Product as a Service adds Spice to Operational Landscape!

Last week on the flight across the pacific, I had an engaging discussion on the effect of “disruptive technologies” not just on efficiency, but on the business models available and are expected. This lines up with a discussion on one of “think tank groups” I am involved on looking at the future, where a thread of discussion was around innovation, and much of the focus on technology but the most effective thread was around “operational, business innovation” enabled by the latest technologies.

In the discussion on the plane we went through the new business models due to cloud e.g “on premise”, “infrastructure as a service”, “Platform as a service” and “Software was a service”. These are related software, but now the conversation started to shift to rise in “product as a service”. Now this is nothing new with rental systems, example is the car rental business, but there is evolution happening with companies looking to enter the market or more importantly capture market share by people avoiding buying or leasing products. Example would be kitchen manufacturer supplies all the equipment to the kitchen or more likely and property development with 100s of kitchens. The contract is not for equipment but it is for “kitchen functional capacity”. Another example would a jet engine supplier supplying not engines but “power as a service”. We have already seen this concept with EPCs supplying a turn key plant, and then an operational contract for 5 years, with performance criteria in place.

                                                                  Source ARC

Another example is the growing “contract manufacturing” where companies out source a section of their value network to another party, (not new) but what is new is the tight alignment of this contract manufacturing to the whole value network in order to enable agility. Again we have seen this in the Toyota models in car manufacturing, but the supplier partnership is key, and this is going beyond the relationship, but the direct linking of the information systems. Requiring a value network to be a federation of value assets, which tightly aligned, but loosely coupled. The blogs on the third generation of MES align to this thinking, where value network of a brand becomes a “virtual manufacturing network” across the different value assets no matter who is executing.

 

Key is now stepping back and understanding what does this mean, what is required to make these models work. Importantly the design and manufacturing expertise of products is maintained but the new business is the service side business which requires linking into the full lifecycle management of the product during usage, so manufacturing does not stop at the day of shipping. Why this is intriguing is that I find myself engaged in a number of companies, not in the traditional manufacturing ut in this service business, which is a new business. The engagement has been around enabling central operational centers for monitoring and providing guaranteed levels of service, across many of the products in usage.

This is demanding some re thinking of the product design to provide usage information that can used to provide the levels of service to acceptable. On the contract manufacturing is driving people to “Information Driven Manufacturing” in a manufacturing 2.0 model, where that the facility can easily couple of another companies value networks, accepting actions/ tasks and providing information in real time exception manner.

The acceptance of Service Orientated Architectures and the “Internet of Things” will only accelerate the ability to provide “product as a service” with the leading supplies actually shifting to information in context and enabling a rapid and natural “plug and play” of plants, assets into a customers value network. Food for thought, when we designing the operational systems going forward.