Digital Transformation

Beyond the product

How industrial goods providers
improve their competitive
advantage with servitization
INSIGHTS
//01
Servitization provides significant business
value that drives total shareholder return
(TSR). Servitization champions can achieve
double the TSR of their industry peers.

//02
Digitalization fundamen-
tally changes the way //03
services are designed and
When transitioning to
delivered. The built-in
as-a-service business
scalability of advanced
models, the key challenge is
services or platform plays
about managing risk. While
drives down cost and
the opportunities are
reshapes the economics
tempting, taking over value
of service business.
creation from customers
requires careful identification,
assessment and continuous
management of risks.
//04
Bolder service transformations require a dedicated
operating model as the DNA of an engineering-driven
hardware company changes with increasing degree of
servitization.

Beyond the product 02

 01

The time for

sustainable
servitization
is now

Beyond the product 03

Intensified global competition and increasing commoditization in most industries are shifting
value pools from hardware products to software and services. While the competitive advan-
tages have been seemingly understood and published in academia such as in Michael E.
Porter and James E. Heppelmanns landmark article “How smart connected products are
transforming competition”1, servitization has not yet found the widespread adoption that one
could assume.

At the same time, it appears that the transition into service providers has become an almost
universal goal when speaking with C-levels across industrial goods industries. To understand
what is driving this paradox, Porsche Consulting analyzed industries that traditionally focus on
developing, building and delivering capital goods. Across a wide range of industries especially
industrial machinery, medical technology and the specialty vehicles including agriculture,
construction and mining equipment, this strategy whitepaper sheds light on actionable best
practices. How do players that are well advanced in their servitization journeys navigate their
transformation towards a service-centric business and reap the benefits described in figure 1.

Beyond the product 04

 SERVITIZATION

Product- Service-
centric centric
Focus on Product Customer

Innovative Customer
Differentiation via technology experience

Maximized Maximized customer

Economics via transaction value (relation) value

Revenue/ Service
profit share
(schematic)
Product

Potentials

Improve resilience and financial profile

Provide strategic differentiation

Extend product lifecycle

Strengthen long-term customer relations

Rebundle value and risk for customers

© Porsche Consulting

Figure 1. Servitization as shift from product- to service-centric business

Beyond the product 05

Why is the time for servitization now?

In the past, services offerings have always been tightly linked Porsche Consulting's empirical research on total shareholder
to the costs and availability of human labour, making it hard return (TSR) as presented later in this whitepaper has shown,
to cost effectively provide services at scale. Today, technolog- that servitized companies outperform their peers in the long-
ical advancements enable access to abundant equipment and term by more than 50 percent. Within the sector of industri-
process-related data at low cost, irrespective of the equipment al machinery, the median TSR of the best leading servitized
location. Digitalization has thereby fundamentally enhanced companies was 22 percent per annum between 2014–2019,
the way services can be designed and performed, enabling an compared to 3 percent per annum of their peers. The impact
easier scaling of service business at low incremental cost. of servitization encompasses upside for corporate top-line,
margin levels and market valuation. By transformation into
The capability to generate cheap insights about the actual service-centric organizations, companies can build economic
usage from an installed base of connected products does al- moats around their businesses as a result of:
low for more efficient delivery of services or helps identify and
provide new services to tap revenue and margin potentials.
Where previously maintenance field force spent a high share `` Strategic differentiation due to a deeper understanding
of their time traveling, ubiquitous data of sensors provide near and integration into customer operations
real-time data to substitute such activities. Further, services
and business customers spun around them can help rebun- `` Competitive edge by generating proprietary data
dle value for customers and fundamentally align interests of that cannot be replicated by competitors
industrial goods companies with their clients.2 By fulfilling
specific customer needs that address all aspects of the cus- `` Long-term customer relationships that promote
tomer’s process, services help to build sustainable relations loyalty and stickiness
instead of relying on a transactional basis that implies compet-
ing solely on (more comparable) product specifications. While `` Product lifecycle extension by providing value-added
products can be compared on their features and their prices services across the lifecycle after initial product sales
decomposed on components and assembly level, services are
considerably more difficult to compare due to shear amount of `` Rebundling value and risks that enhance the value
physical and non-physical parameters that influence the ser- proposition by addressing unmet customer needs
vice experience plus the ability to continuously improve the
performance of the system. The number of such (oftentimes
customer-specific) parameters present significant opportuni-
ties for differentiation for companies that servitize.

Beyond the product 06

Servitization creates resilience in times of crises and also Given the apparent benefits of service transformations the
help truly service-centric companies to emerge from eco- questions arise: Why do not more industrial goods com-
nomic downturns as market-share winners against their panies exploit the potentials of servitization strategies and
peers. The COVID-19 pandemic and previous economic what can we learn from companies that are already more
downturns have shown a significant resilience of industri- advanced in their servitization journey?
al goods companies that have already shifted from a prod-
uct-centric towards a service-centric business. Service This strategy whitepaper seeks to shed light on exactly
business is more robust both on top- and bottom-line, typi- these questions. Chapter 2 provides insights into the busi-
cally at even more attractive margins than product business. ness value provided by services including a quantitative
In the extreme event of a lock-down that shuts down cus- analysis across (sub) industries. Chapter 3 outlines the key
tomers operations, however, also services do not provide considerations to define a winning service strategy, start-
a complete downwards protection. Especially players that ing with the question when and if servitization is the right
have already scaled their services beyond physical field ac- strategy for an industrial goods company. It further identifies
tivities, e.g. via data-driven services, profit. Their service op- the key elements of successful service strategies and trans-
erations are only to a minor degree impacted by limitations formations. Chapter 4 outlines how industrial goods players
on physical site access. For instance, Siemens Healthineers can operationalize such a comprehensive service strategy
has shown that their broad service business can limit neg- by adopting their overall operating model to successfully
ative impacts on hardware sales. With a wide range of dig- drive their service business. Finally, chapter 5 summarizes
ital services that do not need to be physically performed at the strategic imperatives for executives of industrial goods
the hospital, the medtech player delivered service growth players to define the servitization journey tailored to their
throughout all four quarters of financial year 2020 despite very own company.
the challenging business environments of a pandemic.3

Beyond the product 07

WHAT IS SERVITIZATION
Literature defines servitization as the process of adding cases service-only business. Figure 2 showcases such a
services to manufacturers' core product offerings to cre- company-specific transformation path by tapping into new
ate additional customer value.4 In this whitepaper, servi- value pools that service play offers. The more a company
tization should not be solely understood as a process of advances from left to right, the more its DNA changes, ex-
adding services, but rather as the evolutionary develop- emplified by other business models and monetization op-
ment of a company from a predominant product-centric tions, other sales & marketing approaches and additional
business towards a service-first or even in highly specific required capabilities.

Transformation degree

PRODUCT BUSINESS TRADITIONAL SERVICES ADVANCED SERVICES PLATFORMS & ECOSYSTEM SERVICES

Total Cost of Optimize & Guarantee Quality & 3rd Party App B2B Market-
Ownership Output Development place
Product Sales
Support Services
Data Mgmt.

Product- e.g.
Product Industrial Provide Data Others Data-
Centric
system Equipment Customer Brokerage
Services
Cybersecurity
Product Business Consulting Solutions
Configuration Services e.g. Industrial Supply-demand
Ordering Installation Facility & Plan & Manage Logistics & Equipment Matchmaking
Operations Inventory­-
Planning Management
Data-driven MRO

10% 50% 30% 10%

Selling the Offering services Offering data-driven services Orchestrating a
product around the product beyond the product multi-sided ecosystem

© Porsche Consulting

Figure 2. The evolutionary servitization path

It should be noted that the terminology, definition and re- lifecycle such as refurbishments or upgrades. It stretches
porting of service business varies to a large degree across towards recurring aftermarket activities that include spares,
industries and individual companies. Based on the under- wear parts, and includes consumables business that is
lying nature of service business as relational customer in- aimed at supporting product sales of industrial goods. Fur-
teractions, this strategy paper adapts a wide definition of ther, advanced services in terms of data-driven services are
services. This starts with traditional services that include included, as well as “software only” offerings fall under the
product-centric services such as technical field services, service definition of this whitepaper. Chapter 3 provides ex-
repairs, and other services provided along the equipment tensive examples along these service clusters.

Beyond the product 08

 02

The business
value of
servitization

Beyond the product 09

 TSR1 Peers Champions
2014–2019 Median Median -10 % 0 % 10 % 20 % 30 % 40 %

Industrial 3.3% 22.0%

machinery n = 25 n=6

Medical 12.6% 21.2%

technology n = 20 n=5

Specialty -1.5% 10.4%

vehicles n = 14 n=5

Servitization Champions
Median | Servitization peers (Boxplot indicating Minimum, 25% quartile, Median, 75% quartile, Maximum)
1 Total Shareholder Return in % p.a. (CAGR) © Porsche Consulting, S&P Capital IQ

Figure 3. Servitization champions provide excess shareholder return over peers

Beyond the product 10

The empirical evidence shown here confirms that servitiza- Servitization provides additional revenue sources both driving
tion drives business value for industrial goods players. Cor- product and service sales. While for most industries increased
porate performance as measured by the total shareholder service sales typically go along with an improved product
return (TSR) can provide insights along the different impact business. For instance Vestas started tapping into non-cap-
dimensions of servitization: revenue growth and margin ex- tive service for 3rd party wind turbines. By servicing 3rd party
pansions that can directly found in corporate P&L statements products that in the meantime account for a two-digit num-
as well as the impact on multiples as observed through capital ber of their serviced wind park fleet, services can also be de-
market valuations aggregate into capital gains for investors. coupled from core product business.
Additionally, free cash flow distributions to shareholders via
dividends provide further capital returns to investors.5 Service business as asset-light business models with a more
flexible cost-structure does typically provide attractive mar-
While service is certainly not the only option to achieve above gin levels. Even under challenging structural market condi-
market TSR, successful service transformations provide high tions, such as Heidelberger Druckmaschinen AG is facing, an
TSRs that excess those of their industry peers. A comprehen- introduction of new scalable digital services helps to provide
sive analysis of publicly listed companies across three key stable margins when product business margins drop.
industries in the field of capital goods as displayed in Fig-
ure 3 underpins this link of an above market TSR of leading Another element of the overall created shareholder value can
servitization champions.6 For industrial machinery players, be attributed to the increased valuation multiples that mirror
servitization champions displayed a median TSR of 22 per- underlying competitive advantage, higher resilience and more
cent compared to 3 percent median for their peers above € favourable (recurring) cash flow profiles of service players.
1 billion in revenue. Servitization champions in the medical Capital markets reward servitization champions such as Cat-
technology outperformed their peers with 21 percent ver- erpillar that managed to drive service revenue up to a third of
sus 13 percent TSR. For specialty vehicles manufactur- overall revenue with further ambition to double their service
ers from agricultural, construction and mining machinery, sales within a 10-year timeframe.
a broader range of TSR is observable. This accounts for the
more diverse underlying market drivers. However, the TSR The overall positive impact of service business is certainly
of servitization champions with a 10 percent exceeded the also depending on market environment characteristics and
-1 percent median TSR of their peers. the corporate strategic ambition. From an empirical point of
view, however, the business value of service is not as easily
The business value of service indicated by such above mar- isolated because building up an excellent service portfolio will
ket TSR stems from a combination of different value drivers.7 also foster product business and vice versa.

Servitization is a long-term play

Going into services will rarely deliver short-term growth. required for building-up the relevant service capabilities.
A significant service shift is often associated with a shift Over a 2-to-5-year timeframe, the reduced revenue and
from one-time to recurring revenues, realized over the life- high initial expenses will subside, and financial profiles im-
time of a contract. In the short-run executives might even prove. Such a transition period is real and almost impossi-
have to cope with the typical top-line dip and investment ble to mitigate.

Beyond the product 11

 03

Defining
a winning
service
strategy

Beyond the product 12

 THREE STEPS
TO DEFINING YOUR SERVITIZATION STRATEGY

CORPORATE STRATEGY

02

Servitization ambition level

03

Strategic product-service
portfolio
Cross-
Product
functional
and Business model Service
and
brand portfolio portfolio
functional
strategy
strategies

Integration of 3rd party offerings

01

01
Suitability of a service-driven strategy
02
Ambition level and value pools
03
Strategic product-service portfolio
© Porsche Consulting

Figure 4. Three steps to defining your servitization strategy

Beyond the product 13

To systematically reap the benefits of servitization, success- The three-step approach depicted in figure 4 guides exec-
ful industrial goods companies take a structured approach in utives to answer the questions if servitization is the right
crafting their service strategy. They stringently integrate ser- strategy and how to craft a product/service portfolio that
vitization as key pillar of their overall corporate strategy to en- creates long-term value for both customers and the own
sure alignment across all company activities. Among others, company. Although the process is linear from the outset, its
this means that a serious service transformation will necessar- iterative nature means that new insights are integrated con-
ily impact the overall brand positioning, requires a tight link to tinuously. A periodic review of the service strategy as well as
cross-functional innovation and digital transformation strate- the derived product-service portfolio is key.
gies, as well as a clear cascading into functional strategies.

STEP 1 STEP 2 STEP 3

SUITABILITY OF AMBITION LEVEL STRATEGIC

A SERVICE-DRIVEN AND PRODUCT-SERVICE
STRATEGY VALUE POOLS PORTFOLIO

The process starts with determin- Companies cannot achieve an effec- To put strategy into action, successful
ing the suitability of servitization as a tive transformation if people have hid- industrial goods companies build up a
strategy pillar along four dimensions: den agendas. There needs to be one modular portfolio of products and ser-
the fit to the corporate strategy, cus- vision and a clarity of fundamentals. vices based on (customizable) building
tomer base, product market saturation Clearly defined ambition levels with a blocks that can easily be tailored to
and competitive rivalry. bold aspiration often help achieve bet- specific customer needs. Just as im-
ter outcomes. Depending on a com- portant as the portfolio itself, are the
pany’s individual positioning, market mechanism to govern and steer the
and competitive environment, the transition. An integrated product-ser-
narrative for a service-driven strategy vice roadmap defines what and when
will differ. Any good (service) strate- future services are developed and
gy starts by working backwards from launched. More crucially, it also helps
the customer to truly understand their to manage interdependencies to the
needs and pain points. Based on the evolving product offering.
gained insights, companies can cre-
ate what is sometimes referred to as
the “value pool map” to link customer
value with business value opportu-
nities. This comprehensive overview
helps to focus resources and funds
on the most promising opportunities,
instead of rushing down one predeter-
mined service trajectory prematurely.
The clarity and consensus about what
a company should not do is just as im-
portant — and it requires this compre-
hensive picture.

Beyond the product 14

 INDUSTRY-SPECIFIC COMPANY-SPECIFIC
DETERMINANTS DETERMINANTS
01 03
CORPORATE STRATEGY FIT PRODUCT MARKET SATURATION

Value proposition Installed product base

Does service-driven value proposi- What is the ratio of new product
tion towards customers align with installations to the installed
corporate strategy? product base?

Transformation Product lifetime

benefit-risk trade-off What is the average
Does the expected business value product lifetime?
outweigh required investment and How significant is aftermarket
risks to successfully transform? business?

Service maturity level Installed base management

Is the current operation model Which transparency level exists?
suitable to successfully support Suitability What is the share of connected
and scale service business? products?
of a
service-
Criticality in customer value chain driven Commoditization degree
How critical is your product for How homogeneous
managing customer operations? strategy is the product business?
How complex is the product
Customer retention on hand?
What is the level of
customer churn? Industry norms and standards
How high are switching costs Which external standards exist?
for customers? Which regulatory requirements
need to be met?
Customer intimacy
To what extent are customer Prevalence of differentiation
processes known? strategies
Is there an opportunity Is competition driven by price-/
for co-creation? cost-, or product differentiation?

CUSTOMER BASE COMPETITIVE RIVALRY

02 04

© Porsche Consulting

Figure 5. Determinants for the suitability of a service-driven strategy8

Beyond the product 15

Suitability of a service-driven strategy

Whilst servitization presents attractive economic opportu- of potential events to tailor maintenance reviews, provide spare
nities for most industrial goods companies, service business parts and manage inventory or lubrication, SKF added a new
itself is not a panacea and every individual company needs fee-based business model that goes way beyond the bearing
to answer the general question of whether to servitize itself. product business itself.10
Both company-specific and industry-specific factors influ-
ence the decision. Figure 5 describes the key determinants For Heidelberger Druckmaschinen AG the relevance and even
for the relevance of service business. necessity of service business is largely driven by industry-lev-
el determinants. Given the high product market saturation and
When looking at the corporate strategy fit, the link to the cus- fundamentally decreasing new equipment sales of their print
tomer-facing value proposition is key. Take for instance the val- machinery, leveraging their installed offset-print equipment
ue proposition of construction and mining machinery producer base for service business is key strategic trajectory for the cor-
Liebherr Group “to offer innovative products of impressive qual- porate re-positioning as “full-service provider”. Under the roof
ity at competitive prices [with] well-planned parts supply lo- of the newly formed Lifecycle Solutions business segment that
gistics and high standards of aftersales service”.9 A key consid- now accounts for 40 percent of revenues, Heidelberger focuses
eration in Liebherr’s mission of supplying technically advanced, on extending their lifecycle services and subscription business
user-oriented product of highest quality is attributed to longer to safeguard revenue and secure profitability despite challeng-
maintenance intervals compared to its competitors. This di- ing market fundamentals. With now approximately 350 life-
rectly impacts the role and magnitude of its service business cycle services contracts that include services, consumables,
relative to the product business. and optionally their print workflow software Prinect offered as
bundle on a pay-per-month basis and around 70 subscription
SKF, a global leading provider of bearings, has strong compa- contracts that also include consulting and training as well as
ny-specific indicators that point at significant value opportu- equipment charged at a pay-per-outcome basis, Heidelberger
nity for service business. Regarding the corporate strategy fit, is aiming at achieving 11 percent of group sales with these new
SKF has extended its former value proposition. Besides provid- service-driven business models in FY 2021 — more than dou-
ing products around the rotating shaft they added the improve- bling this revenue in a 3-year timespan.11
ment of rotating equipment performance as second element to
their customer-facing value proposition. Looking at their cus- In the medical imaging products market characterized by in-
tomer base, the criticality of the product in the customer value creasing competitive rivalry e.g. from Chinese players, lead-
chain is a major determinant for the underlying service business ing incumbents such as Siemens Healthineers, Philips or GE
opportunities. SKF identified that their products are a critical Healthcare leverage servitization as value adding strategy in
part of their customers value chain across different verticals face of maturing core technologies for magnetic resonance
like wind energy turbines or cruise ships. While rolling bearings imaging or computed tomography scanners. While high tech
are per se a small component of a larger asset system, sensors products such as MRI or CT modalities do not fit the common
that capture data such as temperature, vibrations or audio sig- notion of commodities, services, especially advanced services
nals can provide crucial insights into the assets health. From such as digital solutions that improve clinical workflows in the
early on, SKF leveraged this control point to extend its core imaging department, can help differentiate on customer ex-
product business by offering asset management services. They perience. For instance, service business at GE Healthcare ac-
now monitor and manage offshore wind parks, cruise ships or counted for about 35 percent of their healthcare system rev-
even entire oil drilling rigs 24/7 on behalf of their customers. By enues in 2019.12
continuous monitoring, predicting and providing early warnings

Beyond the product 16

Ambition level and value pools

Value pools mapped along your customer’s value chain help to spectrum is an ultimate strategic one that requires full C-level
comprehensively analyze, size and prioritize service opportu- attention and close alignment across the entire board. Along
nities based on current or anticipated customer needs, as laid the strategic rationales for service business as depicted in Fig-
out below in the infobox “The customer side of servitization”. ure 6, executives should concretize their ambition levels both
It forms the basis to define the ambition level for servitization on top- & bottom-line as basis to size transformation efforts
as clear answer of why to strive for service transformation. The accordingly.
decision of how to position the firm on the product/service

+ _bn | _%
New customer base EXPAND TO NEW CUSTOMER BASE
and target customer segments

+ _bn | _%
Existing customer
base with EXPAND SHARE OF WALLET
3 party equipment
rd via service business

+ _bn | _% + _bn | _%

Existing customer
base with PROTECT THE CORE GROW THE ADJACENT
own equipment product business service business

Product business Service business

Financial ambition level 2025

Revenue EBIT
contribution margin
[in € bn] [in %] © Porsche Consulting

Figure 6. Ambition level along growth trajectories via service-driven strategies

Beyond the product 17

A distinctive servitization “north star” along with the clearly able value propositions — for instance for financial investors
defined ambition level serve as a guidance to develop and that value business case certainty in a first place — Vestas
align the service portfolio, business model and integrate it supports performance optimization and takes over opera-
into a seamless value proposition. The relevance for internal tive risks in order to align incentives with its customers. The
communication and change as well as for external communi- derived service offerings address those service value pools:
cation should not be underestimated. 1) Maintenance partnering business models in the form of
Active Output Management packages range from preventive
Wind turbine producer Vestas has clearly mapped out their maintenance contracts, shared risk packages, time-based
ambition levels capturing growth opportunities. Vestas’ ser- availability guarantees for up to 97 percent uptime, towards
vice business is established as third strategic business area a “move wind from hour to power” package where energy
besides the onshore and offshore wind turbines business. By output in terms of 97 percent energy-based availability is
expanding its service to a multi-brand offering also servicing guaranteed instead of measuring uptime also when no wind
non-Vestas wind turbines Vestas is pursuing the ambition to is blowing. Looking at 2) fleet optimization solutions, Vestas
become global leader in fleet-wide wind service solutions with has acquired the Utopus Insights software platform to of-
a service revenue growth above projected 8–10 percent per fer advanced plant and data management, diagnostics, and
year market growth compared to new onshore wind turbine forecasting capabilities. These digital solutions help identify
installations growing at 1–3 percent per year. Additionally, upgrade potentials to yield more energy and thereby improve
also industry leading profit growth driven by service business an existing wind power plant’s output, thus improving the
is clearly laid out as corporate priority — with attractive ser- customers’ business case. Improvements of the production
vice EBIT margin of around 25 percent compared to an overall efficiency of a wind power plant can be carried out through
8–9 percent EBIT margin on group level.13 site-specific optimisation of operational parameters, imple-
mentation of intelligent software algorithms, and enhanced
To operationalize their service strategy, Vestas has thoroughly aerodynamic add-ons – in turn fuelling product business.
analyzed their main customer segments’ needs. To build suit-

THE CUSTOMER SIDE OF SERVITIZATION

While industrial goods firms ultimately want to create business value for their company, the underlying ratio-
nale must start by understanding and addressing customer needs. Whether these needs are explicitly men-
tioned by customers (pull), or implicitly observed customer needs (push), successful services must provide
value to customers. Typically, such customer value can be provided along the following dimensions:

`` Increase operational efficiency via optimized `` Reduce risk by sharing operational and market risks
Overall Equipment Effectiveness (OEE) that in with the service provider for fast reaction to chang-
turn helps increase output, improved plannability, ing business environments, such as shifts in market
or lower total cost of ownership (TCO) can be demand.
achieved.
`` Focus resources on core business when service
`` Optimize cash flows by shifting CAPEX to OPEX, providers are taking over processes that range from
front-loaded high investing cash flows can be out-tasking, e.g. single tasks such as repairs to
converted into continuous operating costs, out-sourcing entire support processes like quality
synchronized with the cash inflows generated or maintenance, customers can reallocate their own
through the output of the equipment operations. resources.

Beyond the product 18

Strategic product-service portfolio

Successful industrial goods companies do not consider ser- tal technologies creates the opportunity for product manu-
vices stand alone. Rather, services are linked to the product facturers to move ownership-based services from reactive
business including hardware, software and system integra- to data-based predictive or even prescriptive services that
tion. Forming suitable product-service bundles helps to de- further increase customers’ process efficiency. Doing so helps
liver customer value along a precise value proposition. So how build up extensive product and process knowledge, however
do successful service-centric industrial goods companies without — yet — transferring operational risks.
build up their portfolio along the product-service spectrum?
In contrast, usage-based business models focus on providing
A strategic product-service portfolio is built upon three in- availability of a product for the time that customers need it.
terwoven elements: 1) the business model portfolio, 2) the The customer does not buy and own the product, but instead
service portfolio, as well as 3) the integration of 3rd party of- pays a variable fee depending on the actual usage (per usage
ferings. time or per usage unit). Since all lifecycle cost in usage-based
business models remain with the provider, such business
Define appropriate business model(s) to capture value models create strong incentives to optimize products for the
As described in the Porsche Consulting publication “Digital cost of usage including the operations at the customer’s site.
Machinery Decoded”14 three different business models15 Consequently, the selling industrial goods company neces-
can be differentiated along the degree of risk exposure sarily must be able to predict and influence the operations
shifted from the customer to the business model provider and processes of the customer to control incurred operational
(see figure 7): risks and foresee market demand risks.

`` Ownership-based A crucial element in the revenue model of usage-based busi-

`` Usage-based ness models is the pricing approach that needs to be orient-
`` Outcome-based ed along the perceived value of the customer rather than a
cost-only approach. An additional risk premium is typically
Certainly not all companies need to strive for usage- or included to account for not foreseeable or not manageable
outcome-based business models. The required deep un- customer-specific parameters and the uncertainty of revenue
derstanding and assessment of risks along such business streams and accruing cost.
models typically comes with expertise built up in years of
service business to truly understand customer operations. Upon the successful deployment, services with a us-
For industrial goods players, the additional business oppor- age-based business model present an attractive opportunity
tunities need to outweigh risks incurred in such new business both financially and to increase customer intimacy. Due to the
model  — both via direct financial gains and more indirectly via continuous development of digital technologies, especially IoT
competitive differentiation. and data analytics, industrial goods companies are now bet-
ter positioned than ever to offer services with usage-based
Within traditional ownership-based business models, ser- business models and learn about their customers' operations.
vices can be sold both on a transactional basis (e.g. spare or Technological advances enable for example easier and more
wear parts) or relational approach (e.g. as part of maintenance accurate tracking and prediction of product usage, improved
contracts). Services such as financing or product mainte- product operations and maintenance planning driving down
nance are supplemental to the product business and typically cost of equipment operation. Lower cost of operation and
sold in separate contractual arrangements. The rise of digi- easy to calculate cost linked to the actual usage also directly

Beyond the product 19

translate into lower risk and in turn into a decreased barrier Particularly when industrial goods players decide to pursue
for potential new customers. Usage-based business models innovative business models, they have to thoroughly under-
therefore oftentimes help companies, that would otherwise stand the incurred risk and define suitable strategies to pro-
shy away from CAPEX but accept OPEX, to expand into new tect their balance sheets. An elegant option is bringing in 3rd
customer segments. parties such as financers that are willing to own risks.

In outcome-based business models the customer pays a fee While not an industrial goods player itself, industrial IoT
that depends on the achievement of a contractually agreed powerhouse relayr supports industrial goods companies in
outcome, such as output and/or output quality. At first sight, introducing innovative usage- or outcome-based contracts.
these services seem to present highly attractive financial op- For instance, they formed a strategic partnership with the
portunities as the contributed value can be directly related to TRUMPF Group to provide laser-cutting machines in a “pay-
the value creation for the customer. However, these oppor- per-part model”. Customers only have to pay for each cut
tunities come with a significant increase in risk exposure for sheet metal part, instead of having to buy or lease TRUMPF’s
industrial goods companies. The outcome is determined by laser equipment. With the backing of Munich RE as financer
many aspects that might be beyond their control. Moving to- for new business models that will own investment risk for ma-
ward outcome-based business models need to be well con- chinery, such new business models allow customers to make
sidered and are highly customer specific rather than one-size- production processes more flexible and react faster on chang-
fits-all solutions. es in market demand.

To determine whether industrial goods companies should Together with FLANDERS, a company specialized in design-
provide outcome-based services, the pivotal question is ing, engineering, producing, and servicing electric rotating
about how well they understand their customers’ processes machinery for high-demand applications across mining, mills,
and influencing factors that determine the outcome. Over- and heavy industry, they recently started offering guaranteed
looking the smallest influencing factors can have disastrous uptime. The new digital services reduce capital expenditures
economic consequences. As this deep customer knowledge and ensure maximum production of critical assets, guaran-
the result of long-standing business relationship and deep teed again via relayr’s parent company Munich RE.
domain expertise. When designing outcome-based business
models the alignment of interests is key. The careful crafting
of underlying measurement mechanisms needs to ensure Define your service portfolio along the service clusters
that there is no damage done to the customer relationship, As second element of the product-service portfolio, industrial
e.g. by instilling messy debates about outcome or discussions players goods need to craft their service offering within their
around pricing models. business model(s). Executives of industrial goods companies
need to understand the entire spectrum and evolutionary
When designed carefully, outcome-based business models nature of potentially relevant services as outlined in figure 2,
can create lock-in effects like no other type of product-ser- tangible examples along those service clusters are provided in
vice bundles. The knowledge to offer these services that so figure 7.16 The more crucial step is, however, understanding
closely interlink provider and customer processes constitute how to determine the single elements of a winning service
enormous switching costs even in a mid- to long-term time- portfolio and their interplay.
frame.

Beyond the product 20

Service clusters Description Exemplary services

Product sales Non-standalone services that are closely Flex Financing Options
support related to or enable product business sales e.g. capital and operating leases,
services ΏΏ Spare parts fee per disposable, or implant
ΏΏ Consumables
ΏΏ Financing
ΏΏ On-demand equipment and rental

Product- Standalone services complementing Air compressor parts delivery plan

centric traditional product-focused business or customizable to individual needs
Traditional services

services aftermarket activities

ΏΏ Technical services
ΏΏ MRO1 services
ΏΏ Equipment-related training
ΏΏ Project management

Consulting Project-based consulting support and training, Virtual Training Platform

services education, or performance optimization around for dealers and customers incl.
product business physical driver training
ΏΏ Training
ΏΏ Expert consulting services
ΏΏ Process consulting services
ΏΏ Performance benchmarks

Advanced Data-driven services related to the product myDMG MORI

services or to solve adjacent customer problems 24/7 central customer service portal
ΏΏ Data-driven MRO1 services incl. extension to 3rd-party equipment
ΏΏ Asset tracking via WERKBLiQ
ΏΏ Equipment fleet management
ΏΏ Data-driven TCO2 and quality mgmt.

Platform and Multi-sided digital platform connecting service teamplay

ecosystem provider(s) with the demand side by integrating Digital health platform around
services service offerings beyond the product business imaging-related administrative and
ΏΏ B2B marketplace clinical workflow services
ΏΏ Digital services platform
ΏΏ Equipment capacity platform

1
MRO: Maintenance, Repair, and Overhaul | 2 TCO: Total Cost of Ownership © Porsche Consulting

Figure 7. Overview of service clusters along industrial good examples

Beyond the product 21

Traditional services
The first three service clusters represent the traditional ser- for to over 25,000 customers covering more than 100,000
vice offering of industrial goods companies. machines. An upgrade to the equipment provider-agnostic
WERKBLiQ solution further extends their portal towards opti-
Product sales support services relate to sales measures such mizing service and maintenance processes also for third par-
as financing, on-demand and rental services or adjacent con- ty equipment — a crucial success factor in a heterogeneous
sumables and spare parts to complement equipment sales manufacturing environment. The one-stop shop platform
(e.g. Atlas Copco’s Air compressor service kit for spare parts). “BOBST Connect” provided by the Swiss packaging print pro-
vider BOBST, goes beyond maintenance to also orchestrate
Product-centric services relate to technical services, instal- the entire production process, while fleet optimization solu-
lation, maintenance, repair, and overhaul services incl. refur- tions like “MySandvik Insights” extend the service offering of
bishment or project management for systems integration. the Swedish mining equipment manufacturer. Sandvik further
extended their service offering by automation software along
Consulting services relate to product-focused support and their OptiMine process analytics and optimization solution,
training along the lifecycle from installation, to operation, to and AutoMine teleoperation system. To successfully offer and
maintenance (e.g. AGCO Fendt’s training for drivers of heavy scale such advanced services that require connectivity of the
vehicles). To stay competitive and improve margins, industrial installed based, however, the implications on product archi-
goods players should undertake a more detailed examination tecture should not be overlooked.
of aftermarket lifetime value — the total revenue they receive
from servicing their installed base. This measure, which is A few selected industrial goods providers already decided to
typically calculated for each product line, provides a more transform into platform and ecosystem businesses that typ-
comprehensive view of aftermarket value than commonly ically extend the established value propositions and reach
used metrics, such as service revenue captured per custom- beyond industry boundaries. Particularly in the arising digital
er. Companies that examine aftermarket lifetime value closely health and precision agriculture space both open and closed
may find that certain services, including core offerings, offer platforms are battling for a dominant position. Given the num-
significant upsides. For OEMs this could also mean that the ber of external factors influencing such a wide-ranging trans-
lion-share of its near-term growth could come from core ser- formation, the decision to launch an own platform business
vices, even though initial estimation suggest that advanced rather than becoming part of such an ecosystem should be
services are the main driver in the long run. based on very solid strategic considerations.

Advanced (data-driven) services Within the arising field of digital health, leading medical
The top players across all industries are actively leveraging technology and diagnostics players have chosen the path to
digital opportunities to enhance their existing service port- position themselves as ecosystem orchestrators. Siemens
folio with advanced services. These services use digital tech- Healthineer, for example, is continuously enlarging the eco-
nologies to provide customer specific, data-driven services system around its cloud platform “teamplay”. Stakeholders
like insights into the performance of equipment, need-based within the healthcare industry such as medical doctors or
maintenance, over-the-air product updates, or even compre- their medical-technical radiology assistants can access cur-
hensive asset or fleet management. Data-driven remote mon- rently more than 20 applications via a digital marketplace.
itoring is leveraged by companies across all sub-industries. Applications range from supporting doctors with interpreting
medical images, managing radiation dosage for patients, or
Atlas Copco’s SMARTLINK, for example, collects operation- securely sharing medical images between healthcare pro-
al data from air compressor equipment and translates it into viders. Similarly, GE Healthcare has created the Edison In-
actionable insights in order to improve uptime and increase telligence Platform to offer healthcare-specific applications
energy efficiency. Similarly, German industrial machinery which can be easily deployed and readily available for custom-
provider DMG MORI offers 24/7 access to an extensive ser- ers via the Edison Cloud that go beyond imaging modalities
vice range via their central service portal “myDMG MORI” and are deeply integrated into clincical workflows.

Beyond the product 22

Integrate 3rd parties into strategic product-service portfolio
As seen with the described platform plays, an increasing But also players form adjacent industries such as agrochem-
number of industries also in the B2B context are eyeing for icals with undertakings such as BASF’s “xarvio” online-plat-
ecosystem approaches of their own. form, or other agricultural processing equipment players like
Ag Growth International with their “AGI Suretrack” platform
In agriculture, such a battle for becoming the predominant have joined the battlefield for precision farming.20
industry platform is on full speed. Next to a handful of start-
ups that try and harmonize the data necessary for precision As seen with the precision farming example, it remains ques-
farming, some of the top agricultural machinery companies tionable how many players will finally succeed in an arena that
have been heavily investing in building platforms and linked tends to end up in oligopolistic structures based on strong
value-added services of their own. network effects. While some companies may choose to build
their own closed platforms and services, exploring mutually
John Deere developed their own suite of precision farming beneficial partnerships and integrating into winning ecosys-
technologies, marketed under “Precision AG”. The endeavor tem plays may provide a faster and more efficient way to de-
is aimed at maximizing yield from field preparation to meet liver value to customers and business.
individual field conditions, data analytics optimized planting,
precise application of inputs such as fertilizer or pesticides, Within the industrial machinery segment, leading players
and yield-optimized harvesting. By connecting machines alike DMG MORI, Dürr, Software AG and Carl Zeiss AG have
of different brands, John Deere tries to define industry wide set-up the ADAMOS platform to join forces for developing In-
standards and aggregate agronomic documentation data and dustrial IoT applications for machine builders.21
a growing number of applications into one system — all at the
fingertips of farmers. Leveraging the John Deere brand and The question of integrating 3rd parties is, however, not only
market reach, such a platform and ecosystem play provide relevant for platform and ecosystem services. Particularly for
stickiness. A farmer that got acquainted to use several appli- advanced services and innovative business models, strategic
cations and their specific benefits won’t easily give up these partners can play a significant role. Such partnerships can be
applications of switch to new ones. This inconvenience built considered as enablers for transformation processes. Team-
into switching goes beyond customer loyalty.17 ing up with more mature players can help kick-start service
transformations of traditional industrial goods players. While
The “Fuse platform” driven by multi-brand agricultural ma- the experience, technological capabilities and digital talent
chinery group Agco-Fendt has been developed to connect does not necessarily change what advanced services are
products from their different machinery brands and beyond. developed and scaled, strategic partner can dramatically in-
Combining customers from their different brands into one crease time-to-market, provide the opportunity to split costs,
platform helps to reach the minimal user base to become at- and use learning curve effects.
tractive platform for other partners to provide their services
via the platform. Following an open platform approach, the
Fuse platform tries to attract 3rd party service developers.18

Spin-off “365Farmnet”, a subsidiary of the CLAAS group po-

sitions itself as an end-to-end service provider for farmers
offering different service packages for optimizing the farm-
ers activities. Besides integrating CLAAS machine data, the
company has successfully formed partnerships with compa-
nies like Bayer (fertilizers) and meteoblue for weather data,
amongst others, to harvest the different insight for optimal
action for farmers.19

Beyond the product 23

 04

Executing
the service
transformation

Beyond the product 24

 SERVICE TRANSFORMATION
KEY SHORTCOMINGS
SUCCESS FACTORS

Missing breakdown of
Define strategic steering metrics
the service ambition level
breakdown into strategic-tactical-
to provide alignment and
operative KPIs
counteract cannibalization fears

Lacking service development Design dedicated organizational

and delivery capabilities and structural setup
to ensure customer-centric with C-level anchoring bridging
service design across functions

Missing sales force enablement Transform sales capabilities

to educate customers and apply around specialized experts and
required sales approaches upskill sales force

Establish structured
Unclear monetization strategies
innovation process
that go beyond only focusing
to support shift in management
on direct ROI
mindset

Missing consideration of Ensure proactive integration

distribution and service partners of channel partners
to anticipate change and avoid in strategy and execution to
channel conflicts support change

© Porsche Consulting

Figure 8. Success factors for service transformations

Beyond the product 25

Any “bulletproof” strategy fails without the right approach Dedicated organizational and structural setup
to execution. B2B industrial goods players that aim to suc- Services are deployed much more closely — or even specif-
cessfully execute upon their servitization strategy have to ically tailored — to the specific context of B2B customers.
adapt their operating model accordingly. Experience shows Customer-specific processes and the active role of custom-
that when companies try to translate strategy into action, ers in the delivery of services can be the source of variation.
they often do so by slightly adapting their old established Compared to product business this makes it much more dif-
and proven operating model. This strategy makes sense from ficult to decide on which level services can be standardized
a risk perspective to avoid disturbances within the existing and how to ensure service quality. A proximity to customers
product business. However, an honest commitment to ser- when developing and delivering and continuously optimizing
vice transformation requires bold moves also on the operating services is therefore pivotal. The arising trade-off between
model. This will almost certainly impact the way the product productivity through centralization of organizational struc-
business is operating as well. tures and increased customer value through market-specific
customization for specific customers needs to be carefully
Figure 8 summarizes five key success factors that should be considered. The decision of central versus decentral organi-
considered when building a suitable operating model that zational elements will oftentimes also deviate from the orga-
helps to translate servitization strategy into action and avoid nizational setup for the product business.22
typical shortcomings that impede transformations in terms of
their speed and lasting business impact. Irrespective of the location decision, the organizational setup
for a service business follows the develop-sell-deliver logic.
Define strategic steering metrics Successful industrial goods players build the required capa-
Missing or poorly designed steering metrics on a strategic bilities accordingly: service development and operations, ser-
level and their breakdown into operative KPIs can easily create vice sales and marketing, as well as service delivery.
wrong incentives. Instead of aligning the organization to strive
for a global optimum on corporate level, fragmented steer- A key factor to successfully scale advanced services are in-
ing metrics lead to local egoism between product and service tegrated development and operations for digital solutions.
business segments that try to optimize their individual view. End-to-end accountability, dedicated product teams, and
Political infights based on fears that service or new business a DevOps approach ensure the continuous evolution of the
models will cannibalize established product business need to digital solution along changing customer needs that is key
be carefully anticipated by the underlying steering metric de- for successful scaling. Digital capabilities in the area of data
sign and cascaded from strategic level down into individual management, analytics and artificial intelligence form the
sales representative incentive schemes. technological basis. At the start of transformations, these
digital capabilities are best built centrally and, in the follow-
Besides the incentive function, KPIs provide the most tangi- ing, gradually spread across the organization. The Porsche
ble form of signalling. Ambition levels that are clearly translat- Consulting publication “Leading the Way to an AI-driven orga-
ed into strategic KPIs enable corporate-wide alignment to the nization” provides further detail of how to build up a suitable
top-down strategic trajectory. Particularly for (digital) ser- operating model that fuels innovative data and AI-enabled
vices that are developed in constant iteration with customers services.23
this alignment is key. The resulting autonomy on an operative
level speeds up decisions and improves decision quality by Due to their reliance on machine-level data that come from
embracing a more data-driven way of working. sensorized products, advanced services almost necessarily
impact the product architecture. The resulting interdependen-
Steering metrics cascade down from strategic company-lev- cies that are managed via the integrated product-service road-
el, over tactical product-service portfolio level, to operative map also needs a structural embedding in the organization.
service-level KPIs. The KPIs need to be closely interlinked Directly anchoring the service organization on C-level helps to
with corporate level KPIs and are therefore tailored to the in- ensure clear interfaces that bridge service with product road-
dividual company. maps and allow fast escalation in case of impediments.

Beyond the product 26

In line with the strategic importance, industrial goods players trial goods players therefore start with building up specialized
with significant service revenue share even introduce a Chief experts while gradually upskilling their salesforce with suit-
Service Officer role with a board seat, like Vestas did in 2019. able training concepts.

To highlight the commitment to service business, Swedish Swedish bearing provider SKF has strongly focused on sup-
access solution specialist Assa Abloy has set-up its “Digital porting their value-based selling approach for services and
Factory”. As cross-functional digital service organization it new business models. By transporting success stories for val-
aims at delivering “a world-class customer experience” via its ue-based selling, stringent reporting of value creation from a
digital products by linking product development, service op- customer perspective, and introduction of support software
erations, and IT operations with the customer.24 to calculate customer value they paved the way for service
growth.26
French industrial engineering group Fives has built up their
“CortX” team to push data science capabilities for the entire Establish structured innovation processes
group. As cross-functional team they act as service center As with any kind of innovation, services that are new to a
across all Fives subsidiaries to provide core technology such company need a suitable environment to grow. Many good
as computer vision-based quality control that can be imple- ideas die along cumbersome path towards execution, rather
mented according to end-industry specifics. Their solutions for the sake of process than quality or potential of the idea.
span from centralized supervision and alerts, predictive main- Other ideas or services, in contrast, make the way towards
tenance, breakdown prediction, predictive quality to produc- execution — however, without really contributing customer or
tion optimization. The required domain expertise for specific business value.
use case implementations, namely deep process knowledge
is ensured via a close collaboration with the Fives core busi- Innovation accounting can provide a suitable approach to en-
ness segments.25 sure both incremental but also more disruptive (service) in-
novations to strive. Along a structured gate-staged process
Transform sales capabilities cross-functional teams are working on innovation topics in a
For years customers have gotten used to product-centric metered funding concept.
sales approaches from industrial goods players. Unsurpris-
ingly, breaking away from an established transactional and Ensure proactive integration of channel partners
CAPEX-focused mind-set needs education. Developing your The magic in developing services that provide actual custom-
customers to shift away from traditional buying behaviours er value is about proximity with customers. Nevertheless, for
and customary tender processes for equipment will be a scaling such services, the go-to-market is equally important.
gradual approach. Particularly around new business models, Industrial goods players frequently rely on channel partners
this also means addressing the different involved decision for their product as well as their service business. If not con-
makers at the customer side early on — a transformation also sidered early on, these distribution and service partners will
for industrial goods firms, their sales processes, capabilities hardly support the service transformation.
and skills. Advanced services typically imply a stronger channel control
than traditional services. The early consideration or even in-
Skills and mindset for selling and successfully delivering ser- tegration of channel partners into the co-creation process
vices are inherently different from selling products. Most no- of services and business model help counteract fears of be-
tably, a lack of understanding for the particularities of service ing “left-out” for future service or bundle business. Potential
business and digital technology (e.g. different channels, 24/7 channel conflicts that can also hurt the product business
availability) impede service sales at scale. Successful indus- should be avoided by design.

Beyond the product 27

IN BRIEF:
IMPERATIVES FOR SUCCESSFUL SERVITIZATION
How can industrial goods executives navigate their individual servitization journey?
Let nine imperatives guide your way from understanding the business value, over
defining the strategic basis, to building the required operating model required for a
successful transformation into a service-centric company.

Understanding the business value

Imperative Assess the relevance of servitization on company- and industry-level.

01 Start by assessing the suitability of servitization as part of your corporate strategy, for your customer
base, product market saturation level and competitive rivalry. Leverage insights from other comparable
industrial goods industries that can provide analogies.

Service transformation strategy

Imperative Focus on understanding your customer and set the ambition level for your
02 service transformation.
Successful transformations require a shared purpose supported throughout the top-level management.
Clearly defined long-term ambition levels linked to a concise north star statement provides orientation
for your organization.

Imperative Explore business model(s) to provide a new source of value to customers.

03 The suitability of new business models is highly depending on your customers. Introducing new business
models is a change process, for your company and the customer. Co-creation based on well-established
relations and a deep knowledge of your customers' operations are keys to assess incurred risks that
must not exceed the created value for customers.

Imperative Identify service opportunities to push aftermarket lifetime value for your
04 target customer segments.
Starting from the defined strategic goals, a structured process to identify, prioritize and co-create
services is key. An integrated product-service portfolio roadmap highlights interdependencies for
successful execution.

Imperative Design your partnering strategy and leverage 3rd parties.

05 Determine which partners can extend or improve your value proposition or help you scale
in a platform ecosystem. Also include time-to-market into your considerations.

Beyond the product 28

Service transformation operating model

Imperative Break your ambition level down into a stringent steering metrics cascade.
06 Give direction and provide a mechanism for alignment via KPIs on strategic, tactical and operational level.
Leverage them in your communication, target setting, and to foster autonomous decision making at the
lowest level possible.

Imperative Design a dedicated organizational and structural setup with C-level anchoring.
07 If service business is a key pillar of your strategy, this should also be visible in your organizational chart with
short reporting lines and direct escalation to the board level. Along the develop-sell-deliver logic the neces-
sity of a central vs. decentral footprint and interfaces to the product business are the core considerations.

Imperative Transform your sales capabilities and gradually upskill your salesforce.
08 Build up dedicated resources for (digital) service and innovative business model sales. Gradually trans-
form your sales DNA starting by upskilling service, then product sales force via suitable training concepts.

Imperative Introduce innovation accounting along a structured stage-gate innovation

09 process.
Metered funding of teams that must show progress helps foster speed, continuously review the service in-
novation portfolio and kill endeavors before they become zombie projects that consume time and budgets.

Along the journey, it is fundamental to understand servitization as a transformation process

that will require time. As with every transformation the impact will rather follow an exponential
than a linear form. A solid strategic anchoring and dedicated operating model build the foun-
dation for sustainable transformation success.

IT’S TIME TO GET MOVING AND UNLOCK THE POTENTIAL OF SERVITIZATION!

Beyond the product 29

Appendix
(1) See Michael E. Porter, James E. Heppelmann “How smart, connected products are transforming companies”,
Harvard business review 93 (10), 96-114, 2015; Christian Kowalkowski and Wolfgang Ulaga “Service Strategy in Action:
A Practical Guide for Growing Your B2B Service and Solution Business”, Service Strategy Press, 2017

(2) The infobox “The customer side of servitization” on page 6 describes the value for customers in more detail, while this
strategy paper subsequently focuses on the service provider perspective of industrial goods player companies.

(3) See https://cdn0.scrvt.com/ec41840e14df52192984582863de63fa/a175fa466a84085f/28bf6d979ba6/

Q3_FY2020_Analyst-presentation.pdf, https://cdn0.scrvt.com/ec41840e14df52192984582863de63fa/425e7a-
be662c24f3/36c5f425f804/Q4_FY2020_SHL_Analyst_Presentation.pdf

(4) For instance see Raddats et al. , 2015 or Marjanovic, 2019

(5) TSR values represent compound annual growth rates (CAGR) over a five-years period calculated as TSR = (IQ_CLOP
RICE_ADJ as of 28.12.2018 / IQ_CLOSEPRICE_ADJ as of 30.12.2013)^(1/5)-1. The S&P Capital IQ adjusted share
price data in local currency includes dividend pay-outs and accounts for changes in shares outstanding

(6)  The analysis comprised overall 260+ (261)

(7) See also meta study of Visnjic Kastalli, I. and B. Van Looy “Servitization: Disentangling the Impact of Service Business
Model Innovation on Manufacturing Firm Performance”, Journal of Operations Management 31(4): 169-180, 2013

(8)  See also Service Strategy in Action: A Practical Guide for Growing Your B2B Service and Solution Business:
Christian Kowalkowski, Wolfgang Ulaga, Service Strategy Press, 2017

(9)  See Liebherr Group Annual Report, 2019

(10) S
 ee SKF Annual Report 2019. https://investors.skf.com/sites/default/files/pr/SKF_AR19_ENG_bookmarks_.pdf

(11) S
 ee Heidelberger Annual Report 2019/20, and Investor Presentation September 2020. https://www.heidelberg.com/
global/media/en/global_media/investor_relations/general_17/2020_6/pdf_92/HDD_Investor_Presentation_
Sep_2020.pdf

(12) S
 ee General Electric Healthcare Investor Day Presentation 2019. https://www.ge.com/sites/default/files/ge_HCInves-
torDay_12022019.pdf
 
(13) S
 ee Vestas Capital Markets Day 2016, Capital Markets Day 2018, Annual Report 2019, and Second Quarter 2020
Report. https://www.vestas.com/en/investor/financial_reports#!pr%C3%A6sentationer

(14) https://www.porsche-consulting.com/en/press/insights/detail/study-digital-machinery-decoded/

(15) A business model is oftentimes referred to “a plan for the successful operation of a business […]”, which in private com-
panies is to make a profit performing its business activities. In context of this strategy whitepaper, we focus the on a
company’s value proposition, revenue and cost model.

Beyond the product 30

(16) F or further examples of services and their empirical frequency of adoption please refer to Adrodegari, Federico, et al.
“From ownership to service-oriented business models: a survey in industrial goods companies and a PSS typology”
Procedia CIRP, 2015, 30. Jg., page 245-250

(17) S
 ee CES Analyst Day January 2020, Las Vegas, Investor Presentation August 2020-October 2020, accessible via
https://investor.deere.com/home/default.aspx

(18) S
 ee https://www.fusesmartfarming.com/

(19) See https://www.365farmnet.com/

(20) See https://www.xarvio.com/ or https://www.agisuretrack.com/

(21) See https://www.adamos.com/

(22) See Christian Kowalkowski and Wolfgang Ulaga ”Service Strategy in Action”, Service Strategy Press, 2017

(23) See
 Porsche Consulting’s “Leading the Way to an AI-driven organization: A practical guide for executives to navigate
tectonic shifts and build an enduring competitive advantage with AI”, https://www.porsche-consulting.com/en/press/
insights/detail/study-ai-driven-organizations/

(24) See https://www.assaabloy.com/Global/Investors/Annual-Report/2019/EN/Annual%20report%202019.pdf

(25) S
 ee https://cortx.fivesgroup.com/en/

(26) S
 ee Christian Kowalkowski and Wolfgang Ulaga ”Service Strategy in Action”, Service Strategy Press, 2017

Beyond the product 31

Further reading

Sales Excellence
Industrial Goods Digital Transformation

High Performance
Agricultural Transformation
Industry Digital Transformation

Digital
Machinery
The Future of The Future Decoded
Construction Machinery Leading the Way to an A practical guide for machinery
Manufacturers of B2B Sales AI-driven Organization How Digital is the Agricultural companies to navigate digital
Ecosystem with a new perspective How sales organizations A practical guide for executives to navigate
Equipment Sector? transformation and outperform
must adapt to changing tectonic shifts and build an enduring
competition
The status of digitalization within the top agricultural players
demands and markets competitive advantage with AI

The Future of The Future Leading the Way How Digital is the Digital
Construction of B2B Sales to an AI-driven Agricultural Machinery
Machinery Organization Equipment Sector? Decoded
Manufacturers

Authors

Marc Sven Andreas Leon Ines

Ziegler Rossmann Steer van Dijk Stoegerer
Partner Manager Manager Senior Consultant Consultant

Porsche Consulting
+ 49 170 911 2500
[email protected]

Acknowledgements
The authors would like to thank Dirk Pfitzer, Andreas Baier and Marius Baltz for their valuable insights and the numerous inter-
view partners across the covered industries for contributing their view.

Porsche Consulting
Porsche Consulting GmbH is a leading German strategy and operations consultancy and employs 670 people worldwide. The
company is a subsidiary of the sports car manufacturer Dr. Ing. h.c. F. Porsche AG, Stuttgart. Porsche Consulting has offices in
Stuttgart, Hamburg, Munich, Berlin, Frankfurt am Main, Milan, Paris, São Paulo, Shanghai, Beijing, Atlanta, and Belmont (Silicon
Valley). Following the principle of “Strategic vision. Smart implementation,” its consultants advise industry leaders on strategy,
innovation, performance improvement, and sustainability. Porsche Consulting’s network of 12 offices worldwide serves clients
in the mobility, industrial goods, consumer goods, and financial services sectors.

Strategic Vision. Smart Implementation.

As a leading consultancy for putting strategies into practice, we have a clear mission: we generate competitive advantage on
the basis of measurable results. We think strategically and act pragmatically. We always focus on people—out of principle. This
is because success comes from working together with our clients and their employees. We can only reach our aim if we trigger
enthusiasm for necessary changes in everyone involved.

Beyond the product 32

Porsche Consulting
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