Ubiquitous connectivity—enabled by artificial intelligence, mobile computing, Big Data and the cloud—is helping drive what Accenture calls Industry X.0, the digital reinvention of industry. This digital explosion is enabling manufacturers to create digitally enabled products, services and experiences that are in high demand. But it also is creating a new challenge for these organizations in managing the products they sell.
Digital technology has not only revolutionized manufacturing but has also profoundly redefined customer expectations and demand. Today, customers expect highly personalized, fluid experiences and services made possible by ever-smarter digitized products. This means status quo is not an option for industrial companies. Instead, they must maintain contact with customers, providing an exchange of data, services and over-the-air product updates—managing the experiences their products generate.
Manufacturing companies must embrace this new way of operating because this era offers extraordinary opportunities for those prepared. Industrial manufacturers will be able to move beyond traditional ways of making and selling products and tap into the full value of digital. By combining digitized operations and industrial workflows with new products and services, manufacturers will not only improve core efficiencies, but also have the chance to continuously reinvent themselves through new products and services. And this, in turn, will help drive new digitally enabled revenue streams and growth.
Moreover, there are emerging trends forging this new business environment. For example, up to 70 percent of the value generated from products will eventually be derived from their software and digital components, not mechanical parts. More companies will turn smart products into carriers of services based on their operative fluidity and adaptability. Increasingly, customers will expect smart, connected and flexible products instead of static offerings. And more products will become platforms for wider business ecosystems in the same way that the car has become for navigation, streaming and other digitally enabled services.
So how should industrial manufacturers prepare for this shift?
There are several actions organizations can take to help them make the transition:
- Create a vision.The process should begin with shaping a clear vision and product strategy around the value that the company is seeking to create. Once this exists, the organization can focus on digitizing existing core operations to drive greater operational efficiency that will help fund the shift from just selling to managing products.
- Rethink the ecosystem.Companies also should ensure that their ecosystem partnerships are in line with the new customer experience they are planning to execute. Once this action is taken, organizations can begin to execute the pivot from the old ways of conducting business to the new approach.
- Redesign products.Focus on building the key capabilities for product reinvention that includes mastering data management. This would include applying technologies such as the digital twin, the digital representation of physical products and product lifecycles. And supporting them by employing agile, iterative engineering practices, while assembling the skills needed to manage ecosystem partnerships.
- Leverage data.To manage the shifts taking place in this fast-changing market, manufacturers will need to leverage the data and insights provided by their own products using agile, iterative methods. This will allow them to anticipate and quickly act on fluid changes in customer demand in terms of evolving products, services and experiences.
- Pursue new revenue models.Expand and build better customer relationships to drive growth. For example, monetize the organization’s unused data and package it in the form of as-a-service offerings to provide new revenue streams. Adding this element to business development will contribute to much higher growth than selling products alone.
Manage the future
The transformation of the products market is dramatically upending the ways industrial companies have traditionally approached the design, manufacture and sell of products and services. To sustain success today and in the future, manufacturers will need to sell and manage the digitally powered products, services and experiences their customers have come to expect.
>>Brian Irwin, [email protected], is a managing director, leading Accenture’s Automotive and Industrial Practice in North America, as well as the Industry X.0 Consulting practice. Eric Schaeffer, [email protected], is a senior managing director leading Accenture’s Global Industrial practice, and Product Industry X.0 practice.