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Monetizing Industry 4.0: Design Principles for Subscription Business in the Manufacturing Industry
(2019)
Subscription business models have a major role for monetizing products and services for manufacturing companies in the age of Industry 4.0. As the manufacturing industry has difficulties generating revenues through digitalization, the implementation of innovative business models are essential to remain successful. Physical assets are often capital-intensive and require a more complex manufacturing process than subscription business models. Moreover, subscription models can focus on the individual customer benefit and a consistent service transformation, constituting a unique selling proposition and a competitive advantage. Hence, the following paper provides a management model that enables manufacturing companies to successfully realize the transformation towards a subscription business model. The management model presents four major fields of action, each matched with one design principle that must be considered when dealing with subscription models in the manufacturing industry. These principles were determined by an in-depth case study analysis among various manufacturing companies. Opportunities, challenges and recommendations for action were then systematically derived and integrated into the management model.
Through data-based insights into customer behavior, products and service offers can be improved. For manufacturing companies, smart product-service systems (SPSS) offer the possibility to collect customer data during the usage phase of the product. As the focus on customer analytics is too often on sales and marketing, SPSS are overlooked as a source of customer data. However, manufacturing companies need to integrate data from all interactions with their customers along the complete customer journey to achieve a holistic data-based view of the customers. To identify these interactions and the customer data derived from them, the concept of a digital shadow will be applied to the customer journey. The projected results for the presented work in progress are a reference process model for the customer journey in manufacturing and a data model of the customer data created along this process.
Pricing is one of the most important, but underestimated tools, to enhance a company's profitability. Especially value-based pricing has a high potential to reach higher levels of satisfaction because it equates the needs of providers and customers. Even though, it is a well-known price model and promises higher satisfaction, many companies struggle to implement it. Especially the manufacturing industry is characterized by cost-plus pricing and competition-based pricing. However, especially for digital products these pricing strategies are insufficient. Therefore, this paper aims at exploring the design fields for value-based pricing of digital products in the manufacturing industry. To achieve this, the basics of digital products and value-based pricing are explored. Furthermore, an expert workshop is conducted that follows a framework for value-based pricing consisting of four consecutive steps analysis, price strategy, pricing, and market launch to capture the design fields. This paper concludes with limitations, and practical and research implications.
Ongoing digitalization and Industry 4.0 enable the development of new business models due to the increase in available data and digital connected products. A promising business model type for the machinery and plant engineering industry are subscription models, consisting of products and services offered in return for continuous payments. However, subscription-based business models are associated with extensive changes in the traditional machinery and plant engineering industry, in particular, for small and medium-sized companies (SMEs). Established concepts for the development of value propositions and business models neglect important aspects, such as the integrated development and optimization of products and services across the entire life cycle or the data infrastructure. This paper presents a concept for a methodology to support SMEs developing value propositions within subscription models. Therefore, the systematic identification of customer benefits, the determination and prioritization of subscription relevant functionalities as well as the design of product and service elements addressing those functionalities are the main aspects on which the focus is placed on. The result is a subscription value proposition canvas for SMEs to address the impact of subscription models on products and services.
The mechanical and plant engineering industry faces a stagnation in the new machinery market and is relying on innovative business models such as subscription to overcome these. In this business model, individually customized solution packages are offered. The success of these models depends directly on the future success of the customer, making the selection of the right customers crucial. The aim of this paper is to identify the criteria that indicate the suitability of customers for subscription models. While there are individual descriptions of suitability criteria in the existing literature, there is a lack of comprehensive consideration of customer relationship, customer company, and customer market, as the extensive consideration was not necessary in the transactional sale of machines until now. Therefore, in this study, expert interviews are conducted with companies in mechanical and plant engineering that offer subscription models. The results show criteria that are used to evaluate customers in the six main categories of creditworthiness, market potential, benefit potential, feasibility, relationship, and sales effort. In total, 24 criteria can provide insight into the suitability of the customer for a successful subscription relationship. These criteria are intended to develop target systems that meet the requirements of different stakeholders in the customer and thus support the economic viability of these business models.
As industrial service portfolios grow, many companies overlook the implications of their business operations: rising complexity and resulting complexity costs. One reason are nonexistent tools that help service managers to decide in planning phases with an adequate effort about the implications that variety and complexity decisions have on the complexity costs of their portfolio. This paper depicts the challenges service companies have to face in this context and presents a concept of a heuristic approach to evaluate the complexity costs for industrial services. The concept is being developed in strong cooperation with industrial partners.
For a considerable time, European companies in the capital goods industry experience stagnating growth in material goods markets. Moreover, increasing international competition forces European companies to improve their market position. In order to stay successful, an increasing number of companies adapt their businesses from manufacturing to service provider. Unfortunately, the number of companies who manage to turn their portfolio change into a competitive advantage is comparatively low. Therefore, this paper focuses on the development of a framework for the positioning as industrial services provider. Besides, it provides support for management in shaping the changes that occur with the transformation.
This paper presents a simulation approach for service production processes on the basis of which an optimal operating point for service systems can be identified. The approach specifically takes into account the characteristics of human behavior. The simulation is based on a system theory approach to the service delivery process. A specific use case of the simulation approach is presented in detail to illustrate how characteristic curves are deduced and an optimal operating point is obtained.
Assets of integrated production systems, especially in the heavy industry, are facing high requirements in terms of reliability and availability. In case of component breakdown, the operating firm is confronted with high costs due to downtime and loss of production. Modern maintenance concepts in combination with advanced technologies can help to improve the plant availability and reduce the downtime costs caused by unplanned breakdowns. Against this background, the research institutes FIR and IMR from RWTH Aachen University, Germany, are collaborating within the research project “SiZu”. This project deals with the integration of condition monitoring system and real time simulation to assess the condition of components and to support failure cause analysis.
Technologiebasierte Leistungssysteme versetzen den Werkzeugbau am Hochlohnstandort Deutschland in Zukunft in die Lage, nachhaltige Wettbewerbsvorteile zu generieren. Dazu ist es allerdings erforderlich, nicht nur die Technologiebasis in Form von Transponder- und Sensortechnik in das Werkzeug zu integrieren, vielmehr ist es nötig, entsprechende neue Geschäftsmodelle für diese Leistungssysteme zu entwickeln. Außerdem ist sicherzustellen, dass die Geschäftsmodelle auf operativer Ebene auch mit der Technologie harmonieren und die gewonnenen Daten entsprechend in die Auftragsabwicklungsprozesse integriert werden. Der vorliegende Beitrag stellt potenzielle neue Geschäftsmodelle für den Werkzeugbau vor und skizziert einen Ansatz zur operativen Integration der benötigten Informationen in die Geschäftsprozesse.
Der vorliegende Beitrag baut auf den Arbeiten eines Forschungsprojekts auf. Das Forschungsprojekt 'TecPro - Geschäftsmodelle für technologieunterstützte, produktionsnahe Dienstleistungen des Werkzeug- und Formenbaus' wird mit Mitteln des Bundesministeriums für Bildung und Forschung (BMBF) innerhalb des Rahmenkonzepts "Forschung für die Produktion von morgen" (Förderkennzeichen 02PG1095) gefördert und vom Projektträger Forschungszentrum Karlsruhe, Bereich Produktion und Fertigungstechnologien (PTKA-PFT), betreut.