A leading global manufacturer of industrial machinery, was traditionally focused on new equipment sales. Facing a saturated market with slower growth, the company pivoted towards enhancing its aftermarket services. This included parts supply, maintenance, repairs, and digital services, to boost profitability and customer loyalty.
The Economic Landscape
The economic landscape during and after the COVID-19 pandemic significantly impacted product sales across various industries. The pandemic led to widespread lockdowns, travel restrictions, and social distancing measures, which disrupted supply chains and consumer behavior. Many businesses faced shortages of raw materials and components, leading to production delays and increased costs. The pandemic also caused significant job losses and economic uncertainty, leading to cut backs on discretionary spending. The economic impact of COVID-19 varied by sector, with some industries experiencing a more prolonged recovery than others. Overall, the economic landscape shaped by the COVID-19 pandemic created significant challenges for businesses, leading to slow product sales and necessitating strategic shifts to adapt to changing consumer behaviors and market conditions
Business Response
Faced with a saturated market with slower growth in new equipment sales due to the pandemic, focus shifted to enhancing the aftermarket services business, including parts, repair, maintenance, and digital services. This pivot aimed to boost profitability and customer loyalty. Through comprehensive market analysis, lucrative opportunities in aftermarket services were identified, while also understanding customer needs and competitor offerings. This allowed us to identify gaps in their service portfolio and potential high-value areas like predictive maintenance.
The introduction of new service offerings such as predictive maintenance using connectivity, machine learning and AI algorithms, remote monitoring providing real-time performance tracking, and digital twins creating virtual replicas of physical equipment for performance optimization. We also implemented subscription-based service plans to cater to various customer requirements.
The business also adopted a customer-centric approach, offering customized service packages and proactive communication. Keeping customers informed about maintenance schedules and potential issues, establishing a feedback loop to continuously improve service quality.
Where investing paid off
Investing in advanced technologies was key to this strategy including, specifically, data collection, which was analyzed to predict maintenance needs and optimize performance. A cloud-based platform was developed for real-time data collection and service coordination, and technicians were equipped with mobile apps for efficient service management.
To enhance service capabilities and expand market reach, the business formed strategic partnerships with specialized service providers and technology firms, and acquired smaller companies with expertise in key areas such as software development and automation.
The business invested heavily in training its workforce, ensuring technicians received extensive training in new technologies and service processes. Continuous learning programs kept the workforce updated on the latest advancements. Operational efficiency was improved by streamlining service delivery processes to reduce response times and enhance quality, and a robust service management system was implemented to coordinate and monitor all service activities. Key performance indicators (KPIs) were established to monitor and drive performance, focusing on customer satisfaction, response time, and predictive maintenance accuracy.
The strategic shift towards a service-oriented business model proved to be highly successful. By leveraging market insights, expanding the service portfolio, investing in technology, and fostering customer engagement, significant growth and profitability were achieved.
As a result, the services business saw double-digit year-over-year growth, driven by increased demand for their expanded service offerings. Recurring revenue from subscription-based service plans provided a stable income stream. The focus on high-margin services resulted in a substantial improvement in EBITA, reaching mid to high 30’s. Customer satisfaction scores improved significantly, with a higher percentage of customers renewing their service contracts and providing positive feedback.
We successfully captured a larger share of the aftermarket services market, further securing the position of ‘industry leader’.
This case study demonstrates the importance of adaptability and innovation in sustaining competitive advantage and achieving business success.