Growth potential in the mechanical engineering industry

In a subscription model (often also called Equipment As-a-service model – ‘Eaas’), customers subscribe to a machine instead of purchasing it. At the same time, supplementary services and/or consumables are integral components of these models. The billing modality can be designed flexibly, for example as pay-per-use or pay-per-performance.

Platform models bring together supply and demand for a good and/or service also in the mechanical engineering industry. For example, contract manufacturers can offer free machine capacities via online platforms to decrease idle times.

Value-added services based on digital information and algorithms complement existing physical products and related services. By exploiting the potential of digital technologies, additional customer benefit is generated (e.g., remote maintenance via virtual reality).

A customer-centric ecosystem in the mechanical engineering industry is a network of partners (e.g., companies, start-ups, individuals) that collaborate to create offerings with a particular customer value. The added value should not be limited to the joint bill for the bundled offerings.

New business models are too often seen as a protection or incremental addition to the existing machine sales. Subscription models, for example, are often reduced to the aspect of financial flexibility (“CAPEX to OPEX“). This ignores the opportunity to comprehensive optimize a customers’ value chain.

A clear vision of how new business models shall create added value for the customers is crucial. To achieve this, mechanical engineering companies must have a good understanding of their customers’ business processes well as the respective success factors, potentials, and challenges. However, many mechanical engineering companies still know too little about the needs of their customers. Hence, developing new business models from the customer’s point of view is hampered.

The development of new business models from the customer’s point of view requires a fundamental rethinking of traditionally technology- and functionality-driven innovation processes. This goes hand in hand with a change in the roles and responsibilities of the organizational units in the process. In particular, the sales department will become even more important to identify customer requirements and to evaluate customer benefits.

Besides adapting the product and service portfolio, new business models also require a transformation of the processes and sometimes of the entire organization. New capabilities must be built and employees’ “mindset” must be aligned with the new ways of doing business. Moreover, the new business models require a different management approach than the traditional manufacturing and sale of equipment to measure and manage their performance effectively.

Up to now, only a few mechanical engineering companies know how to price their new business models successfully. Pricing must be based on quantifiable value drivers that are comprehensible to the customers. To be flexible and scalable, the varying scope of performance components needs to be optimally supported by these models.