"Just a side business" is often the opinion in the mechanical engineering industry. Dr. Martin Habert of bachert&partner on stumbling blocks, untapped potential in corporate processes and a holistic life cycle view of service in mechanical engineering as a sustainable criterion for success.
The role of service in mechanical engineering is often underestimated. The five biggest thinking errors in the bachert&partner listicle. (Source: bachert&partner/Unsplash)
Thinking error #1: "After sales (service) is a reactive follow-up business that results from the sale of hardware products - a no-brainer according to the motto 'The customer depends on us'."
This error in thinking is dangerous: From the customer's point of view, these are production-relevant activities for the care and maintenance of his equipment. An increasing number of competent providers are competing for these services in a highly competitive market. The customer thus has a free choice and is often not dependent on the manufacturer. Those who only reactively take care of this business risk losing the quite lucrative services to competitors.
Tip from Dr. Martin Habert, service expert at bachert&partner: "To be successful with aftersales, you need attractive service products and (pro-)active service sales."
Thinking mistake #2: "Our company is well positioned in service."
Good margins and initial success in developing the service business are deceptive. In fact, however, many companies are "flying blind" when it comes to service in mechanical engineering. On the one hand, concrete data regarding the market potential for services on the company's own installed base of delivered machines is not determined. This means that there is no relevant benchmark for determining status and targets. Secondly, business figures and key service indicators are not explicitly recorded and tracked. This means that there is a lack of assessment and control options for consistently developing the company's own service business. Often, less than a third of the market potential is actually exploited by the company.
Tip from Dr. Martin Habert: "The individual market potential must be determined in order to determine the actual performance of the service. This is the basis for a successful service strategy and sustainable investments in this area."
Thinking error #3: "Digitalization is not a service topic."
Studies by the German Engineering Federation (VDMA) and other industry-related sources show that profitable innovations with digitization are possible, especially in the service business: for example, with IT-supported processes, digital tools (e.g., augmented reality) and data-based new services. The existing installed base is the biggest market for new digital offerings - not the market for new machine investments.
Tip from Dr. Martin Habert: "Digitalization is a service topic! With remote service and the use of machine and production data (keywords: IIoT and Industry 4.0), real added value can be generated."
Thinking mistake #4: "We know our products and are the experts."
Technical support is the basis, but customers are increasingly interested in the optimal use of their equipment. Machine manufacturers often have technical product expertise, but less application expertise. Accordingly, services to optimize utilization are often not possible at all because there is a lack of insight into the concrete application on the customer side. Particularly in connection with digitization topics, this is a critical success factor for service in mechanical engineering if digitally recorded machine and process data are to be interpreted and used profitably.
Dr. Martin Habert's tip: "This is where the greatest business potential lies, but manufacturers need to build up new competencies for this. In the future, they will have to understand how the customer actually uses the products and help him increase his efficiency in using them."
Thinking mistake #5: "Service growth must occur at stable margins."
Many companies react with restructuring and cost cutting when the usual high profitability in service declines. However, the causes of lower margins often lie in changes to the product mix: If high-margin spare parts were sold primarily in the previously rather reactive service, new services seem to be less attractive or even harmful. Often, as service grows, it is also allocated a larger share of the company's general selling and administrative costs - in other words, it bears a higher proportion of the company's costs.
Tip from Dr. Martin Habert: "The decisive factor is not the profit margin, but the plan-actual comparison. Stringent tracking and transparency of business figures in conjunction with a clear strategy and defined measures are the appropriate tools for assessing and managing the service business and avoiding mistakes."
Conclusion: Service in mechanical engineering as a top management task
Machine manufacturers should also make service a top management task - and not wait for the end of the crisis! Thanks to years of consulting experience, bachert&partner has established a clear connection between the position of service in the company and its economic success: Growth in service succeeds if it follows a clear strategy and is backed by consistent material and personnel investments. bachert&partner supports companies in setting up a solid strategy and business planning and evaluating it in a meaningful way.
More information on the current situation of the mechanical engineering industry can be found in the whitepaper of bachert&partner – download it hier for free!
Dr. Martin Habert is a project manager at bachert&partner and a specialist in the field of mechanical engineering. (Source: bachert&partner)