Companies could fend off new waves of tech competition by partnering in a B2B ecosystem and developing the capacity to deliver innovative aftersales and services offers.
The traditional business model of hardware-oriented industries includes production, sale, and service of equipment. However, digital promises to make some big changes to product, project, and process industries. This has urged machinery companies to innovate their business models. One-fourth of respondents to a recent survey of the machinery industry said that their companies have digitised their service, spare parts, and consumables business, and more than two-thirds are planning to do so.
This higher commitment to digital is expected to result in greater business success. The more digitally mature a company is, the better its performance is along two key indicators: TRS and revenue growth.
Although most companies across industries have ventured into the digital space on some level, less than one in 10 are highly mature, however, it is these companies that are reaping the rewards of digitalisation. Compared with the least mature, the most digitally mature companies see 3-year TRS rates nearly three-times greater and five-year CAGRs more than four-times greater.
Digital is an OEM Opportunity
Digital has implications for every link along the value chain. In the earliest parts of the value chain, digital applications are creating efficiencies for original equipment manufacturer’s (OEMs) and Tier-1 suppliers.
AI is reducing the time to market for new products. In manufacturing, the ubiquity of autonomous robots is boosting workshop performance. The emergence of collaborative robots is improving the lives of humans working alongside them. And in distribution, digital is reducing costs by optimising delivery routes and fleets.
OEMs and suppliers are not the only players to gain from digital. Tech giants are using their digital expertise to enter the manufacturing industry in the aftersales and services sectors. Digital is becoming the foundation of aftersales with new platforms for spare parts and consumables. In services, a single application of a digital-technology, such as augmented reality, can provide a premium service and increase on-site maintenance efficiency. Tech giants have boldly inserted themselves in these links of the manufacturing value chain and threaten to stand directly between manufacturers and their customers. Some are integrating directly into the procurement systems of manufacturers’ customers, making tech companies, not OEMs, the go-to provider for parts and services.
Examples include Amazon and Alibaba, both tech-giants that have taken over aftersales and service. Hardware still accounts for more than 60% of the value of traditional OEMs, with software and services making up the rest.
However, digital proliferation is shifting the balance. Hardware prices are increasingly coming under pressure as machine prices continue to drop, and software and services are expected to make up the majority of value in the near future. The value-add is increasing in digitally-enabled services, software, and machine integration, and tech companies are already well-positioned to dominate in this arena.
B2B ecosystems to create and secure value
No machinery company can rival the software and IT capabilities of a technology powerhouse like Amazon or Alibaba. However, as part of an ecosystem of machinery industry players, they have a chance to can fend off the new wave of tech competition by developing the capacity to deliver innovative aftersales and services offers. This type of alliance of traditional players constitutes the core of a digital B2B ecosystem play, and it is a radical strategy with the power to help manufacturing companies create and secure value in aftersales and service.
Food packaging: Creating an aftersales ecosystem
A digital ecosystem is a partnership of players that combines deep industry insights, profound customer understanding and relationships, established industry-specific networks, and highly complementary value chains to create true value-add to their end customers.
The digital B2B ecosystem is a carefully selected group of industry players which collectively establish the key characteristics that none of them provides individually. A successful ecosystem requires that all players be prepared to approach competition in a radically new way. Specifically, businesses need to view each other as partners so that the networks that form the foundation of the new B2B ecosystem can be established.
It is the collective know-how and ecosystem access that gives businesses the advantage over digital natives looking to enter the industry and dominate. Successful digital B2B ecosystems are lines of defence that help manufacturers and suppliers create real value in aftersales and services and hold onto valuable customer relationships.
The digital ecosystem starts with rethinking the competitive arena. Players must recognise that they are part of an essential network of peers delivering value to customers. This helps each player to secure the others in the market.