These manufacturing companies take the lead developing digital, business related services
What were the challenges, results and lessons learned from manufacturing companies when making the transition to a new business model, driven by digital services? These were the topics of the webinar hosted by Noventum and HSO, on June 23rd. Knorr Bremse and Huisman Equipment, companies that have also been involved in our research project ‘Drivers for Growth in Service’, shared their experiences with the development and launch of new, customer business related services. In this blog we share some of the highlights of this webinar.
Knorr Bremse is the global market leader for braking systems and a leading supplier of other rail and commercial vehicle systems. The company has around 29,000 employees at over 100 sites in more than 30 countries. Meike van ‘t Hoen is head of the Rail Service Product Management Team and responsible for the service portfolio with KB Rail. In 2018 the company started their service transformation journey.
Huisman Equipment engineers, builds, installs, and maintains large offshore equipment, such as cranes, drilling and pipelay equipment. The company has around 2.200 employees, of which around 250 work in services. The services branch focusses on maintenance, repair, and upgrade of all delivered equipment, with service engineers flying all over the world. In the webinar, Martijn Reissenweber, Director Huisman Services, shared his experiences with the introduction of new digital services.
Developing and delivering new services
We asked Meike and Martijn to explain a bit more about new services they have developed so far. Meike: “Historically, our service offering at Knorr is very much product-related. As we started our service transformation process, we asked our self how to become the business partner of choice for our customers and how to develop business related services, that add value for our customers.
Together with Noventum we developed four new value-adding services that are currently in the pilot phase. One of these is our Energy Saving Service. With this service we help our customer to reduce the operational costs via energy saving through a fixed periodic service fee. We support them by improving their ecological footprint, while at the same time meeting public expectations and tender requirements. For this service we use data from several sources, internal and external.’
Martijn: ‘At Huisman, we have developed an automated drone inspection. The drone flies a pre-defined path around the equipment and takes photographs of the complete surface of the equipment. We use AI and algorithms that are learning continuously to recognize defects such as paint damage, corrosion, cracks and deformations.’
Delivering added value for the customer
Martijn: ‘Our drone-inspections added value to our customers directly, especially in the past few months, when our engineers could hardly travel around the world, during the lockdown. In addition, we find that the quality of our reporting is better, because it is based on objective data instead of human observations. Drone inspections are less expensive for customers, easier to organize and safer. We can deliver the report faster, since it is generated automatically instead of written manually.’
Meike: ‘We find that our customers not only benefit financially from our Energy Saving Service, they also reduce their ecological footprint and are able to meet for example legal and tender requirements. They also get a lot more insight into the factors that influence energy consumption, so they know how to change and control these.’
The value of service driven business models for your organization
Meike: ‘We are convinced that new, digital service models will help us maintain and grow our installed base. A recurring revenue stream is very important, since product sales can be vulnerable. This became even more clear in the past few months of the covid-19 pandemic. We also see more upselling potential in services and opportunities for higher revenue and cross margin. We find that delivering services, such as the Energy Saving Service, helps us to get a better relationship with customers and to become a business partner instead of a supplier.’
Martijn also sees long term advantages for Huisman: ‘The drone inspection service is easily scalable, since the drones themselves are not very expensive. Once we have the data and AI models in place (which actually has not been easy!), the service will be improved continuously. We see that new markets open up, such as building inspections and the inspection of third-party equipment. The costs for the clients are lower, but the margins are higher, which means that we create a healthy revenue stream.’
- With regards to AI, many companies say they can do but very few companies really deliver, so it’s important to challenge and assess them thoroughly.
- Start developing a new service in small, lean and efficient small companies. For that reason, we have dedicated Singapore as our testing ground.
- Educate yourself, be critical and keep asking questions to keep improving your offering.
- Implement a thorough change management strategy, including communication plan.
- Involve top management; for example, we made board members sponsors of each new service to be developed.
- Make sure to develop new skill sets, for example additional consulting capabilities.
Challenges and lessons learned at Huisman and Knorr Bremse
Meike: ‘We found that to sell this new offering, we needed to find other stakeholders at our customers, and we also must get a better understanding of the customer’s needs. Another challenge is that customers are still hesitant when it comes to sharing and exchanging data. This means we need people with technical and consulting skills. It is a different game than selling spare parts.
Internally we met resistance to change, as we expected. Knorr is a proud company, a worldwide market leader, so why should we change? We need to keep communicating and explaining this strategy to our people. This is also one of the main reasons that we involved the management team from the start and made them sponsors of each new service we were developing. Our services offering has impact on all processes, tooling and for example also our accounting department when moving from selling products to subscriptions.
We have also learned that this transition is a multi-year project because there is so much to learn. As mentioned, how to sell new services in a tender-driven market? We learned that to create demand this requires a consultant-driven sales process.’
Martijn: ‘For Huisman Services it was quite a challenge to find the right partner with enough knowledge to develop the AI we use. In line with this, it has also been quite difficult to draft the requirements for a tool we did not know yet. In the meantime, we have learned a lot about data and AI.
Huisman is still a very product-oriented company and our cranes are actually doing well. So, to make services development a priority has been difficult. We deliberately selected a relatively small location, Singapore, for the development and roll-out of this service. There is a lot of AI knowledge in the region and an eagerness to innovate. Now that the drone inspection service is doing really well, others also see the opportunities this offers and that we can move to a service-oriented business model. We foresee that in the future, instead of offering drone inspections as a service, will offer uptime of our equipment.’