Service now! Time to wake up the sleeping giant - Bain & Company

Executive Summary
Be ambitious!
Services generate about 20% of revenues for many
European industrial goods manufacturers, but they
account for half of the sector’s profits and are growing
steadily at 5% annually. In spite of this impressive
performance, services remain an underexploited
opportunity for most original equipment
manufacturers (OEMs). Their service initiatives are
typically halfhearted. When considering the fullservice
potential of their installed base, companies
typically reach only 10% to 25% of potential revenue
– and often companies don’t even know where they
stand with their service potential. OEMs’ engineering
roots have led them to focus their attention
and investments on technical innovation and new
product sales. Careers are made in the products
division, while services are seen as a backwater. As
a result, service improvements have been difficult to
develop and implement.
That’s beginning to change, however, in the wake of
the financial crisis, as the industry confronts slower
growth. Executive boards are taking a more ambitious
approach, aiming to multiply their service business
instead of settling for incremental growth. At
the heart of this change is a shift in thinking about
the value of service for an industrial goods manufacturer.
Executives now see that an efficient service
line can not only raise their company’s profitability
and increase its resilience to economic cycles, but
it can also become the main avenue for significant
future growth, strengthening the new equipment
business and producing a “service champion” that
generates value year after year. What’s more, companies
can expand their service business in careful
investment steps and with less risk than manufacturers
accept in their traditional equipment business.
4 Service now! Time to wake up the sleeping giant