How Manufacturers Fuel Growth Priorities


By Judy Cubiss, Director and Global Industry Marketing Lead for Industrial Manufacturing, SAP

Midsize industrial manufacturers are quickly realizing that the pursuit of growth isn’t just about reaching a specific destination. They’re also viewing it as an ongoing journey marked by evolution, adaptation, and innovation – and at the center of that strategy is a shift that goes beyond traditional product-centric business models.

According to an IDC survey of midsize manufacturers, over half (52%) consider the new service-based models as “very important” or “important” to their revenue growth and differentiation. While offering “everything as a service” is not necessarily a top priority right now, respondents indicate that they may be on the way toward achieving it. They’re considering various service-based models, including installation, maintenance, field service support, digital services, and predictive or preventative maintenance.

The pivotal element in this evolution? A cloud-based platform that enables manufacturers to consolidate their legacy systems and data and foster an environment that is ready to flex and scale as business needs and customer expectations change.

Evolving with flexibility and scalability

Midsize industrial manufacturers embrace service-based models out of a desire for growth and margins. Yet, while their needs resemble those of larger competitors, they contend with fewer resources. However, this reality doesn’t mean they cannot unlock tremendous business potential from models based on solutions, subscriptions, usage, or more.

Consider the complex flow of materials in most manufacturing operations, which usually include multiple vendors and long lead times to fulfill customer orders. An integrated, yet flexible and scalable, cloud platform simplifies the introduction of new business models based on best practices across the entire value chain – which is crucial to provide new solution bundles and billing options.

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More important, data from across the entire business can be brought together into one location to improve transparency.

With this approach, manufacturers can optimize operations and spot new trends faster with better analytics. More important, they have the foundation to fuel ongoing growth – providing real-time insight to scale operations as circumstances change quickly, increasing automation to boost efficiency, and adding new technology capabilities as needed.

“There are so many benefits to the cloud,” said Katie Evans, the research director of IDC’s worldwide small and medium business research program, in the video Smart Manufacturing in Growth-Focused Companies. “It requires less upfront capital and less technology expertise for implementation. And it enables companies to scale up and down and use the computing power and pay only for what they need, when they need it.”

However, Evans’ research acknowledges that wonderful benefits do not happen without overcoming a few challenges along the way. A big challenge that the study reveals is a lack of IT talent and budget to cover costs.

Discover how growth-focused manufacturers use new technologies to increase process efficiency and business value. Watch the video, Smart Manufacturing in Growth-Focused Companies, and read the IDC Info Snapshot, “Using New Service -Based Business Models for Growth and Profitability.”

IT staff at midsize firms are often small and too busy with day-to-day operations to focus on moving the company forward in strategic digital transformation to be more competitive. For those reasons, Evans advises midsize manufacturers to lean into cloud technology more because it reduces the overhead of running day-to-day operations.

Smart Press Shop GmbH &Co KG is a prime example of a midsize manufacturing business following this recommendation. By digitalizing its core manufacturing processes with core ERP and manufacturing execution systems, the automotive component producer established fully paperless production and a completely automated process for configuring machinery to press parts. This enables the company to deliver small-batch, make-to-order products in a cost-effective manner while running on 100% green energy.

“Manufacturing leaders that we surveyed view technology as a competitive differentiator that can help offset things like rising costs of skills or increased interest rates or inflation,” said Evans. “Increased efficiency and ROI that the technology delivers will pay off quickly. But they must be very wise about their investments.”

Reshaping perspectives on everything as a service

The core of business model innovation doesn’t merely rest in its inception. It’s also about staying relevant, adjusting dynamically, and evolving with ever-shifting customer needs and preferences. This is undoubtedly the case for industrial manufacturers that desire the benefits of new service-based business models but do not have the budget and resources to realize them.

Like the endless nature of digital transformation, introducing service-based business models as part of a continuous evolution requires a platform that allows operations to flex and scale quickly business-wide. In return, manufacturers can innovate new bundles, services, and complementary offerings that diversify their customers’ options and embrace a versatile system of diverse revenue-generating opportunities.

Discover how growth-focused manufacturers use new technologies to increase process efficiency and business value. Watch the video, Smart Manufacturing in Growth-Focused Companies, and read the IDC Info Snapshot, “Using New Service -Based Business Models for Growth and Profitability.”


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