The distinction between service and manufacturing continues to shrink as products get smarter and as manufacturers recognize there are piles of money to be made supplying services after the sale. Thanks to the Internet of Things (IoT), that often means responding when products themselves sound the alarm. But what role will remain for external field service as the makers become the doers, tapping the IoT to produce and fix smart, connected products?

To find out, we spoke with Andreas Schroeder, a servitization expert and a senior lecturer at Aston Business School in Birmingham, England. If you’re worried that the IoT and new models like servitization spell the end of field service, Schroeder will put you mind at ease.

Is connected technology the lynchpin that allows manufacturers to sell outcomes, not products?

Andreas Schroeder

Andreas Schroeder

It’s a double-edged sword. The digital link allows manufacturers to advise customers on optimal product use and work with them to improve efficiencies. The UK’s MAN Truck is a good example. The company can advise customers on inefficient drivers based on the data its trucks capture. But some customers may be hesitant to reveal too much about their internal operations out of fear that a service provider will exploit that information. It’s important for service providers to develop trust and show customers value propositions to prove the benefits of releasing their data.

What role is there for third-party service providers in servitization — and what effect, if any, does the IoT have on that role?

There may be a role for third-party field service organizations, if they are in close partnership with manufacturers. The crucial thing that distinguishes servitization from any third-party service offering is that the manufacturer, enabled by its unique product and customer knowledge, provides services.

The in-field service delivery could potentially be done in close partnership with a third party, but the manufacturer needs to design and drive the service provision.

As products get smarter, is it easier for smaller companies to offer advanced services?

Rolls-RoyceThis is definitely where the trend is going. One of the pioneers of servitization was Rolls-Royce and its “TotalCare Package,” which provided engines to airlines as propulsion services more than 20 years ago. Rolls-Royce invested in satellite communications to maintain the digital link to those engines, but these were expensive assets. With the IoT, the cost of sensor hardware, communication and cloud-based data processing have plunged. Now, it’s affordable for less capital-intensive products.

Data is the real benefit here, no? What new services will companies be able to offer thanks to this data?

Service providers will be able to manage risk by assuring uptime and proper product usage. They will also be able to learn about their own products, including patterns regarding failing parts and customer use. Companies will also be able to engage in predictive analytics to anticipate failures and offer predictive maintenance based on those findings.

“Companies should understand that data is a resource that can create broader benefits than just the ability to monitor products.” — Andreas Schroeder

Those that do it well can even develop a data resource that will give them a competitive advantage. Richer data leads to better predictive abilities, risk management and, ultimately, greater efficiency and more competitive prices. Companies should understand that data is a resource that can create broader benefits than just the ability to monitor products.

Are companies prepared to make sense of all this data?

That is the tricky bit. Manufacturers that are pondering servitization do not necessarily have a precise understanding of the value that data could create. A company that’s traditionally focused on selling a product will find it more difficult to judge how much efficiency they’d create by adding a few more sensors to the product. They know it creates value, but how much? As manufacturers become more digital, they should look at purely digital companies, such as Facebook, for clues about how to invest in and develop data resources.