What is a Connected Service?

A Connected Service is a service offered to the end customer of a product, made possible by the fact that the product is permanently (or semi-permanently) connected to a central information system (typically a Cloud-based DPS), through IoT technologies.
Connected services are a typical result of a servitization journey. Although in fact, theoretically, servitization can also envisage non-connected services, the latter are significantly more expensive, less scalable and less effective in ensuring a positive business impact to the customer and the provider.
The basic principle behind a connected service is to exploit data to generate value for the end customer and at the same time keep under control costs and risks incurred by the service provider.
Several elements can make up the value proposition of a connected services offering, and they are not only digital (in fact, most of them are not digital).

Digital Services vs Digitally-enabled Services

We distinguish:
  • Digital Services: services delivered only through a digital system and a digital interface → the provider sells the digital system → the value of services is entirely generated by the digital system
  • Digitally-enabled Services: “traditional” services that are enhanced by the use of digital technologies → the provider uses the digital system to generate and sell more value → the value of services is the sum of the value generated by the digital system and your activities

Elements making up a Connected Services offering

Elements making up a Connected Services offering and different groups: Digital services, Digitally-enabled services, Services giving monetization opportunities, Services requiring an organizational change.
Elements making up a Connected Services offering and different groups: Digital services, Digitally-enabled services, Services giving monetization opportunities, Services requiring an organizational change.

Digital Services (Base and Value-added)

The service provider offers end customers access to data, information, advice, control tools and other digital capabilities through a digital interface, typically a Web portal or a Mobile App.
Capabilities are enabled and empowered by data collected from connected products and a two way communication established with them.
Service delivery is fully managed by an information system (typically a Cloud-based DPS) and no staff of the provider is actively involved in the delivery.

Base Digital Services (Free)

Some basic digital capabilities are now considered a commodity by customers, so they will be part of a free basic package. This may include remote control of the product, visualization of real-time status and data through dashboards and alerts notification.

Value-added Digital Services (Paid)

More value-added digital capabilities can instead be packaged into paid digital services. This may include:
  • fleet management with bulk updates and configuration
  • relevant insights that the customer could never have computed on his own
  • contextual suggestions to increase productivity, efficiency, and availability of the product

(Semi-) Automated Spare Parts & Consumables Supply

The permanent connection with products is an excellent basis on which to set up a continuous supply service for spare parts and consumables.
Data helps the provider to accurately estimate the stock available to customers and predict the date when the customer will need a new supply.

Data-rich Reactive Maintenance & Data-driven Proactive Maintenance

Maintenance activities can be greatly enhanced by data collected from connected products.
We can identify 2 degrees.

Data-rich Reactive Maintenance

At a first degree, data and information extend and deepen the knowledge of the actual situation in the event of a support request or failure report from a customer.
At this degree, the service department's approach remains reactive: it only acts when called upon by a customer.

Data-driven Proactive Maintenance

However, thanks to a permanent connection, a radical change in approach is possible, which favors the delivery of much greater value to the customer.
The transition from a reactive to a proactive approach. The service provider can itself become aware of a failure situation or, better still, of an anomaly that could cause a failure and decide to act accordingly to avoid it.

Data-rich Performance Advisory

Traditionally, the services provided by a manufacturer have focused only on maintenance practices, with the aim of ensuring the health of the product.
A data-rich approach opens up a new horizon.
Data from products allow the provider to take care of other aspects, more interesting for the customer than “just” health. In a performance advisory contract the provider gives recommendations, best practices and suggested configurations that enable the customer to increase productivity, reduce waste, increase quality, reduce consumption and the environmental impact of their operations.

Data-driven Outcome-based Contracts

In outcome-based contracts, the provider takes responsibility for guaranteeing the outcomes the customer wants and implements all actions that maximise these outcomes.
The key here is to reach the optimal compromise between acting too infrequently or too late, and thus not guaranteeing the result, and acting too frequently or too early, and thus reducing profit.
A permanent connection, data and all further processing (which typically takes place within a DPS), help with exactly that.

Connected Equipment-as-a-Service (EaaS)

In markets that are ready to accept it, and with the appropriate financial support, a permanent connection is the solid base on which a provider can build an Equipment-as-a-Service (EaaS) offering.
Such an offering will certainly also include Data-driven Proactive Maintenance, at least.
Furthermore, if the metric for calculating price is not just usage (Pay-per-use) but an outcome (e.g. Pay-per-availability or Pay-per-performance), the service will also include the characteristics of Data-driven Outcome-based Contracts.