Digital innovations are an ever-increasing part of the business of industrial companies. New services are constantly being developed at KONE. It requires courage, new skills and high-quality data. Services must always be developed with a people-first approach, an expert says.
Many people believe that the Finnish KONE company is primarily a manufacturer of elevators and escalators but in reality, the manufacture of equipment covers only about half of Kone’s total business.
“We strive to deliver value to our customers through digital innovations. Today, half of our business comes from the sale of new equipment and half from the services that we provide to our customers,” says Janne Öfversten, who leads KONE’s innovation team.
According to Öfversten, the figure varies with business cycles: when the economy stagnates, sales of new equipment decrease. The service business, on the other hand, is more stable, as the equipment must be maintained regardless of the economic cycle.
The service business is not a new business for KONE, on the contrary: it has been a significant part of the company’s business for decades. However, the importance of services has grown over the years and they have become an increasingly significant part of KONE’s entire business,” Öfversten says.
A well-functioning service is based on high-quality data
In addition to KONE, many other manufacturing companies are now investing in services. A machine or other physical product alone will no longer stand out in the market or produce enough added value for the customer, according to Outi Määttä, Head of Gofore’s Intelligent Industry business area.
“Competition is fierce, and customer expectations have increased. For example, the user of a mobile work machine often has a close relationship with the machine. The machine is the user’s beast of burden, and they expect a lot from it,” Määttä says.
The services provided by industrial companies are based on data collected over the entire life cycle of the machines. In particular, data during use is important, as it helps to better understand the customer and thus steer product development in the right direction. By using data, it is possible to carry out preventive maintenance on the machine, for example, thus avoiding downtime, optimising energy consumption and increasing the utilisation rate.
There are many types of services, depending on the company and its customers. One extreme example of the services offered by industrial companies is that the customer company does not actually buy the machine, but pays for its operating hours.
“A large machine can stand idle at a production plant for long periods of time if it is broken or under maintenance. When the customer pays for the machine according to use, they do not pay for any unnecessary hours,” Määttä illustrates.
The development of services requires constant innovation
The services provided by Kone to its customers ensure that the elevators, escalators and automatic doors that have been sold function safely. In addition to its own products, Kone also services the products of other manufacturers.
According to Öfversten, the development of one functional service requires that there are dozens of service models being tested and planned all the time.
“We also have the potential to develop services unrelated to the servicing and maintenance of equipment,” he says.
One example of such a service is a digital service called Kone SiteFlow, which was developed in Öfversten’s team. This is a service for companies in the construction industry. It collects data from an elevator located on the construction site. The data explains how people, materials and tools move around at the construction site – as well as how to make the movement more efficient.
“The service significantly improves the efficiency of construction projects. Sometimes it is necessary to wait for hours for access to an elevator and other floors at construction sites. With the help of the service, it is possible to prioritise the use of an elevator and, for example, to lock or restrict access to certain floors.”
People are at the core of the service
KONE SiteFlow’s development work was a customer-oriented project, according to Öfversten. In order to make the service as useful as possible to customers, KONE first had to understand what was happening at the construction site.
“In the past, we just brought the elevator to the construction site. When developing KONE SiteFlow, we also started to monitor how construction work is carried out and how the elevator is used. We designed the first prototype and then gave it to the construction sites for testing,” says Öfversten.
Some of the service’s applications proved to be useful at construction sites, while others were useless. Testing helped develop a service that is genuinely beneficial to customers, according to Öfversten.
“This is exactly how the development of new services should take place,” Määttä says.
“When developing services, you have to start with people and their needs. People for whom services are designed should always be involved in the development of the service, and their experiences should be listened to. Assuming things is dangerous.”
Growth, customer retention, environmental benefits and transparency
For many large industrial companies, servitisation is familiar, as is the case with Kone. However, for smaller companies it can still be an unfamiliar thing, according to Öfversten. He says that even small companies should still take advantage of the opportunities offered by the service business, as it offers many companies a way to grow. There are also other benefits.
“Digital operations scale more easily than physical operations. When a digital service is implemented properly from the start, it is immediately available to even 100,000 customers,” says Öfversten.
Määttä adds that providing useful services to customers is also a way to strengthen one’s position in the market.
“The service business often makes customer relationship closer and more strategic. This, in turn, increases customer retention, as the customer is more committed to the company providing the necessary services.”
Servitisation is also an environmental issue, both experts point out.
“The world is already full of goods and equipment. That is why it is important to think about how the life cycle of existing equipment can be increased by maintaining and modernising it,” says Öfversten.
The data collected for service development also makes it possible to know more about the equipment production chain. For example, the origin of the raw materials used can be traced more and more accurately. Thanks to this, companies can verify the environmental goals they have achieved more transparently.
Transformation requires new skills and courage
The development of a company’s service business does not just mean additions to the product range, according to Määttä. Sometimes it even requires a redesign of the entire organisational structure, as well as the freedom to act in a new way.
“Many industrial companies have a long history and strong know-how. At worst, however, this can become a hindrance when bold renewal is needed,” Määttä says.
In order to succeed in the transformation, a strong vision and commitment from the senior management are needed, as well as good change management.
The effects of increasing services must be taken into account in the surrounding processes and systems, according to Määttä. In addition, companies often need new kinds of skills. The provision of services requires, among other things, strong customer service expertise. Some job descriptions may change quite significantly when the role of machines changes.
“A machine with which a person works can, at best, offer suggestions and spar a person, or even be an independently functioning partner. This means that the user’s skills and ways of working must change,” Määttä says.
However, it is worth it, because at their best, new innovations can help an industrial company to produce better quality and operate more efficiently.
Servitisation is not a value in itself
Servitisation offers great opportunities for many traditional industrial companies, but it also means a significant change and transition to a new way of working. The industrial business of the future significantly differs from the long-standing way of operating.
Although large industrial companies understand the importance and benefits of services, many still have a lot to do in practice, according to Määttä.
“It is important that the Finnish competitiveness is as high as possible so that we will not lag behind in the international development. We have a tremendous amount of excellent know-how. Industrial companies cannot afford to be left behind in the development of servitisation and digitalisation.”
Both Määttä and Öfversten urge companies to focus on delivering value to the customer. However, servitisation must not be a value in itself. Instead, a company needs to think about what kind of range of products and services their customer base really needs.
“Where does the value that your company creates for the customer come from? A device or perhaps a solution that contains elements of both a product and a service? When these questions have been answered, it is possible to understand what is most valuable to the customer, that is, what the company should invest in,” Öfversten says.