From Sales to Services: The Next Big Shift in Manufacturing
Move over, product sales. Manufacturers are now using data analysis to create ongoing services that satisfy a customer’s specific needs.
This program was produced by the Marketing Department of WIRED and Ars in collaboration with CA Technologies.
Jet engines built and sold by General Electric’s aviation division in Ohio come with onboard sensors as standard. That means even before an airline requests maintenance on an aircraft engine, GE Aviation already has an idea of how the engine is performing, what might be wrong with it and the services that airline will need.
“The data we’re pulling from it can help you determine whether the engine needs anything special now to fix it,” says GE Aviation spokeswoman Deborah Case.
Crunching Data to Create Value
More and more, large manufacturers are building physical products that are connected to the internet and generate loads of data, a trend called “servitization” in industry jargon. The smartest manufacturers have realized analyzing that data shows them how customers are using their products and how the products are performing. In turn, manufacturers are able to offer more tailored services to each of their customers, based on the data they’re analyzing.
“It’s mobility as a service. ... You put your needs into an app, and the app figures out the best way to provide that service and what it’s going to cost.”
— David Alexander, Navigant Research
At GE, that means not only selling a jet engine, but also alerting customers to the data analysis that can help keep the engines running in top shape. As long as customers approve the collection of data from an engine's onboard sensors, GE is able to keep tabs on metrics such as the engine’s exhaust gas temperature (EGT) margin. Fluctuations in the EGT margin can indicate ahead of time whether an engine needs maintenance, even before the standard five to eight years until an engine’s first tune-up, according to Case.
“We keep track of EGT for every engine, and we know what the fluctuation should be on that data for an engine that’s in great operating condition,” she says. “It becomes predictive maintenance. We can understand how an engine is operating now and expand using the data to project out to the next two to three years to help our customers plan their maintenance ahead of time.”
New Services, New Revenue Streams
What GE Aviation does with jet engine data is just one example of a lucrative shift in how manufacturers have traditionally looked at their revenue streams. Instead of making money solely from product sales, manufacturers are able to use data analysis to create ongoing services that satisfy a customer’s specific needs.
David Alexander, a senior analyst for Navigant Research, says the auto industry is primed for a similar shift.
“It’s mobility as a service. That’s what we call what Uber does,” he says. “You put your needs into an app, and the app figures out the best way to provide that service and what it's going to cost.”
MAN Truck and Bus in the U.K. is already pioneering mobility as a service. About 15,000 of its trucks are available to delivery fleet managers on a “truck as a service” model, where MAN provides fleet managers telematics data on driver behavior to help increase fuel efficiency and ensure safety.
At GE Aviation, there are even apps the company has started rolling out to give customers access to their data in order to make their own judgments. Data used in this way is really like a “health-monitoring system for the machine,” Case says.
“Data has been very key,” she says. “It helps customers with planning fleet management, and it helps our facility as well because we already have a picture of what areas of an engine are slipping and what we need to do to make it top performer again.”