Digital transformation is changing the way businesses view service, allowing them to maximize the potential of this valuable sector
W hen a car leaves a factory, this no longer signifies the end of the relationship between manufacturer and vehicle. The car goes into the next stage of its lifecycle, where it must be maintained and serviced. Businesses are realising that this servicing offers a significant revenue stream. For example, automotive manufacturer margins on new vehicle sales range from eight to 14 per cent, whereas servicing a brake disc carries around a 65 per cent margin.
As businesses become service-oriented, digital transformation (DT) gives them the tools to change. By enabling visibility of an asset using the Internet of Things (IoT), the provider can better understand its use in the real world and feed that back into its research and development (R&D) process. Any issues from the manufacturing process that affect usage and failure rates of equipment can be managed via the IoT feedback loop. Data analysis using business intelligence or big data and analytical tools can derive value from that data.
Historically, companies have seen service as a cost centre and a necessary evil. Now, DT is enabling more organizations to realize the potential that service has as a profit centre. Yet there is considerable variation in maturity across the sector globally. While our research indicates the majority of firms are ‘enabled’, a good number of businesses categorize themselves on either side of the spectrum. To some extent the size of a firm correlates to maturity; six per cent of firms over US$25 billion turnover are digitally ‘optimized’, compared to zero per cent of smaller firms, however the maturity perceptions are relative.
Within regions, the understanding of this maturity is highly localized. Where in APAC 37 per cent of firms identify themselves as ‘enhanced’, the same percentage describe themselves as either ‘exploratory’ or ‘nascent’ in North America.
Given the extremely advanced levels of service provision in the US and Canada among the most digitally mature businesses, it is not surprising that many firms still see they have some way to go compared to their market- leading peers. Equally, funding for DT in the US at the most advanced firms – encompassing driverless vehicles and highly automated processes – results in a larger number of mid-tier firms perceiving their own funding as less adequate than that of their peers in other geographies, who have a tighter range of capital committed.