As I have spoken to manufacturing CIOs across Silicon Valley, their top focus is trying to determine what the transition to the cloud means for their business. Most have grown up on an on-premise model, tied down by the SAPs, Oracles, and ERP vendors of the world. Now they are facing a new world with SaaS based service, mobile capabilities, social platforms, and streams of rapidly available information that they can leverage within their daily operations.
Manufacturing companies are looking for ways to reconfigure their traditional value chain and keep pace with the changing world around them. Here is a look at 3 ways innovative manufacturers are re-imagining their business models:
1. Pricing Power through Service
The dramatic increase in globalization we’ve experienced in recent years has meant an increase in business and market presence for many manufacturing companies. But it has also meant an increase in competition, particularly from China and other up and coming geographies. A pressing concern is, how do you maintain pricing power when you are negotiating with customers?
Many companies are developing a culture of service transformation. The goal is to sell solutions to end customers by packaging the physical product with services and service contracts in order to eliminate the pain of learning how to run these new products. Successful manufacturers such as GE and Caterpillar, are mimicking the SaaS model by renting equipment as needed by the units of operation.
2. Operational Process of Getting Closer to the Customer
Manufacturers have always been challenged with delivering ROI to the shareholders and providing operational excellence. They have been keenly focused on their employees, partners, and distributors, making sure their end to end transactions are frictionless. In this new age of information, companies are delivering value within their systems by shifting the focus from internal perfection, to external satisfaction by getting closer to the customer. To do so, they are utilizing the cloud to increase the flexibility around their supply chain and integrate with their sales and marketing operations. This provides a full 360 degree view all channels, customers, and networks, increase partner and customer loyalty, drive revenue, and maximize order potential.
3. End Customer Applications
The Internet of Things (IoT) is really opening a new set of business opportunities for manufacturers, by taking all of the data that is gathered from connected devices and creating innovative business models. Some of the companies I have spoken to are developing applications for end customers that interact with the products they’ve purchased. For instance, your customer is a farmer that recently purchased a tractor. The application would inform him/her of the best place to get seeds, the optimal time to sow, soil bulk density, drainage, weather patterns, market prices for crops, etc. These applications are an effective way to extend value and get closer to your customers.
These are all things manufacturers have traditionally never been concerned with, but as the world changes so do the priorities. Everyone is looking at these innovative business models as ways they can differentiate themselves and improve external processes.
For another example of manufacturers are embracing the cloud, download Driving Manufacturing Growth with CPQ.