It’s the worst nightmare of any industrial executive.
To see the value of their products slowly slip away. The profits melt first, followed by revenue.
There IS a solution for this problem. But what causes it in the first place? It’s an invisible and inevitable market force called commoditization.
It’s in avoiding commoditization that the greatest value of Industrial Internet lies. And the answer is surprisingly simple.
The Economist wrote an interesting story recently about Trumpf, a prime example of Germany’s “industrial Mittelstand.”
Trumpf was founded in 1923 to manufacture motorised hand shears and sheet metal tools. A little later it invented fabrication machines, and was one of the first ones to use laser in cutting metal. The annual sales of Trumpf currently run at €2.7 billion.
So, Trumpf is in all regards a fairly traditional industrial company. How does it plan to fight the inevitable industrial commoditization?
Answer: It adds digital value-added services to its core offerings.
Last month Trumpf announced Axoom, its new IoT solution. It connects machines built by Trumpf and other vendors, using the collected data to help its customers in various ways. As an example, it alerts manufacturers to order more raw material when it’s about to run out. Axoom is also able to predict when a certain machine needs a spare part – well in advance of the actual need (and the inevitable breakdowns and downtime, that would result from it). This is commonly known as Predictive Maintenance.
So, Trumpf is essentially building a brand new business that’s purely based on software and data.
The best part for Trumpf is that the needed data already exists, and its customers value these services highly. This translates to more value for the customers, and more profits for Trumpf.
Sometimes the conversation starts to sound a bit like every company should strive to become Apple or Google. Nothing could be further from the truth.
But neither does it help to simply ignore the power of the inter-connectedness and data sharing. If you are the last one to the game in your industry, the consequences could be disastrous. So, don’t.
But what if you acknowledge the promise, but don’t know where to start?
Your best bet is to first read this.
Then contact us for a brief meeting. We can show you a risk-free way to test the promise of Industrial Internet for yourself. Best part is that it is fairly inexpensive and rapid to implement.
And the good news don’t end here! Your new value-added offerings do not necessarily have to match the actual core product. Think about a car as an example: the data can be used to not only improve the performance and safety of the vehicle, but also to add totally parallel services, like entertainment and e-commerce functions to the very same car.
Your business is virtually guaranteed to have these kinds of “pockets of value”, where customer could get a fast win with very low cost on your end. You just need to find these pockets, and the further upstream you start, the faster you get to test your services in actual market conditions (and tweak them based on feedback).
So, don’t wait. Be brave and act now.
COO, Service Delivery
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