It’s one thing to become a digital-first manufacturer. Consider that step one of two. But to become truly future-proof and ahead of the curve manufacturers need to extend into step two: unlocking avenues of continuous and recurring revenue. As TechTarget contributor Emanuel Bertollin put it, “the meteoric rise of the consumer subscription market is having an impact and influencing B2B industries, including manufacturing.” Recurring revenue gives manufacturers an edge in the market and stability they can depend on, but to get there, manufacturers have to tap into the strategies of that consumer subscription market: partner with third-party developers, get in tune with the ways their products can extend into services and software, and use data in bigger ways than ever before.
To create this setup for continuous and recurring revenue as a manufacturer, there are two foundational principles organizations in the industry must adopt: making your data work for you and leveraging equipment-as-a-service for innovative revenue streams.
Make your data generate money for you
Data monetization in manufacturing can be looked at in a variety of ways. On a high level, manufacturing organizations use their collection of user and buyer data to enhance existing products, develop new ones, build new and strategic partner relationships, or improve overall performance to cut down on costs and spend more time selling. This is a great entry-level arena to focus on and develop if your organization hasn’t already.
Data monetization can also be much more directly tied to revenue. Manufacturers generate a wealth of data on how equipment, chemical products, and more are used. This data is valuable and worth something to a number of buyers. Manufacturers can practice direct data monetization by bartering and trading information or selling raw data through brokers. This approach is a newer and intriguing option for continuous revenue growth, but it is not necessary to make your organization’s data do more than just pile up.
Subtle and less attention-grabbing approaches to data monetization in manufacturing are often the most effective. This can include increasing efficiency in various value chains, like R&D or floor operations, or amplifying the impact of service and support teams with more empowered, dynamic data at their fingertips. Whatever path you choose, the point of data monetization is to make your data go to work in a way that increases your bottom line with ongoing revenue.
To learn more about the differences in data monetization strategies and which one may be best for your organization’s capabilities, we recommend this white paper from data management leader Tableau.
Leverage the possibilities of equipment as a service
At its most basic level, equipment-as-a-service in manufacturing means a product is never purchased or leased—it’s used and the user pays for the service of being allowed to operate the product. In this model, the manufacturer is often not only the maker of the product but also the owner, ultimately responsible for maintenance and free to make changes at any time. The only external role is the user or operator—that is the new customer. This is an appealing avenue for recurring revenue because it gets customers using a product, dependent on it, and then repeatedly resigning to continue usage of it. All the while you as the manufacturer and owner are free to regularly update and enhance the product to keep it relevant and appealing to your customer base.
A key benefit of this approach for manufacturers is that you can make your product offerings more appealing to a wider audience of prospective customers. By assuming more of the financial risk of owning the product itself, more customers may be willing to sign up for weekly or monthly payments for using the product based on actual market demand. Many are already taking off with this model: the equipment as a service model is expected to reach $131 billion in 2025, while it was only at $22 billion three short years ago in 2019. What’s driving this rapid shift to the model is lower setup costs, more mature financing tools available, and increased competition from third-party servicers.
This is an extremely compelling path for manufacturers looking for more continuous, dependable revenue, and the cloud technology is already built to support these unique billing and quoting situations if organizations choose to adopt this approach.
Want to learn more about custom-made ways to optimize processes for your organization to earn more continuous revenue? Our manufacturing COE and advisory services are proven experts in the subject. Let’s connect.