Heppelmann Predicts “Servitization” of Manufacturing

ANAHEIM, CA.—The world of building stuff is being transformed into a world of building services tied to stuff. That was the message from James Heppelmann, president and chief executive officer of PTC, for thousands of engineers and managers at the company’s annual PTC Live Global meeting for its customers.

This change in manufacturing is being driven by a shift from analog to digital. More and more products are digitally connected to a grid and back to the engineers and manufacturers who created them. More and more of them are controlled by software that customize their functions. What the products do over time is more important than what they are at the moment a customer buys them, Heppelmann said during his keynote address.

“Smart, connected products with digital umbilical cords attached to a manufacturer essentially represent a new value delivery platform. The manufacturer always knows about the product. It can develop ongoing, long-term businesses to maintain a revenue stream from the customer. By the same token, the manufacturer never transfers the risk of ownership to the customer.”

Academics have coined a term for this business transformation. They call it “Servitization”.

Servitization grows out of digitization. Instead of having analog diagrams and service records, manufacturers now have completely accurate digital designs and histories of a product. Those can easily be shared across a global value chain.

In essence, the information about a product—some of it created by the product over time—is more important than the physical product itself.

Digitization has allowed for things like global product development and rapid simulation, but increasingly digitization also means that products are integrated systems of hardware and software, Heppelmann said.

At the least products perform diagnostics and capture service information. But they can often do more. For example, auto-industry supplier Continental AG, based in Hanover, Germany, makes windshield-wiper systems with rain-sensors and software that controls how rapidly the wipers sweep across the windshield.

This embedded software means that any product can be given an IP address. Then the product can be connected to both its owner and the manufacturer that originally built it. The world of ubiquitous connectivity is creating the servitization revolution.

“It’s at this point that a manufacturer can begin to collect large volumes of performance data to truly understand how its products are being used, how best to maintain them, and how best to deliver value over the useful life of the product to those who own them,” Heppelmann said.

Manufacturing companies are already changing their business models to embrace selling bundles of services, sometimes by subscription, tied to the use of their products, Heppelmann said. Ultimately that model will replace simply selling the product, he predicts.

For example, Trane, a maker of HVAC systems that is part of Ingersoll-Rand Corp., continuously collects and interprets data from building systems and controls to optimize building performance. It offers this as an ongoing business service to its customers. And it fixes 30 percent of the service issues remotely without sending a truck.

In the new world, Heppelmann predicts, the customer relationship will involve an ongoing delivery of value, rather than a transfer of ownership of a product.

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