How digital transformation can help OEMs to respond to the COVID-19 pandemic

How-OEMs-can-leverage-COVID-19
Author : Rutva Safi   Posted :

The second half of the year has already begun and the COVID-19 pandemic continues to hamper business continuity across different sectors of the economy, but especially in the manufacturing industry. The crisis has sent solid shockwaves through the industry, pushing large component manufacturers and OEMs to re-examine their existing business models and the resiliency of their operations.

Global OEMs – original equipment manufacturers make the wheels go around for the entire world. So, in the wake of the ongoing pandemic, as the demand for smarter, faster and economical products and components continues to grow, OEMs need to roll up their sleeves to keep the momentum going.

But, with the existing business models and infrastructure, it becomes difficult for OEMs to leverage opportunities and create ancillary revenue streams in the new business climate of 2020. 

This blog post will help OEMs to understand how they can turn the ongoing crisis into new growth opportunities and gain a competitive edge by shifting their focus from offering just products to innovative technology solutions like COVID-19 monitoring solutions.

Deal with disruptions: Every crisis is an opportunity to emerge stronger

Despite the grave nature of the pandemic, the world needs to get back to some level of functioning. Every crisis presents an opportunity to become more resilient than ever before. While most OEMs, worldwide, continue to grapple with the economic slump triggered by the current crisis, some are already considering leveraging the opportunity to scale up their services, build a digital muscle and add new capabilities.

To turn this unending stream of the event into an advantage, OEMs need to shift focus from the core business model of manufacturing/selling hardware devices to offering innovative solutions in a way that allows them to get recurring payouts. And this not only needs to be done on the heels of the crisis, but also through the uncertain times and beyond. However, there some greater concerns associated with it like:

  • Integrating software with devices
  • Offering insights from the device data
  • Balancing the economies of scale
  • Overcoming the shortage of lower-tier suppliers
  • Optimizing overall equipment effectiveness (OEE)
  • Offering outcome-based services

However, it is not just the pandemic that forces OEMs to make rapid changes in operations to respond to nascent market-driven menaces or opportunities, but the rate at which the world is changing. The opportunity now exists for OEMs to rethink upon their traditional approaches and infrastructure, and invest in:

  • Retrofitting existing structures and redesigning technology infrastructure as new demand patterns emerge.
  • Embracing technologies for creating connected apps and digital transformation services to increase customer uptime, remotely monitor equipment, etc.
  • Launching tech-driven products and services like data monetization and subscription outcome-based offerings.
  • Adding new cloud-based capabilities to improve visibility and unlock new potential revenue streams.

Navigate the new normal with innovative COVID-19 monitoring solutions

Webinar agenda

  • Introduction: COVID-19 impact on businesses
  • Challenges faced by the markets due to the pandemic
  • Use-cases on COVID-19 detection and prevention in battling the crisis
  • Why you need COVID-19 monitoring solutions in the new normal

On Demand

Relaunch: New business models, new ways of working

The changing market conditions drive OEMs to move from the traditional business models to new, digitized, service-focused business models and prepare for future growth during and in the aftermath of the COVID-19 downturn.

Product + Service = Value

Also, to meet the needs of our new reality, OEMs must double down on the core of their portfolio and provide a bundle of offerings from turnkey solutions, connected systems to subscription-based services that modern consumers want. It would be a win-win for both OEMs and their customers. Based on service offerings and business needs, OEMs can choose from different types of business models, such as:

  • Virtual
  • Usage-based
  • Transformational
  • Relationship-based
  • As-a-service

In a nutshell, OEMs can stabilize their business by forming new business models to reposition from being a pure hardware provider to becoming a service-based provider, which will help them hugely in:

Driving recurring revenue streams – Cloud-based solutions and advanced pay-as-you-go service models creates constant revenue streams.

Prioritizing relationship-building – Build customer trust and align closely with customers to generate positive outcomes and aim for zero unplanned downtime.

Providing continuous support – Offer maintenance and support as a billable service package to customers, and ensure business continuity by offering remote assistance.

How-OEMs-can-leverage-COVID-192

New business models, especially pay-per-usage models (subscription-based) and outcome-based services will drive the global OEM market to strengthen security, improve equipment uptime and get value-added business outcomes, during and post disruption.

Digital Transformation : The differentiator for sustainable and immediate success in the crisis

The ongoing pandemic has increased the appetite of OEMs for digital transformation and investments in cloud-based digital platforms. And it is wise to make strategic investments on digital platforms like IoT and cloud, as these platforms can help OEMs to enhance their service standards. To seek out the bright spots in the global landscape, OEMs should focus on three major areas:

1. Leveraging the IoT platform

IoT platforms present a significant opportunity for OEMs. These platforms enable both industrial and commercial OEMs to deploy their devices on the cloud and offer real-time insights to consumers via web portals or mobile apps. They can leverage IoT platforms by partnering with best-in-class IoT service providers, which will enable them to drive value creation.

Real-life use case: CareSpace, a U.S. based health band provider offering a continuous body temperature monitoring solution to its consumers has joined Avnet’s IoTConnect Partner Program to drive their IoT strategy.

2. Offering subscription-based services

Armed with real-time data insights, subscription-based/pay-per-use pricing models enable OEMs to sell hardware packaged with software subscriptions to customers and charge them per-use fees. These models also benefit customers as they have to pay only for specific services and not for an entire product, which brings down their costs. By creating a subscription module for the services, OEMs can also offer aftersales services like support, maintenance or repairs.

Real-life use case: Microsoft, along with its hardware device – HoloLens 2, also offers Dyanamic365 and Azure cloud services to its customers on a monthly subscription basis. Their subscription bundles not only help them to generate a higher ROI but also save on travel and training costs.

3. Providing real-time data insights from products

The data generated by IoT devices is not only of value to an OEM, but to the end customer as well. So, along with the hardware devices and components, OEMs can offer real-time data insights to their customers using cloud services and data platforms that can help generate an additional revenue stream. OEMs, using cloud-based platforms, could monetize the data/analytics generated by their device and sell it back to end-consumers of the product to create alternative revenue streams.

Real-life use case: Rolls-Royce is leveraging the data generated by IoT sensors to make better decisions and keep tabs on the health of their products from helicopter blades, power generation systems to jet engines. And with this data capability, the company is moving beyond just monitoring and predicting equipment’s health to offering aftermarket services to their customers.

Modern IoT-based strategies: Opening new revenue streams for OEMs

Service Packages Solution Enablement and Support Monetization Approaches Data Monetization Options
Subscription-based Custom platform services vs. packaged solutions Outcome-based pricing Real-time data streaming
Hardware i.e. products and spare parts-focused IoT managed services Data monetization Advanced analytics
Cloud-based software i.e. IoT platforms Usage-based services Value chain stacking Data management services

The time has come to prepare for the long haul

The year 2020 has shed new light on the need to optimize manufacturing workflows. While COVID-19 is imposing a greater threat to the manufacturing sector, it is also providing large equipment manufacturers and OEMs with an opportunity to diversify their offerings and gain a competitive edge.

In fact, it is the right time for OEMs to make a move, and grow their business to drive better margins, improve customer service and achieve greater customer loyalty. If you want to transform your business and offer revolutionary service offerings to your consumers, get in touch with our experts.

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