There was a time when simply having a shiny new product idea was enough to allow industrial equipment companies to prosper. But that time is gone. Today, hampered by a sluggish global economy and challenged by constantly evolving customer needs, OEMs that want to succeed must attach a service contract to that new idea.
In fact, to increase equipment sales and bolster shrinking margins, OEMs must seek new growth opportunities in industries like the aftermarket as service and parts providers. Success, however, will clearly hinge on their ability to perform as service organizations and to establish symbiotic working relationships with their customers as partners.
To this end, OEMs must think and act in terms of -- and truly master -- a new management approach, which can transition them from producers to service providers and partners and allow them to achieve high performance in the service world. This approach involves three fundamental strategies:
- Refocus the company''s organizational structure from top to bottom
- Create value for the customer
- Know the customer base.
Out With the Old, In With the New
Despite the fact that marketing-led management has proven to be among the most promising means of generating profit in today''s marketplace, the organizational structure of many OEMs remains overwhelmingly product oriented.
Ironically, OEMs are willing to manage corporate policy that reflects the lessons of the market. But when it comes to marketing itself, instead of looking at the big picture -- and treating a customer''s value-creation chain as a single entity while focusing on additional revenue source opportunities -- manufacturers are concentrating on selective customer demand. Moreover, many are failing to systematically identify market requirements and manage functional areas accordingly. In today''s environment, they must refocus their organizational structure and adopt appropriate management methods and tools.
Beyond production and equipment sales, OEMs must apply a marketing and service orientation to every aspect of the customer experience. The goal: to support innovation, respond quickly to customers, and build on customer relationships.
Giving advice is a key part of this strategy and essential to service and business development.
For example, OEMs must provide operators with information on how to select capital goods to guarantee optimum use of equipment. They also must know how to incorporate information about their client''s end-customers, to offer advice on acquiring new equipment and create new business potential.
Creating Value Through Service
Producers that can combine technical competence and deep industry knowledge while understanding the customer will be able to provide value throughout the product and customer lifecycle.
By systematically developing varied services -- including maintenance, repair, upkeep, and consultative services -- OEMs will have a positive influence on their customers'' value creation chains and further align their own corporate structure to a more suitable market and service orientation.
Beyond these benefits, the information and data that the lifecycle support relationship generate will create specialized knowledge and product development -- promoting new partnerships and potential new business.
The New Customer
Today''s market offers a variety of potential customers, and OEMs must know them all. In fact, they must be flexible and have an arsenal of service capabilities at their fingertips, as service relationships can assume three different forms:
- Technically Capable Customers: These customers can handle the majority of their maintenance work independently and, more than likely, seek a partner to provide spare parts and/or an exchange service.
- Efficiency and Optimization-Driven Customers: These customers are generally interested in wider-ranging support from a service partner. OEMs must assume sole responsibility -- including service contracts -- for the overall maintenance of the machinery and/or equipment in question.
- Service-Focused Customers: OEMs must also be prepared to enter into full service contracts with customers that no longer view equipment management as core to their business. Typically, such contracts cover strategic optimization and further equipment development, as well as financial responsibility and investment risks. Here, operator models are most useful.
A Look Ahead
Clearly, the aftermarket''s growth potential is compelling. But companies considering the service provider and partner option must take a serious look inward. To succeed in this arena, they must examine their market position, customer structure, and technical possibilities to ensure the sustainability of a service organization.