Digitalization offers several new service opportunities for the operation and maintenance of asset fleets. Companies need competencies in analytics and an understanding of the customer’s business to utilize these opportunities. The challenge for companies is to identify untapped opportunities that are relevant to a large enough number of paying customers.
We argue that a holistic view of the customer’s processes supports the development of the service provider’s product and service portfolio. The figure below shows the key elements related to the development process of digital services. We particularly highlight the importance of customer knowledge and the understanding of customer value creation being utilized throughout the service development process.
In efforts to understand the potential and impact of digitalization, asset owners, original equipment manufacturers (OEMs) and service providers have established their roadmaps for the adoption of digital technologies. Roadmapping for digitalization and analysis of the value potential related to circular economy, as well as comparisons of the customer organizations’ and service provider’s roadmaps and plans are among the key tasks to be done when starting to identify concrete steps towards digital services.
Reliability and criticality analysis may be applied to identify where maintenance and investments could result in the best value for money and also to reveal bottlenecks in the customer’s processes and the potential for digital services. Life cycle cost and profit (LCC/LCP), Total Cost of Ownership (TCO) and Overall Equipment Efficiency (OEE) models provide additional information in terms of efficiency and economic measures. Data regarding large fleets may be utilized to provide benchmarked knowledge and act as a gap analysis for the customer.
Large amounts of operations and maintenance data have been collected in recent years; however, use of this data has often been limited. Relatively small investments in the analysis of maintenance history data, for instance, may provide significant support in identifying where maintenance is most needed, where most costs originate and where the most potential lies in operations and maintenance.
Digitalization creates opportunities for new business models. Key elements in business models are the value proposition, value creation and value capture.
The value proposition and an understanding of how value is created in customers’ processes are at the core of the digital service business model. This begins with a vision of the technology, process change or service with which a positive impact on the customer is to be achieved. A structured approach is needed from the outset; however, there is room for iteration regarding the value proposition throughout the business model development process. Digital products and services require rethinking the value proposition. The whole life cycle of products and services must be considered. Digitalization enables new ways of selling performance instead of products, as it is possible to monitor the use of products. Optimization of customers’ processes is also an area where digitalization opens new opportunities. This is a particular area where novel analytics models and domain knowledge of the customer and provider organizations need to be efficiently utilized together. Data analytics provides information that can be used in improving the efficiency of processes.
Customer relationships change from individual transactions towards continuous partnerships. New customer segments can be considered with digital products and services. It is important, jointly with customers, to define and agree the KPIs that will be monitored to ensure the quality of service. New partnerships might be needed to deliver the value proposition. It is important to identify these partnerships and create the business ecosystem. Partners could include, e.g. cloud service providers, analytics experts, and ICT companies. Models for sharing benefits within the ecosystem need to be established.
Digitalization also provides new opportunities for reaching customers through direct channels, as well as globally. Furthermore, digitalization enables the automation of processes related to customer interactions, e.g. by automating orders based on data received from production. Digitalization provides new opportunities for continuous cash flow and revenue from life cycle services. Pricing can be based on shared benefits. However, costs related to collecting, storing and analysing data need to be taken into account, and services related to, e.g. data analytics or cloud services may need to be purchased.
Towards new digital business models
Despite the rapid development of digital technologies, business models have so far remained largely transaction-based. However, there seems to be a mutual understanding that value-based earning models and value sharing models will increase in importance in the future, specifically in future business networks. Capabilities and tools are required, such as measurements for value sharing, key performance indicators and models for life cycle costs and profits.
Senior Scientist, VTT
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