Hello everyone,
last month, I released the "Future Business Models in the Industry"-Landscape.
Today I'll share a detailed explainer about EaaS risks, some numbers about revenues with new service models and a few examples from our landscape including the comparison of two similar companies.
Let's start with an update for the landscape:
(Click on the image for full size)
With now over 150 companies included it becomes clear that most large OEM manufacturers have at least some digital service and own software offering. Not suprising when we look at the crowded bottom right software provider corner. There is still room for better and hopefully cheaper standard solutions - or at least this is what was often requested when I talked to many more people deep into the matter. More learnings can be found in my blogpost about the landscape.
Did I forget anything? I'm always looking for feedback and more insights.
⚠️ Equipment-as-a-Service ist neither easy and not always the same.
Volkmar Mohs- an absolute veteran when it comes to machines and financial numbers - has written a detailed blogpost on how to tackle risk when implementing an as-a-service-model. Highly recommended read as it also explains the difference between various service models well.
Commercial Risk and EaaS Performance
💰There is money in industrial Servitization (Numbers)
A survey from 2017 on Service-based Business Models (PDF) conducts that 21% of companies want to offer an outcome-driven pricing model. Based on recent discussion I had and with this study from Porsche Consulting ("Beyond the Product") (PDF) this still seems to be true.
Not every manufacturer want to enter the pay-by-use models but most of them - the study says 75% - plans to become a service-driven company. Margins around 15% to 35% can be achieved which is higher than the usual margin on hardware (2-3%). Note that the study is based on interviews around real numbers and not just plans.
I've found these studies on a recent blogpost from SAP. They mentioned some of their customers, that went into a pay-by-use model. Here the push towards service is based on the higher margins in after-market services and that a consistent customer experience helps with loyality. The article includes possible methods for the transformation.
(Note: Take this with a grain with salt, as this is a press release from a vendor. But thumbs up for including so many sources and doing research!)
🔎 Some (new) Examples from the Landscape
Heidelberg Druckmaschinen was one of the first large OEM that offered a subscription-based business. And added more services afterwards e.g. for consumables.
In contrast to Heidelberg Druckmaschinen, König & Bauer (same industry) sets the focus on customer contact with a growing shared customer community and many digital service options.
Path Robotics is a startup that aggressively markets their machines as "Zero CapEx" assets.
GOM (now part of ZEISS) released their latest software update - including a good video overview by the lead software engineer and public available release notes. It's rare that software features get so much attention in this industry.
Remberg, a startup building service software recently created a video case study.
👋 Thanks
I want to end this issue with a thanks to all the people that sent feedback and helped me understand this market even better. The goal of this newsletter is to learn more about new business models in the industry.
We will continue next month with more examples.
Best regards
Philipp Reiner
(Drop me a mail at mail@philippreiner.info )