the repair of existing equipment, as well as installation and commissioning. Not only does this ensure business continuity, but it also reduces travel time as well as health and safety risks.
Service partnerships provide results-based business models
Customers can realize many benefits by replacing outdated business models and price-driven win-lose sourcing exercises with relationships built on trust. Their service partner, enabled by digital solutions, is then able to implement a holistic approach to reduce risk, optimize performance and foster innovation.
Ultimately, this will also enhance sustainability by reducing waste as part of the circular economy and reducing carbon dioxide emissions.
The next step is a new type of service contract that allows customers to purchase agreed levels of uptime, productivity, energy efficiency or other KPIs. We are also witnessing the establishment of ecosystems that bring together service providers for the overall success of the client’s business. These may be insurance companies, financial institutions and businesses in the
areas of cybersecurity, AI and machine learning.
New service business models are not just about reliability and availability. They can also improve sustainability, with energy efficiency being a huge opportunity. Remote monitoring of equipment allows the business to see where it is performing well and where it is not as efficient as it could be. For example, electric motors can be upgraded to the highest efficiency levels, such as IE5. Inefficient methods of speed control, such as throttling, could be replaced by variable speed drives which can typically increase energy efficiency by 30-50%.
Payback periods for energy efficiency improvements can be as short as one to two years. In some cases, the payback period could be five years, which would normally be a hard sell to customers. However, as mentioned earlier, we are seeing greater questioning of sustainability and carbon neutrality, in particular. With the ability to reduce their energy bill and carbon footprint, customers make investments over much longer periods. Therefore, a five-year payback period becomes much less of an obstacle.
The implementation of new business models, also called XaaS (everything as a service), is already well underway in other sectors. The industrial services industry is still in its infancy, but early adopters are likely to gain a significant competitive advantage. MRO
Adrian Guggisberg is division president of ABB Motion Services.