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 DPS), through IoT technologies.
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 supplier.
Several elements can make up the value proposition of a connected service offering, and they are not only digital (in fact, most of them are not digital).
Elements making up a Connected Service offering
Digital Capabilities (Base and Premium)
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 the DPS) and no staff of the provider is actively involved in the delivery.
(Free) Base Digital Capabilities
Some basic digital capabilities are now considered a commodity by customers, so they will be part of a free basic package.
(Paid) Premium Digital Capabilities
Despite this, a service provider has the opportunity to offer other, more advanced digital capabilities in a premium package for a fee.
Consumables & Spare parts Replenishment
The permanent connection with products is an excellent basis on which to set up a continuous supply service for consumables or spare parts.
Data helps the provider to accurately estimate the stock available to customers and predict the date when the customer will need a new supply.
Support & Maintenance (Informed and Enhanced)
Support and maintenance functions can be greatly enhanced by data collected from connected products.
We can identify 2 degrees.
Informed Support & Maintenance
At the first degree, the data and information extend and deepen the knowledge of the actual situation in the event of a support request or fault report from a customer.
At this degree, the service department's approach remains reactive: it only acts when called upon by a customer.
Enhanced Support & 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.
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.
Now a permanent connection 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 “performance advisory” we find tips, practices, configurations that enable the customer to increase productivity, reduce waste, increase quality, reduce consumption and the environmental impact of their operations.
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.
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 enhanced support and maintenance.
Furthermore, if the metric for calculating price is not just usage but an outcome (e.g. availability or performance), the service will also include the characteristics of outcome-based contracts.
Connected services and servitization
Connected services are a typical outcome 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 an outcome for the customer.