Cisco Study: Execs see need to resolve ‘service dilemma’ in manufacturing

Eighty-six percent of manufacturers view the transition from product-centric to service-oriented revenue models as a core part of their growth strategies. However, only 29% believe services will grow faster than the product aspect of their business, according to a new Cisco survey released Monday (Nov. 16).

The study of 625 senior manufacturing decision makers across 13 countries highlighted this disconnect between the size of the service opportunity and how much is being captured.

According to Cisco, simply making a good product is insufficient; what happens after the product is sold is becoming increasingly important. Industrial machine builders that successfully leverage services, for example, are using them to drive disruptive new business models. This enables them to charge for business outcomes – such as plant uptime – just as they now charge for physical products sold as a capital investment. Companies that don’t harness services for such recurring revenue will risk falling behind in this new dynamic marketplace.

Cisco’s survey respondents recognize this threat. Seventy-nine percent believe digital disruption will have a significant impact on their companies over the next three years. However, many manufacturers are either struggling with the transition to services or are not moving fast enough.

Manufacturers cited digital technologies such as cloud (37%), Internet of Things (33%), and analytics (32%) as having the greatest impact on production over the next three years. This is notable in part because of what respondents did not emphasize: “manufacturing” technologies such as robotics, 3D printing, and so forth. It underscores the pivotal role of digitization for the industry’s evolution, especially as connecting across an entire manufacturing ecosystem becomes critical.

Link here to read the Cisco report: “The Digital Manufacturer: Resolving the Service Dilemma”