The pandemic shock pushes manufacturing servitization​

• Manufacturing industry was severely hit due to COVID-19. As a result, enterprises have started to look for opportunities in the adjacent industry segments. For example, automotive and aerospace electronics suppliers explored the possibilities to cater to demands of industrial equipment, high-tech, and consumer electronics sector. Also, many enterprises are increasing the supply chain resilience through diversifying the supplier base, eventually expanding the customer base across geographies for industrial manufacturers.
• COVID-19 has forced enterprises to adopt the online medium for customer connect and, in some cases, this has disrupted the existing value chain. For example, some of the auto OEMs (the trend started by Tesla) are allowing customers to buy car online, disrupting the existing dealership model. As a result, emerging technologies like VR are used for interactive visualization to provide the best online customer experience before buying the car.
• Manufacturers have started to understand the importance of data as the adoption of smart manufacturing increases. Real-time data about the design, operations, and supply chain has helped in remote operations management, enhanced workforce management, cost engineering, faster GTM, and better decision making.
• As the buying behavior of the customers (relevance, affordability, health/environment/sustainability factor) have changed in the pandemic, so enterprises need to revisit their product mix. The pricing model is also evolving (primarily SaaS pricing model) as customers are looking for servitization (As a Service model instead of capital expenditure).

The Bottom Line: Manufacturers need to shift their mindset from survival mode to thriving mode. With overlap of industry segments, new competition will arrive from adjacent industries. Confined to the existing industry, geography, product, and customer segments can limit their prospect. Thus, manufacturers need to revisit their entire portfolio for the future growth.