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Interview: „Smart Services are the Future“

Jörg Niemann, professor of industrial engineering at Düsseldorf University of Applied Sciences, in conversation with Stefan Pletsch, partner at i-tec Business Consulting, a consulting firm specializing in digital transformation processes.

Stefan Pletsch: Basically, we want to avoid one-off solutions that are not scalable because they only fit specific customers – they would simply be too expensive for most companies, apart from very large players. But we also want to avoid “one-size-fits-all models” that have been elaborately developed but do not address the individual needs of different companies and industries with sufficient granularity. In mechanical engineering, as in all industries, digitization must advance if it is to remain competitive internationally. However, the sector also has its own laws and peculiarities.

Niemann: Can medium-sized companies build these themselves?

Pletsch: I advise against it – not because we offer such services, but because it requires specialized knowledge that medium-sized companies cannot have at all.

Niemann: What is this specifically about?

Pletsch: First and foremost, there needs to be a clear vision of what is to be achieved with smart services. Then it’s time for implementation, which should be based on a clear investment strategy. Together with the customer, we develop professional data management, lean innovation processes and the right digital technologies. We also involve the machine manufacturer’s customers in this change process, as well as its own employees, because they always have a deep understanding of the customer’s needs.

Niemann: Do you always plan the big shot right away, or do you take a step-by-step approach?

Pletsch: We recommend companies that want to optimize and expand their digital service processes to start small and digitize their process chains piece by piece. You don’t have to build a large platform right away.

Niemann: Isn’t there a danger that the result will be more piecemeal?

Pletsch: This can be prevented by mapping all processes in digital applications with the aim of one day fully linking them into a chain. This means making sure from the outset that all individual processes have the identical technological basis in terms of data processing and analysis. Processes, know-how and core competencies must be neatly documented. Ideally, this is done by external consultants who already have experience in implementing such transformation projects – IT specialists should definitely be among them. External experts and interim managers look at the situation from an objective perspective, bring in a variety of methods, absorb missing resources and, last but not least, develop fresh ideas.

Niemann: How to avoid customers having the feeling that digitization is happening just for the sake of digitization?

Pletsch: It is indeed our job to explain to the customer that he is not just selling machines, but services and added value. Digitalization is changing his entire business model. Machines are enhanced by services and ideally run in a complete ecosystem with optimized supply and value chains. The machine thus becomes just a part of the product, which is more like a digital service.

Niemann: With which concrete wishes do the companies approach you?

Pletsch: These are of various kinds: Some want to digitize their administrative processes, track their products, or develop an interface to a specific software. Others want to digitize sales or support their project management with digital tools.

Niemann: Can you explain this with an example?

Pletsch: I would like to take a company that cannot easily be assigned to a specific industry, most likely logistics: A leading global recycling company that specializes in electronic waste (e-waste) wanted a better overview of the value chain and a deeper integration of it. Suppliers, buyers, distributors – all were to be networked. In the best sense of the word, a one-stop-shop solution was to be created. After a careful market analysis, we set up an integrated platform for trading and scrap recycling. This enables the company to offer individual, customized service solutions. The core element here is the digital integration of service providers to cover various processes within the electrical scrap value chain.

The model was tested with a pilot customer, optimized, implemented and rolled out to other locations after pilot completion. The additional profit margin netted out to €220k per year for one logistics location.

Niemann: What were the factors critical to success?

Pletsch: We had to determine and map the processes within the end2end value chain in detail and perform a value stream analysis involving all stakeholders. The eco-system determined in this way clearly showed the positioning of the company within the value chain. In a matrix comparison with the competition, we then worked out the development potentials.

Niemann: What tools did you rely on?

Pletsch: The canvas methodology and logic were used. This is a tool that can be used to quickly visualize and test new ideas and business models. The method allows different options to be compared at an early stage of service development and is therefore an equally efficient and effective tool for service enhancement. In addition, all relevant business areas can be included. In the case of the recycling company in question, we succeeded in turning the service business into an important revenue driver