service transformation in the high tech industry
TRANSCRIPT
© 2014 IBM Corporation
Service Transformation in High TechPartha Bose
13 Nov 2014
© 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model
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Even high end Consumer Electronics products are becoming commodities
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Source: idealo
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Sales of Equipment Manufacturers are severely impacted by business cycles
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Source: IDC Manufacturing Insights, 2013
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Product Manufacturers have many reasons to sell Services & Software
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Fight commoditization of products
Fight commoditization of products
Create annuity revenue streamsCreate annuity revenue streams
Build customer intimacyBuild customer intimacy
Note: Icons from the nounproject.com collection
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Customers also prefer the simpler and faster buying process
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Lower upfront capital expenditure
Lower upfront capital expenditure
Buy capability vs. productsBuy capability vs. products
Simpler pricing, less complexitySimpler pricing, less complexity
Note: Icons from the nounproject.com collection
© 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model
© 2014 IBM Corporation
Consumer Electronics example – Programmable thermostat
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$249 $24.98
10x price differentiation driven by software on the device and in the cloud.
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Medical Devices example – MRI hardware vs. imaging software
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Repeat sale in 7-10 years Repeat sale 1-2 times per year
Continuous revenue stream & customer engagement
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Aerospace example – Selling engines vs. Selling Operating Hours
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From selling engines on an one time basis
Rolls Royce now earns >50% of revenue from integrated services.
To selling Power by the Hour
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Semiconductor example – Software delivers better yielding chips
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Every foundry sells chips Winners sell better yield
Big Data drives competitive differentiation through improved yields.
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Software industry example – Move towards Appliances
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Instead of giving software away for free
Customers likely to pay more for something tangible like an Appliance
Put software in a box and charge a premium
© 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model
© 2014 IBM Corporation
Service Business Models
• Warranty / Extended Warranty• Maintenance agreements• Training
• Product based Service
Business Model Characteristics
• Advanced Consulting services• Engineering & IT services
• Standalone Service
• Bundled hardware, software, services, financing
• Simple pricing – but based on complex underlying analysis
• Sensors to monitor product condition & usage
• Analytics to enhance uptime & add to product value
• Frequent upgrades via software
• Solution Business Model
Note: Icons from the nounproject.com collection14
© 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model
© 2014 IBM Corporation16
DESIGNCollaborate with partners and customers to develop smarter products and services.
DELIVERDeploy the products and services via appropriate revenue model and fulfillment path.
MANAGEEnsure ongoing value throughout the product and service lifecycle.
3 Steps to get to a Solution business model
© 2014 IBM Corporation17
DESIGNCollaborate with partners and customers to develop smarter products and services.
DELIVERDeploy the products and services via appropriate revenue model and fulfillment path.
MANAGEEnsure ongoing value throughout the product and service lifecycle.
1. Design
Design Service using customer experience journey mapsDesign Service using customer experience journey maps
Incorporate IoT (Internet of Things) & Analytics in the design of service and asset management
Incorporate IoT (Internet of Things) & Analytics in the design of service and asset management
Align hardware and software design cyclesAlign hardware and software design cycles
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DESIGNCollaborate with partners and customers to develop smarter products and services.
DELIVERDeploy the products and services via appropriate revenue model and fulfillment path.
MANAGEEnsure ongoing value throughout the product and service lifecycle.
2. Deliver
Determine revenue models by product, service and solutionDetermine revenue models by product, service and solution
Establish routes to market, e.g. Direct, Channel, OEM Establish routes to market, e.g. Direct, Channel, OEM
Identify fulfillment models, e.g. EMS, s/w license & download Identify fulfillment models, e.g. EMS, s/w license & download
© 2014 IBM Corporation19
DESIGNCollaborate with partners and customers to develop smarter products and services.
DELIVERDeploy the products and services via appropriate revenue model and fulfillment path.
MANAGEEnsure ongoing value throughout the product and service lifecycle.
3. Manage
Use cross-functional teams, build a separate Service organization
Use cross-functional teams, build a separate Service organization
Train or hire personnel with the right skills, leverage partnersTrain or hire personnel with the right skills, leverage partners
Establish performance metrics - revenue sharing, sales metrics (less compliance, more insight)
Establish performance metrics - revenue sharing, sales metrics (less compliance, more insight)
A business absolutely dedicated to service will have only one worry about profits. They will be embarrassingly large.
A business absolutely dedicated to service will have only one worry about profits. They will be embarrassingly large.
Henry Ford
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Let’s keep in touch
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Email [email protected]
Phone +1 408 7917042
Twitter @pbose17
LinkedIn linkedin.com/in/parthabose
IBM Electronics Blog insights-on-business.com/electronics