As part of the launch of the Business as Unusual book (click on badge on left to get to the Amazon page) by Thomas Saueressig and Peter Maier that we helped conduct interviews and research for, we will share excerpts from each of the 10 chapters/300 pages, and also give you a “behind the scenes” view by sharing snippets of some of the over 100 SAP, customer and partner video interviews that ended up in the book.
Here are some excerpts from the first Megatrend – Everything as a Service. Includes quotes from executives at Tetra Pak, Bain & Co, the Advanced Services Group at Aston University, Capgemini and SAP.
“In 1995, astronomer Carl Sagan had a pessimistic view of the coming transition from the industrial economy to a service economy…. Others predicted a nation of low-skilled workers, and similar fears arose in other developed countries. Around the same time as Sagan’s words, a more optimistic expert, Gartner analyst Roy Schulte, wrote a note predicting the growth of a different breed of services in the software engineering space... Both Sagan and Schulte were prescient in their own ways. Low-wage employees in retail and food service are today some of the world’s largest working populations. Meanwhile, a Google search for “service-oriented architecture” (SOA) fetches nearly 3 million references plus 16 million for “microservice,” the modern form of SOA.”
“Jeff Immelt, former CEO of GE, co-authored an article in 2019 describing how GE’s manufacturing businesses were among the earliest to morph: “GE was probably the first manufacturer to internalize that digital technologies could disrupt its businesses. However, that happened only after a GE scouting team searching for megatrends serendipitously figured out through its online research that some incumbents, such as IBM, and several high-tech startups were gathering data from GE’s customers to develop novel data based services in sectors such as aviation and power.” And it’s not just GE: The floodgates have opened for a new generation of offerings and business models.”
“Neither Sagan nor Schulte predicted this blending of labor and digital services and the creation of new bundles of physical products, software, financing/leasing, spare parts, and consumables, never mind all the after-sales monitoring, maintenance, and other services.”
“Mark Burton could easily be a historian of the services economy. He is a Bain & Company partner focused on business-to-business (B2B) models and value-based pricing. He speaks frequently about time and materials, fixed price contracts, subscription software models, and outcome-based contracts.”
“Thousands of companies have attempted to follow the role models Burton has highlighted to differentiate from competitors and generate the following benefits for their business:
- More predictable revenues
- Improved attachment rates for aftermarket services
- Continuous engagement with customers, resulting in better insight into their individual experiences and needs
This trend is now dubbed servitization. In a world of global competition, many physical products can be copied and commoditized quickly. If you embed software to make your products smarter and add layers of innovative services, especially physically local services, you’ll raise significant barriers for your competition.”
“Professor Tim Baines at the Aston Business School in Birmingham, UK, is executive director of its Advanced Services Group (ASG). Since 2011, ASG has focused on the adoption of servitization and outcome-based business models and is respected globally in both the research community and the industrial community for their work on servitization.”
Over the years, ASG has developed its “services staircase,” shown in Figure 2.1, that progresses from supplying products at the bottom level to guaranteeing the outcomes of a business platform at the top.”
“Torsten Welte wears two hats at SAP. He leads solution management for the aerospace and defense industry, looking at industry trends, focusing on enablement through leadership, and connecting development with the SAP field organization. He also leads a cross-industry team focused on the Everything as a Service megatrend, especially as complex equipment makers are learning to blend hardware, software, spare parts, and services into coherent solutions with different commercialization models…. Moving from a product-based to a service-based business model impacts several enterprise areas, from product design to balance sheet structure and customer engagement. Welte estimated that over 3,000 SAP customers across a wide range of industries could benefit from the pioneering efforts of the aerospace sector in delivering products as a service.”
“Rolls-Royce has been diligently building a massive engine performance database for each flight. It has also created a digital twin of every single engine. Digital twins are models based exactly on the physical component; they use data from sensors on the physical machines to monitor operations and predict breakdowns, thus enabling maintenance that reduces downtime and ramps up reliability. Using the volumes of rich data created by its digital twins, Rolls-Royce can reliably predict every major maintenance event an engine is likely to encounter over its lifetime. Such forecasting precision allows for planned downtimes, less frequent swapping of engines, and less unproductive time while the engine is “off wing.” In an industry that is highly regulated and whose reputation rests on safety, this forecasting allows the company to, in its vernacular, “not be overly conservative.””
“While each Tetra Pak customer will have to make their own calculations, (Alejandro) Chan said that the company will guide them using its simulation tool to compare three business models: buy, lease, or servitize. Servitization is becoming a common customer request, he added….
Chan said he has seen companies without well-established service business failing to develop successful service-based business models. These companies find that they don’t have much communication with their machines, and their predictive maintenance capabilities are still immature. In contrast, he said, Tetra Pak has more than 60% of its installed bases connected to Tetra Pak to capture machine data to optimize services.”
“From SAP’s perspective, servitization is widely helping to drive software upgrades. David Lowson, who runs the SAP Center of Excellence for Capgemini in Europe, has seen servitization become a top business driver for customers moving to SAP S/4HANA, noting that it has joined agility, simplification, and sustainability as motivations to upgrade software systems.”
A twin of this post will include video excerpts from conversations with many of these executives so you can put a face and voice to those in the book.
