The business benefits of Servitization plus the availability of IoT technologies (sensors, embedded systems, gateways, connectivity, platforms) are pushing Equipment Manufacturers to develop and deliver Connected Services.
Our definition of Connected Service: a Service enabled by a Connected Product
We define “Connected Service” a service delivered by an Equipment Manufacturer, or a Service Provider, that is based on, or enhanced by, the fact that the product (machine, appliance, system) related to the service is connected to the Internet (“Connected Product”). In this way, the Connected Product and the Connected Service form a Digitally Enhanced Product-Service System.
A few examples of Connected Services offered by leading equipment manufacturers are:
- thyssenkrupp MAX
- Schindler Ahead
- Kärcher Fleet
- Domino Printing Scienses Safeguard and Smart Production
- Crown Connected Solutions
- Biesse SOPHIA
What these value propositions have in common? Are there any common denominators?
Yes, we identified 6 common denominators across all the Connected Services cases.
In this article, we are breaking down Connected Services into modular blocks. You can compose them to form a composite offering.
As you’ll see, there are so many different ways to put the blocks together and offer a unique Connected Service.
Some Connected Services are Digital-only Services. This means delivering to customers useful information, insights or integration services via digital systems only.
Other Connected Service are a mix of physical and digital capabilities. This is the case of enhanced maintenance contracts, made more effective through monitoring, preventive, condition-based or predictive maintenance algorithms.
Advanced Service Contracts and Equipment-as-a-service offerings are also examples of composite Connected Services.
Why? To help you define your Connected Service “Mix”
The purpose of this classification is to help you define your Connected Service “Mix” in a very practical way.
If you just want to design your Connected Service offering, you can work in detail on each individual block, and then compose the overall offering.
If you also want to develop the Connected Service, in Servitly you will find a set of ready-made functionalities for each block. On our side, in fact, we are using these 6 common denominators as the foundation of our functional architecture.
We are designing and developing Servitly SaaS to give you everything you need to develop your Connected Services offering, based on the composition of these 6 blocks.
On your side, this classification can help you to:
- define your Connected Service “Mix”, depending on your IoT maturity and the value you want to deliver to your customers
- focus on each single component to understand and define what is your competitive advantage, your key differentiator, your unique selling proposition
- evaluate the overall value of the offering, as a sum of the parts, and let you answer more precisely to the key question: “Are my customers willing to pay for this, and how much?”
The 6 blocks
We refer to a typical Product-Service System and we consider the main interactions that occur within it:
- the Product is being used
- the Product needs maintenance to continue working properly and efficiently
- the Product receives an input in order to work: e.g. energy, consumables
- the Product generates an output as a result of its work
- the Product-Service system is being sold by the provider and purchased by the user
Each of these interactions represents an opportunity to offer a connected service.
Block 1: Monitoring & Reporting
By Monitoring & Reporting we means collecting data coming from the Connected Product, then organizing and structuring it to provide a report to the customer of everything the product has done.
If you are familiar with the DIKW pyramid, this corresponds to the transformation of Data into Information.
Monitoring and reporting is related to virtually everything that happens in the product and, if relevant, also in its environment. If the customer has purchased multiple products, monitoring and reporting covers both individual data and aggregate data for all products in use. This is the case with a Fleet Management solution.
The value of Monitoring & Reporting for the customer
The value for the customer is to extend its measurement capabilities and have precise and accurate information about its products or fleet of products. Thanks to this service, the customer can measure variables that were previously inaccessible to him or that would have required a large investment in IoT technologies on his side. Instead, in this way the equipment manufacturer provides the customer directly with the information he needs.
The key differentiators of the Equipment Manufacturer in Monitoring & Reporting
The Equipment Manufacturer has the opportunity to differentiate itself from its competitors by:
- extending the coverage of monitoring as much as possible; ideally, monitoring should cover all functions of the product that are relevant for the customer (e.g. consumption, production, work cycles, critical variables); this could also collect data from the surrounding environment;
- digesting data and defining reports as simple and accurate as possible; simplicity and accuracy are a value to customers.
Block 2: Connected Maintenance
By Connected Maintenance we mean leveraging Digital Capabilities enabled by the Connected Product, to make maintenance activities more efficient. The end result is a longer lifespan and a lower risk of failure and downtime of the product.
Maintenance activities involve many roles. Therefore, Connected Maintenance services can take many forms. To guide us we refer to this diagram, that represents the main interactions within a Connected Maintenance service.
Data coming from the Connected Products enable the development of Digital Capabilities supporting maintenance activities. We classify such capabilities according to the stage in the life cycle of a failure in which they are useful:
|Before the failure||Prevent the failure||Predictive maintenance algorithms that estimate the Remaining Useful Life (RUL) of the product or a component.|
Condition-based maintenance algorithms, based on the wear of the product or a component, canaries and other metrics that signal deteriorating health status.
Preventive maintenance algorithms, based on the number of hours the product or a component has been working.
|At the exact moment the failure occurs||React as quickly as possible||Real-time monitoring of all possible failures.|
|After the failure||Understand what needs to be done to fix the failure||Real-time monitoring and historical recording of all the variables useful for diagnostics.|
Ability to immediately and ideally automatically recognize the needed spare parts.
|Fix the failure as soon as possible||Remote configuration.|
The value of Connected Maintenance for the customer
The final purpose of Connected Maintenance for the customer is a longer lifespan and a lower risk of failure and downtime of the product.
The customer may receive the value of Connected Maintenance in 3 different forms. These corresponds to the marker (1), (2) and (3) in the diagram above.
- The customer has direct access to (some) Digital Capabilities directly. These support him in the maintenance activities he is in charge of.
- The customer receives faster and more accurate support when the failure or anomaly occurs. This is because technical service has access to Digital Capabilities.
- The customer subscribes to an enhanced maintenance service contract, which includes a guaranteed service level and/or an all-inclusive agreement. This is possible and sustainable for the OEM and the technical service thanks to the support of Digital Capabilities.
The key differentiators of the Equipment Manufacturer in Connected Maintenance
The Equipment Manufacturer has many degrees of freedom to build its own unique Connected Maintenance offering.
First of all, the definition of the boundaries of responsibility for how does what:
- which maintenance activities the customer is expected to do himself?
- which maintenance activities are in charge of the technical assistance service?
- which maintenance activities require OEM involvement
Regarding the development of Digital Capabilities:
- define the subset of Digital Capabilities available to the customer and to the technical service;
- develop algorithms useful for prognostics;
- extend alerting functions to all possible failures;
- extend and deepen the level of information available for diagnostics;
- extend contextual troubleshooting to cover all possible cases;
- develop algorithms to identify the needed spare parts;
- develop capabilities to allow remote configuration;
- provide the technical service with a control room to supervise the products under contract.
Regarding the delivery of maintenance service contracts:
- offer a proactive maintenance service, in which the technical service realizes immediately a failure, without the customer having to do anything, and organizes the visit and the repair in the shortest time possible;
- offer a guaranteed service level;
- offer an all-inclusive agreement, with labor and spare parts are included.
Block 3: Insights & Advisory
By Insights & Advisory we mean using data collected from the Connected Product to provide the customer with useful information and knowledge to make optimal use of the product. By “optimal use” we mean using the product in a way that improves one or more of product’s KPIs such as:
- Availability (Uptime)
- Spare parts
Digital Capabilities for Insights & Advisory are fed by data about product usage. This is first organized and structured (from Data to Information). It is then given a context and finally synthetic indicators are computed (from Information to Knowledge).
This process could be entirely automatic or require human input at some point.
In the first case, the Digital Capabilities alone are able to give the user all the information and knowledge he needs to make optimal use of the product.
In the second case, the Digital Capabilities are used by a team of advisors at the manufacturing company. The advisors enrich the digital information with their know-how and experience. In this way the advice given to the customer is based on the combination of actual, accurate data and human experience and knowledge.
Of course, the KPIs that the service want to improve must also be measured. This allows the customer or the advisory team to measure the effect of their actions and to correct them if necessary.
The value of Insights & Advisory for the customer
The final purpose of Insights & Advisory is to help the customer improve the way he/she uses or set the product to get more value from it.
The customer may receive the value in 2 forms:
- Insights and advice computed automatically from data. In this case insights and advice are shown to the customer through a digital mean. The customer has to interprete the insight and then take action. If available, an advice could be more direct in telling the customer what action to take.
- Advisory from a human advisor. The customer receive advice from a human advisor and then take the suggested action (This type of services is also described here: https://www.advancedservicesgroup.co.uk/product-page/performance-advisory-services-whitepaper).
The key differentiators of the Equipment Manufacturer in Insights & Advisory
As an Equipment Manufacturer you can build a competitive Insights & Advisory offering by working on these elements:
- extend the monitoring capabilities to all the data needed to understand how the customer is using the product
- develop and implement usage recognition and usage recommendation algorithms
- build synthetic indicators to help customer evaluate good and bad usage behaviours
- build a team of advisors who can access to IoT-based information and knowledge of the product and add their own know-how and experience
- extend the above capabilities beyond the product to embrace also the process or context in which the product operates
Block 4: Control & Configuration
By Control & Configuration we mean using the IoT infrastructure the other way around: sending commands and configurations from a central system to the Connected Product. Such commands and configurations aim to optimize the operational processes of the product.
Your customers are used to interacting with your product through HMI interfaces. With this type of Connected Service, your customers will be able to interact with their machine or fleet of machines through a Cloud-based application.
If your machine has some configuration settings, you could offer a set of predefined configurations on the Cloud; this way you can keep the configurations continuously updated and adapt them to new situations that might arise.
The value of Control & Configuration for the customer
The value for the customer is to be able to quickly choose the most suitable configuration (or recipe, program, profile) for the job to be done and to have access to the latest configurations prepared by your R&D department.
Another useful utility is to store past configurations, to restore them in case of need. Moreover, the customer could find it useful to have a log of all the changes made to the machine configuration.
Automatic optimization is the union of automatic advices + remote configuration.
The machine sends its operating data to the central system, which processes them, identifies the conditions of use and, based on these, calculates the ideal configuration. The configuration is then sent to the machine, which adapts to the actual conditions of use.
Automatic optimization can be one of the biggest value proposition you can deliver to your customers.
The key differentiators of the Equipment Manufacturer in Control & Optimization
In Control & Configuration, as an Equipment Manufacturer you can create your competitive differentiators by:
- making it possible to remotely configure the largest number of parameters (taking into account any safety regulations)
- developing a series of predefined configurations, optimized for any kind of job your machine does
- developing algorithms that allow to automatically identify the best machine configuration according to the real conditions of use
Block 5: Integration & Interoperability
By Integration & Interoperability we mean leveraging the IoT connection to let the product interact within the process or context in which it operates. Examples of interactions are:
- The product receives information from other products / machines working upstream. This may allow the product to adjust its operations.
- The product provides information to other products / machines working downstream. This may allow them to adjust their operations.
- The product provides information on the need of consumables. This may allow an automatic order of consumables.
- The product provides information to and/or receives commands from a system that coordinates multiple products.
This kind of connection can take 2 routes:
- local communication between the product and its environment
- communication between the product and a central Cloud-based system and then Cloud2Cloud integration with other systems operating in its environment
In the first case these capabilities are delivered directly by the product itself. They are (smart) product features.
In the second case these capabilities are delivered through the form of a digital service. Although this route is longer, it can bring greater benefits to both the Customer and you as an Equipment Manufacturer.
The value of Integration & Interoperability for the customer
The value of Integration & Interoperability for the customer is the amplification of the benefits of digital capabilities. The digital capabilities we have seen so far offer benefits related only to the product alone. With Integration & Interoperability services these benefits are amplified, extending to the entire process or context in which the product is inserted.
Additionally, having access to information and knowledge via API is of greater value to the customer than having access to the raw data generated by the machine. Turning data into information and knowledge is a complex task, that requires a deep understanding of how the machine works. Digital service gives the customer exactly what they need. In fact, often, having access to raw data, even a lot of it, doesn’t allow the customer to extract value.
The key differentiators of the Equipment Manufacturer in Integration & Interoperability
In Integration & Interoperability, as an Equipment Manufacturer you can create your competitive differentiators by:
- identifying all the input factors that, if received, could improve machine operations + exposing APIs to receive them
- identifying all the output factors that could be exposed to help the customer maximize the performance of the entire process in which the machine is used + exposing them through APIs
- if the machine makes use of consumables, monitoring consumption and enabling automatic or semi-automatic reordering mechanisms via API
- if yours is a B2C product, integrating your Cloud system with popular Home Assistant platforms (Google Home, Alexa, Siri) and leveraging as much as possible the functionalities already available on those platforms
Block 6: Advanced Pricing
By Advanced Pricing we mean exploiting IoT connectivity to define the price of the service as a function of a KPI.
The advanced pricing model could be used to determine the monthly price of:
- the entire product delivered as a service (Equipment-as-a-Service)
- an advanced service contract
- an all-inclusive maintenance contract
- an advisory service
The variable price could be a function of:
- the amount of time the product has been used
- the amount of output generated by the product: kilometres travelled, cubic metres produced, number of pieces produced, litres filtered, etc.
- the availability and/or performance and/or quality rate of the product (OEE)
- the economic impact of the product on the customer’s business
Finally the variabile price could be purely proportional or tiered.
The value of Advanced Pricing for the customer
First, the customer has the advantage of a variable cost. This allows him to better adapt to dynamic and unpredictable market trends (for a business) or habits (for a consumer).
Secondly, the benefits for the customer increase even further when the price-determining variable becomes a function of the final outcome rather than just use. In this case, the customer pays to get a result, rather than paying and still having to worry about getting a result.
The final effect is that the customer feels good about how much he is spending.
The key differentiators of the Equipment Manufacturer in Advanced Pricing
In Advanced Pricing, as an Equipment Manufacturer you can create your competitive differentiators by:
- choosing which service to associate Advanced Pricing with. Ideally, you can associate Advanced Pricing with all the service blocks we have seen so far. In addition, you could also add your product itself as a service. Thus, the most comprehensive offering could be: your product as a service + connected, all-inclusive maintenance + advisory services + digital monitoring, configuration and integration services.
- choosing which KPI the price is linked to, within the usage-based – outcome-based range. This choice depends on your confidence in achieving the defined KPI. It is also conditioned by the possibility of measuring the value of the KPI in a certain and indisputable way.
Summary: the value for the Customer
We hope these 6 blocks can help you in defining your Connected Service “Mix”. Especially in assessing the most important question: why are you doing this? What value will the customer get from it all? Here’s a final takeaway:
|Connected Service Block||Value for the Customer|
|Monitoring & Reporting||I want to be sure that everything is ok|
|Connected Maintenance||I want to ensure that everything will be ok|
|Insights & Advisory||I want to improve the way I use the product to get more value|
|Control & Configuration||I want to save time when using or setting the product|
|Interoperability & Integration||I want to extend the benefits to the process or context in which I use the product|
|Advanced Pricing||I want to feel good about how much I spend|
We hope we’ve been helpful.
Let us know and stay tuned!