Evolution of service
It's no secret that services represent a large chunk of profits for the engineered products industry. As markets become increasingly saturated, services offer new revenues and a chance to leverage the installed base. Not only that, the service business can help smooth out the ups and downs of economic cycles, at the same time as binding customers into a close relationship with the supplier. But spare parts – which along with maintenance traditionally form the main pillars of the service business – are declining in both revenue and profit terms. This places companies in a dilemma: How can they compensate for their shrinking business? What should they be doing to exploit the upside potential that still exists? How can they develop more sophisticated offers, including services such as consulting and performance increase, say? And in terms of organization, should they structure their service business as a separate business unit or integrate it into the new machine business?
To find answers to these pressing questions, Roland Berger carried out an extensive study of services in the machinery and production systems industry in German-speaking countries. We spoke to senior executives at 30 companies, both big and small, to find out what they were doing and where they felt services were heading. On the basis of our discussions, we identified four types of companies, each employing a distinct business model in the area of services. For each type of company we developed key strategies – strategies that can help them prepare for the challenges of the future.