Beyond the Product
How industrial goods providers improve their competitive advantage with servitization
Increased global competition in the industrial goods sector is shifting revenue structures from the core product business to the software and service business. Digitalization is changing the way services are designed and delivered. In this strategy paper, Porsche Consulting analyzes this industry, which is traditionally focused on the development, production and installation of capital goods. How are successful companies managing their transformation toward a service-centric business model? The publication shows best practice examples and provides answers for concrete implementation with a focus on the industrial machinery, medical technology and special vehicles sectors, including agricultural, construction and mining machinery.
- Servitization provides significant business value that drives total shareholder return (TSR). Servitization champions can achieve double the TSR of their industry peers
- Digitalization fundamentally changes the way services are designed and delivered. The built-in scalability of advanced services or platform plays drives down costs and reshapes the economics of service business
- When transitioning to as-a-service business models, the key challenge is about managing risk. While the opportunities are tempting, taking over value creation from customers requires careful identification, assessment and continuous management of risks
- Bolder service transformations require a dedicated operating model as the DNA of an engineering-driven hardware company changes with increasing degree of servitization
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