Mark Homer, Vice President Global Customer Transformation at from GE Digital, delves into how future generations won’t be familiar with standalone products as the concept rapidly becomes extinct.
It’s strange to think that Generation Z, the current crop of trend-setting teenagers and twentysomethings that tend to hog coffee shop Wi-Fi and laugh at their parents’ DVD collections, are going to witness a piece of history. Gen Z (roughly those born between the mid-1990s to the mid-2000s) is the first truly digital generation that has grown up with the internet and latterly the smartphone – and yet it’s going to be the last generation that witnesses the product-only economy.
How businesses deliver products and services is changing rapidly. Convenience and personalisation are key drivers. The rise of the subscription service model is no coincidence, and this is leading to a shift in culture and expectancy. This is not just a consumer thing either. Businesses too are already changing – driven, in part, along similar lines.
According to research conducted by Vanson Bourne, “”, on behalf of ServiceMax from GE Digital, found that the bundling of services with products and the appetite for outcome-based contracts and business models is re-shaping how organisations deliver and manage their products and services but how they operate entirely.
Interestingly, 77% of 600 IT decision makers and field service management leaders surveyed (across the US, UK, France, Germany, Turkey, UAE and Saudi Arabia) believe Gen Z will be the last generation to experience an economy dominated by products alone without any embedded services or outcomes, such is the extent of this change. The research also revealed that 84% say they want the same outcome-based efficiencies in their consumer lives that organisations are currently experiencing in business.
So what does this mean? Certainly, this is a dramatic shift in business thinking, delivery and management. It is being fuelled by asset data and automation delivering real-time intelligence on products and customers. Initially, this was intended to improve the performance of field service teams. Repairing products was traditionally a costly business but sensors, the internet of things (IoT) and advanced data analytics have turned everything on its head.
This asset and service data is so rich in intelligence that it is helping to redefine not just asset management but entire organisations, from sales, R&D and IT through to finance, marketing and CSR. This servitisation of business is changing processes and decision making and it’s built on convenience and efficiency. It’s both convenient and efficient to optimise product repair even use technology to predict potential issues and so this is permeating across business departments. In fact, it’s just a matter of time before it reaches a tipping point in a consumer context.
Outcome-based contracts and business models have put service data in a new light with products, new revenue streams and operational interdependencies all gravitating towards it. The advent of connected equipment assets, industrial platforms and servitisation has made service data more valuable and strategic than ever before, yet it remains under monetised for most companies. This will change.
As Vanson Bourne’s research suggests, vast improvements are needed in the management of real-time access to the service data, as well as the ability to both aggregate and analyse it with the rest of the business. 87% say the successful collection and use of asset service data will have an impact on their organization’s ability to remain competitive. The research also found that 95% of companies that don’t currently operate a fully servitised business model say they are already working towards it or are planning to in the future, and around 89% believe servitisation will enhance the way their industry operates.
What this means is that the days of rack ‘em and stack ‘em are drawing to close. Businesses are starting to look beyond product-only sales. They want on-going relationships with customers, opportunities for upgrades and value-added services, all to be delivered through efficient supply chains. While the sentiment itself may not be that new – businesses have been trying to do this for years – the technology that can make it happen is. For the first time ever, businesses can start to deliver on the outcomes economy, where even Gen Z-ers may gawp at its potential.