For several decades, economists have observed that Service businesses are playing an important role in fueling the economy. In fact, Services as a percentage of the US GDP has grown dramatically. As of 2015, the service sector employed approximately 90% of US workers and accounted for 78.9% of the US Gross Domestic Product (GDP).
Nowhere is the service trend stronger than in the Manufacturing Industry. Most people do not think of services when they think of manufacturing and distribution of Capital Equipment. However, companies engaged in these activities are generating a significant portion of their total revenues from the provision of service and support of high technology equipment and systems.
In general, consumers require a broad array services and support on the products they purchase to ensure these products work effectively. For example, design & engineering, installation, integration, technical support, extended warranties, software subscriptions, and break fix services. Consumers are also increasingly interested in purchasing value-added services such a predictive maintenance, analytics, and optimization which extend the life of the product, minimize downtime and disruption to their operations, and ensure better outcomes or yields for their business.
Because of these requirements, Capital Equipment Manufacturers have found that services can generate 10 to 20 times more value (i.e., revenue) over the life-cycle of the product than the actual purchase of the product itself. This is compelling reason why many companies have developed services offering and adopted a services mind-set. Other reasons include:
It is a strategic imperative that companies adopt a services mindset, deliver exceptional service, and monetize their service offerings if they are going to survive in the future.
Increasingly, product manufacturers are recognizing the strategic role and value of service to their business. As a result, they are expanding their service force to include “Anything as a Service” (XaaS) business models. These business models have not built overnight. They are often the last step of a business transformation journey known as the “Servitization”. The first step is making the commitment to managing services as a profit center. Therefore, it is strategic imperative that companies adopt a services mindset and provide service offerings if they are going to survive in the future.