How can customers and operators benefit from Product-as-a-Service? By creating efficiency gains that both parties share.
With its Pay-Per-Part model, Trumpf developed a concept that forced the OEM to rethink major elements of its offering. In doing so, overall machine efficiency increased to a degree that customers and Trumpf benefitted from.
In this episode, Tom Schneider, Benedikt Braig, and Jörg-Andre Junker provide insights into efficiency gains and their requirements.
This episode is the 15th in the series PaaS Decoded, 16 conversations about the fine details of product-as-a-service.
Impression
People
Dr. Tom Schneider, Global Head R&D at Trumpf MT (CTO)
Benedikt Braig, Head of R&D Management Services, Trumpf
Jörg-Andre Junker, Lead Business Center Smart Material Flow, Trumpf
Patrick Hypscher, Co-Founder of Green PO, Expert in Sustainable Business Models
Chapters
00:00 Intro
03:15 Offering Pay Per Part through the TruLaser Center 7030
05:34 Discovering the unexpected Efficiency Gains
10:37 The North Star Pay Per Part
15:00 Finding new ways to improve the service
19:32 Reducing the material consumption
24:32 The sum is more than all of its parts
28:06 The top efficiency drivers
32:15 Creating closed data loops to enable efficiency gains
35:07 Digital twins and AI as upcoming enablers
37:26 A state-of-the-art machine as basis
42:08 The transformation journey wrapped up in a book
44:50 It needs the right people to drive the change
48:09 Even more digital, more collaboration, more gamification, more robotics
About TRUMPF, from website
The high-technology company TRUMPF offers production solutions in the machine tool, laser and electronics sectors. The company is driving digital connectivity in manufacturing industry through consulting, platform and software offers. TRUMPF is the world technological and market leader for machine tools used in flexible sheet metal processing, and also for industrial lasers.
Further Links
https://www.trumpf.com/de_DE/produkte/services/services-maschinen-systeme-und-laser/pay-per-part/
https://umdenkenasaservice.de/
Transcript
[00:00:00] Intro
The biggest driver was increasing the number of parts that can be produced on one system. And this is what we call overall equipment effectiveness, increasing that tremendously. This is at the core
Welcome to the 15th episode of PaaS Decoded, 16 conversations about the fine details of product as a service. In the last episode, Dave Mackerness told the compelling story of cooling as a service. In today’s episode, we look at the efficiency gains a equipment as a service model can create.
He studied mechanical engineering in Karlsruhe before joining Airbus as the head of controlling A380 Engineering Germany. He then moved on to McKinsey, where he worked as a consultant and product development expert. After five years with Liebherr Aerospace, he joined TRUMPF, where he serves as the managing director of research and development of TRUMPF Werkzeugmaschinen. Welcome, Tom.
Thanks, Patrick, for inviting me.
He studied engineering and industrial engineering in Stuttgart and Reutlingen. He worked for TRUMPF in China and later for Porsche’s consulting branch, MHP. 10 years ago, he joined TRUMPF as a product manager, worked later as executive assistant and then as head of business development equipment as a service.
He is lecturer at Karlsruhe Institute of Technology and now head of research and development management services. Welcome, Benedict.
Hi.
He studied industrial engineering in Aachen and joined TRUMPF after completing his degree. He started as product manager and held various positions among them, the head of business unit, global integration team, TruLaser center, 7030. Currently he’s head of product management, smart material flow. Welcome your Jörg-Andre.
Glad, to be here.
Guys. What’s your favorite pay per use service in your personal everyday life.
Cool. I would say, since I visited with my family last week Berlin, it was miles.
Oh yeah. Good one. Any additions, any other examples,
Yeah, well, there’s a controversial discussion about the the benefit of them. But I used to live in Stuttgart and I out myself as a liker or someone who likes the e scooters that stand around in the street and annoy anyone else. I personally find them quite handy. So yeah, that’s, that’s, I would go with Voy.
Benedikt, anything to add?
Depends on what you call pay per use, but I would say Spotify is one of the one of the services I use most at the moment, I would say.
[00:03:15] Offering Pay Per Part through the TruLaser Center 7030
So before I start asking about your let’s say what kind of songs you listen to let’s look at a TRUMPF and your equipment as a service proposition What exactly does TRUMPF offer there?
We decided that we would try to evaluate with the product of pay per part, giving our customers the opportunity to to subscribe on the production outcome business model for our cutting machine on the 70 30. that we give the market the experience of how you could use in one of the highest commoditized market segments and cutting sheet metal parts, how this could change with a servication model.
So this was the journey we started and we just reflected shortly before the podcast that it is quite a time ago, it was in the October, 2020. So it’s more than four years now. So it’s it is a, it is a journey which we started based on the understanding that our customers have the strongest fight on part price for cutted, for cutted parts in the single volume, so piece flow one Is the highest challenge and therefore we look for a different approach to the market.
And I think just to add to that, to really think it from the end, to really think it from the, from the outcome and really think it from the best possible solution and work backwards from that way.
So right now you have this machine 7030 and the machine can either be bought traditionally, or it can be used as a service with the monetary model or the revenue model pay per part.
Yeah, so the, the, I would say traditionally it’s still bought. The CapEx wise, it is, is still, this is the strongest part. Then that is a traditional financing with the TRUMPF Bank, so you can also get it financed and and as a third option there is the pay per part in dedicated regions.
[00:05:34] Discovering the unexpected Efficiency Gains
So you mentioned the journey and you even sort of did that journey was so exciting and colorful that you even wrote a book about that one to spread the word about the learnings. And when I read that book it was for me pretty apparent that you always come back to the efficiency gains you managed to achieve via that model. What kind of efficiency gains do you mean?
So I w I would say it is the unexpected efficiency, which come along if you change the way, like Jörg just mentioned, looking at from the backward. So what is, what the re what the customer really wants? He wants to have the perfectly cutted part in high quality and, and, and along this What it’s needed to get this part, there are a lot of steps to be done.
And some of these steps are done in the individual expertise of the end customers. And some of these steps can be more efficiently done if you collect them across a number of customers. And a trade off of our efficiency that we would like to gain is, which of these services could be somehow shared and therefore get the efficiency of the unseen potential. And, and, and that is what I think that is still our excitement that if you take it like this, you find a lot of opportunities where you didn’t thought before, but it comes for the price of a complex business model.
It’s also very important to see that we don’t think that we are wiser than our customers, that we can run our machines or do better the job that our customers do today. It’s more that we have different angles of attack and we have different opportunities. We have, we have a software team. We can, we can control things that the customer can’t control today. And that gives us opportunity as Tom just said, to, to level those efficiencies.
And maybe also one, one example to be very specific is something that we call remote operation, which is when, when there’s an issue with a system, for example, at night there is a TRUMPF remote control center that can take over the whole system and restart it without the customer taking care of anything.
And, and this means that one person at TRUMPF can take care of 20 machines at different customers. And the customers who usually only have one or two of these systems. Don’t have to have one person present the whole night. So this is, for example, one very specific point where we see this is developed in this business model.
And, and with that, there is a tremendous efficiency gain.
And what, what is interesting is that we developed it in the business model, but we, we carved it out to become a service of the TRUMPF group more in general. So it’s, there are also trade offs and and what we have, we have built up during the project phase
and for the first customers, we have built up a remote control center in, in, in Neukirch, which is close to Dresden, Saxonia in Germany. And last two weeks ago, there was the, the fair in the U. S. Which is Fabtech, which is our our, our fair where exhibition of the new technologies and sheet metal business in the U. S. market. And we have brought to the market that we could remotely control machines in these markets, so in the U. S. market, from our remote control center in Neukirch.
And, and I think that is why we call it it was our transformation journey for, for us as a team, which we have described. And thanks for sharing the knowledge that we have written a book. There’s all, there will be an ebook and there’s a a yearbook on Apple too. So you, you can get our journey if you would like to. And the idea behind this.
That it is that you have to start and to learn and, and, and the different approach we took is we didn’t do it incrementally, so step by step, we, we just somehow jumped to the, to the North star and then went back and looked, okay, what is scalable, what can we bring to the market differently?
And it has changed the way how our organization is thinking about business models, it has changed how the different departments have to look on it. From sales over a product management to technical sales support to remote control service centers, which have not been part of the TRUMPF group before there’s a lot to develop, which is beside the product, how we have seen it in the past.
[00:10:37] The North Star Pay Per Part
So you mentioned many aspects. Let me pick out two or three. So Tom, you started with something unexpected happened. So some of the results or efficiency gains you know you didn’t plan for that at the same time, you said there was also the North Star. Can you maybe separate the two from another?
So what was your North Star? And then maybe what are two, three things that kind of surprised you, especially when it comes to the efficiency gains or the benefits process wise?
So I would say the North Star was the pay per part within the ecosystem of servitization, a business model, that is the, the thing you would like to reach after a decade of transformation of different business models. And we decided, or maybe it’s interesting to jump directly there and then go back and not doing it pay per use, pay per something, dah, dah, dah. So we say, okay, we do it.
The ultimate game is in servitization is yet to, that you only pay for the part you would like to produce. You don’t own the machine. You don’t own the software. You don’t own the service. You just pay what you get.
And you can do a pretty simple calculation because you have a customer, your customer calls you, he wants to pay you a certain price. This is at the phone and negotiated. And we guarantee our customer, the producer of the part for the end customer, the other price, though he can get his EBIT margin directly by just do a minus. So the price he can get in the market minus the cost we, we bring as a price to guarantee the produced part. And then he has. His his EBIT margin.
So, and we thought this should transform the market. It, by the matter of fact, it is not today. It’s intellectually, it’s right. But in the market perception, it’s not seen as a benefit because it’s a high transparency and all that. And, and we can’t, we somehow are in the position that we also get something out.
I think the interesting thing about that, what you just said is the step is so big, that’s why thinking of it from the end, like paying per part, that’s such a huge step for our customers today, they’re in a completely different world. And that’s why Northstar is a good picture for it because it’s very, very far away, up in the sky.
But, yeah, but, but, so this was the idea and we have learned that it was too far away. So we are sitting in the bus and we traveled and nobody was joining the bus. And It’s still hard to find some bus stops to, to bring people in. So we invite everybody who wants to join, but it’s still, it’s a North star.
But what, what, what me surprised me the most in this journey was with these two gentlemen that, that when we directly started it, our system didn’t work. We put together all we had. We have been faced that the complexity was not. It was not designed to directly work 24, 7, 364 days a year. So we learned, I would say that is the, the, the biggest benefit for us was to put products together in the purpose.
What our customers need is the biggest learning for us and our organization. As there’s a storage system, there’s an automation system. There’s a software, there’s a production planning software. There’s a servization app. There’s an interaction with our customers through the service pipeline through service calls and all that has to work perfectly aligned that the customer is really happy. Yes, in principle, all our products are perfect. Yes, we do a lot in quality measurements. We do a lot to make sure that it works. But if you put it together in this kind of systems, which we also operate. In the sites of our customers. That’s a different, that’s a different.
And I absolutely have to say that because that’s my, that’s my spot.
It’s like sleeping in your own hotel and at night it smells and it’s loud and you realize it’s not experience you always thought it was. So it’s, it’s a different way of, of experiencing your own products.
[00:15:00] Finding new ways to improve the service
So Jörg, you also referred to efficiency gains that happen on the client side or on the machine side, and then also efficiency gains you realize when you kind of pool all the, as a service appliances together and you steer them. Are these the two main categories where you say, this is where overall there’s the economic benefit of that model.
Well, I would say there is more to that. So I think we only scratched the top of that. And there’s, and when discussing this and when designing that, we realized, okay, we are starting with the things that are most obvious for us as the, as the OEM, but going into this model, scaling this model, there will come more things, for example we could address, material purchase more efficient than our customers can do that today. And we can pool that and we can handle that differently. And there’s those, we didn’t tackle those things, but there’s a lot of things we, we realized that we could solve differently when we have the opportunity in this model.
And for example, our bank, we have TRUMPF bank, which finances machines But they also offer, since a couple of months now, that they finance the material purchase for our customers too.
We didn’t get to the point that we manage the materials for our customers, which we also thought might be interesting, but we found that our bank could help our customers by financing material.
So it’s a deviation of our idea, of the idea of the business model equipment as a service, or paid per part, including paid per part. We didn’t do, we will not do this, because it’s, It is the home turf of our customers and they would like to control it, which we respect, but our bank now helps financing the purchase of our customers for the material, which is 80%. of the part price is material price.
So, and, and therefore new ideas came out and I think that was, is a message of also our book which we call in German Umdenken as a service. So rethink the way you think your business and, and, and that is what, what, what our message and that what also is the reason why we wrote this book is to tell it. If you start doing it, you will see the things where you could do servization. And it’s not always the obvious part, because for example, one thing I like most is we have a service app where we have a traditionally for all our machines. And we have now learned that with the service app, we could also interact with our customers differently.
And in the pay per part business model, we even came to the point, we do a kind of, Lean production hand over call every day shortly to exchange the knowledge of how did we produce overnight? Is this not a kind of a micro consulting for our customer? So this is a totally new idea and we would never have experienced it, but we needed it because we produce for our customers 24 seven.
And there has to be a certain handover if the customer is going into the night shift and he’s not on site because we remotely control the machine. But if he’s coming back in the morning, he wants to know what happens during the night. New services pop up by just having first partner, first customer in these kind of complex business models. In theory, you would have never seen that this could be an efficiency gain, also for the end customer, that he’s interested in this handover connect of our operator and the operator of the customer.
Different responsibilities lead to different opportunities to attack efficiencies. And also because we’re talking about in the circularity podcast being able to supply the customer, the machines or the equipment differently, and also develop it differently because we operate it ourselves and we, we can, we can completely see that differently. You make use of used equipment differently.
There’s so many things that. That come to mind once you start, you know, changing the boundaries. That’s basically.
[00:19:32] Reducing the material consumption
You also refer to material usage, so that there was also some kind of efficiency gain. What exactly was that about? And
Well, let me put it like this. What our customers do is producing metal parts, and these are cut out of sheet metal. And you need to kind of program where these parts are cut out of the sheet. And you need to, that’s what we call nesting.
You need to align the parts that you want to cut on the sheet. And this is like what do you call that? No,
it’s good. Cake for Christmas. Yeah. We are, we are shortly before Christmas. So everybody in the kitchen starts bakery. And at the end, if you now think about Christmas cookies, it is like producing sheet metal, only with a different material.
This
a bit more tasty, I guess. I hope.
is very, very expensive and you want to use as little dough as possible.
Yeah, exactly. Because all the material that is this is what you, what you take for the cookie dough and, and remix it needs to be reheated and melted again to create new sheet metal. So this is the huge point where efficiency comes in.
And in this model, we take over this step of nesting these parts on the sheet. And we have a different setup technologically compared to the customers where the customer typically one experienced employee is doing that as best as he can we can leverage technology and wait for the latest or the latest point in time to nest all the parts that need to be produced.
And there are certain percentage point where we can increase the percentage or decrease the percentage of material that needs to be thrown away as scrap. And, and this is, I would say the biggest effect on, on the economic side of the customer, because material is so expensive, but at the same time, this is also the biggest lever on.
on CO2 reduction. And I think this is one point where we can see that economic and ecologic benefit go hand in hand. So by decreasing cost for the customer you can also decrease CO2 emissions. And, and this is this example that we mentioned in the book.
Also beside, because we had mentioned it’s a circularity podcast, maybe just seeing this from different, we also learned every day, or we learn every day. So our products of the next generation will look different because we, we see where we have put the wrong focus, not the wrong focus, a different focus because we didn’t know better or spare parts, so being responsible by yourself for managing the spare parts across day and night, across your operations.
Brings you in the position that you think, is it really the best way how I could set up this feature? Should I, is it not an opportunity to, to do it slightly different and then avoid interruption by waiting for spare parts? How to, how to maintain. The system in a way that we really see the operation output of the machine in the optimum because at the end circularity is for our customers, it’s, and that is something where we learn a lot is because we take out the operator in one technology. The customer gets our end customer gets the opportunity to get, to take these people to new technologies from cutting to bending from bending to welding. So because part of the processes are more autonomous, they don’t need people.
They, they are more efficient equipment on a, on a world perspective. is used more efficiently. So it’s avoiding to build new equipment to use it as inefficient as the old ones have been. So there is an efficiency gain in the global scale of economics. And we, we can contribute to this because we have the better and the more experienced and therefore complex, but therefore also better auto, in the auto, in the automation part, in the software and the service part, better positioned and therefore bringing something good into the world and to our end customers.
[00:24:32] The sum is more than all of its parts
So I, you, I understood by like shifting the system boundaries and sleeping in your own hotel you, you discovered many, let’s say, opportunities to improve the, the process, but also the product itself and the interaction. And I also understood that some of them are also carved out of the equipment as a service and you offer them now stand alone to, to the other customers.
Are there any Let’s say aspects or services that are, let’s say, tied to the equipment as a service, where you say, this is so, so at the core of this pay per part model, that if you want to experience that, you have to sign up to the pay per part model.
Yes. So I would say the, the, the, the, the fully outcome driven business is only pay per part. What, what we’ve seen is you cannot add up all the other services and come to the same.
The complete digital chain for this. Which is, which serves from order to getting the delivery, getting the feedback.
So this complete chain is linked to equipment as a service.
And, what do you, what do you mean by digital chain?
so we guarantee a price for the produced part by the, the, our, our customer who is Connected to his end customer, he needs our digital cloud service where he uploads the part he would like to produce and we guarantee a price and this interface and this technology stack, which gives you a price guarantee you cannot get without having our equipment as a service because it is our knowledge of the shared services in the background, which allows the pricing of the part.
And, and, and we could not guarantee a price for a part produced without having remote control, without doing the nesting, without doing the service control. So there are some of these services which are strongly linked and there are others which can be used differently for different machines. And we are balancing this out and we are also checking it out.
Markets are different. And European based companies would like to own the machine. So it’s, there’s a, there’s a strong core belief and entrepreneurial spirit to buy it or to finance it with your finance institution, which is around the corner. So there are also obstacles which are outside the area where we could define it, it’s good for that.
And there are other areas we’d say, okay, remote control sounds very interesting and remote control from Germany in the U S. Might be a very interesting thing. We will see how the market will react on that. We are really curious to see if this part of the servitization is is, is, is faster developing. We are well prepared.
But it’s at the end, it’s it’s a question of transformation of a market. Where do the core beliefs of a market change? How business should look like.
I think in the end, what do you, the only thing that you only get with equipment as a service is, it is the closest partnership you can go in with the OEM as in any other product that you can buy at TRUMPF, for example, you will not get any closer and you will not get more attention of, of the OEM.
[00:28:06] The top efficiency drivers
Yeah. If we zoom out, what would you say, what are like the, the main the main points where you you improved efficiency so that it then also drives economic attractiveness?
I would say the biggest driver was increasing the number of parts that can be produced on one system. And this is what we call overall equipment effectiveness, increasing that tremendously. This is at the core. And most, most of that increase is really due to the remote control center ability.
Not because it’s about changing the person who operates the machine, but rather in case of a standstill, reacting faster, bringing it back to life faster. Because that is a usual topic for customers producing lot size one or two or three. So there are different things happening and the faster you react the higher your, your efficiency gain.
And this is what we ramped up very fast.
I would add two more things. I think the speed up of using our equipment compared to the normal learning curve that has been achieved by customers, it is significantly faster. I would say that is, that is something where I was surprised at, but also I’m really happy to see.
And it has also put us in the position to reflect the way how we bring products to the market. And if I just look what we have presented to the market. A couple of days ago at the Euroblech, which is our biggest exhibition where we brought a new product, which is not as a service, but it’s also servication based because we put in robotics with vision and So, And, and, and steered out of control without programming.
So I would say this product and this is a story of pay per part and rethink how we, we bring products to the market also put us in the position to, to learn different and to, to gain this efficiency in our product development process in our customer centricity wish. So we, we have learned that being so, as Jörg mentioned, so closely connected to our customers by operating the machines.
Is something which helps us to, to focus more on what is really needed as a product. And we derive two business units. And the one is a smart material flow, which is currently steered and headed by Jörg. So it was also hopefully a success for him to do this product. And and we have built a a dedicated department dealing with service and servitization products, which we didn’t have before.
And, and, and I would say in the past we looked on spare parts, yes, but, but now we look on servitization, how to support our technical service guys out, how to remotely help them with a predictive service center. So there are so many ideas and therefore customer oriented efficiencies for our customers have been developed over the last four years, which I would say we would have developed them anyhow. We focus on putting us in our customer’s shoes more specifically. I would not say that we have not done it in the past, but it was an eye opener that We, we should change the way how we look
And if I understand you correctly, it’s also not limited to these let’s say two teams and departments it’s, it’s kind of you, you, it triggers different perspectives and innovations also across the organization and other departments, I guess. Yeah.
[00:32:15] Creating closed data loops to enable efficiency gains
for sure. And Benedikt, I think you should explain that always the best list the closed data loops and closed learning loops which are established with this product.
Yeah. Yeah. Let me think of a good example to point that out. I think in most cases the loops for learning as an OEM are not there because you typically get feedback from the customer very anecdotally but not linked with here’s the data point. Here’s what happened.
Here’s the video snippet of, of the failure of the machine. And, and bringing that right into the development department and prioritize whether you solve it and what, what kind of solution and, and this loop right back to the person improving the technology makes you a lot faster compared to people telling each other what needs to be solved
and to really technically be specific. We have a dash cam and we never had dash cams before. Because we had to build it as a remote control. And we planned to have the cameras for the remote control operator.
Finally, it came out, it has a perfect dash cam to get to the developer to explain, because he saw that he has developed to do it right. And he has in the past, he heard that it doesn’t work. And then he explained that that cannot be because he has developed it right. With the dash cam, the feedback is directly to the guy who has developed it.
It’s proven it’s on the video. It’s. It doesn’t work, whatever was there, it didn’t work. So let’s just do the analysis and refocus what we should do differently that it works the next night.
In the beginning, we never thought about installing dash cams on our seats. And if I would have asked the IT security guy, if we are allowed to do dash camming, I would say the answer would be, would have been no.
It’s not a good idea. Now the customer sees, okay, it’s part of the remote control item and the customer in the handover in the morning interaction with our service operator by night said, okay, I can explain it. It didn’t work and here’s the video snippet and then he says, okay, I’ve understood. Thanks to the transparency, the openness, the, it is an eye opener.
And, and that was, I would say it was an unplanned benefit. But it’s now there and we will bring it in more products to come. It is, it will be essential of our product development circle.
[00:35:07] Digital twins and AI as upcoming enablers
Yeah, you, now you mentioned also the, the cam and let’s stick to technology, the physical technology. So what I get over and over again, it, it all depends on connectivity. So the machine has to be connected to your cloud, to your systems. Next you also added cameras. Is there anything else that from a, from a physical hardware technology perspective, that is kind of required for you to realize these benefits?
Yeah.
so I think in the, in the systems which we have, we have almost everything now is the connectivity is vision dash cams low loop closure. Re Reconfiguration, refinement of software layers. So this is all I would say it’s established.
In the next step, in the future, what we see with the next product to come, and we have presented them on the Euroblech, is the digital twin will become more and more important for us.
To, to somehow train ourselves by having digital instances of our real physical world. to avoid complexity once we install the machines at our customers, once we, we operate complex systems. So I would say this is something where our industry will come in the next decade in a more gamification way of producing things for digital first.
So I game my smart factory and I operate it based on the results of my improvements in the virtual world. From my perspective, this will be the next North star. And it was not possible the last decade because technology compute power was too expensive. Now it’s becoming better. And AI is the missing booster to, to bring the physical world to into a digital world and to allow people to decide based on digital experience to then operate it better.
[00:37:26] A state-of-the-art machine as basis
And, and then look into technology deeper also, you also have good old hardware from, from that perspective of TRUMPF hardware in here was a really, really cool system. The true laser 70 30 fiber which is a fully automated system, which completely takes care of everything, loading material, unloading material.
And that was a technology base that made everything else possible because we were able to, to do the full process automatically. And that’s also something that, where we decided, okay, this machine is the best base because we’ve, we’ve advanced the furthest in, in terms of process reliability and so on where we can attach our model to, and you know, I say that because I love that machine and it’s all very, very, when you look at technology, that is also a core technology in here and you know, it’s good old hardware.
But but it’s good that you come back to the machine itself just to get the context clear here. So the machine was there before you started pay per part and equipment as a service, right?
Yeah. So it, it took us 80 years to get the idea of this machine. Then we developed it 12 years to make the physical function working. And then we added on top and because it’s Christmas we, we don’t put it as a cherry on the cake, but the business model was the, the rethinking of what in this technology stack on the physical side, which we have invested for long period to make autonomous laser cutting.
We invested a lot in software and we also invested in service, but not in servication. So we provided with a technical vehicle, which is, it was cutting sheet metal, like printing a sheet of paper. That was the value proposition of this machine, but with, it came with a complexity for the operator and for the end customer, which didn’t allow them to buy them like In automotive, I would say like a Golf, it was more or less a Ferrari or a Bugatti or whatever it was, it was the ultimate rager on if you would like to cut a piece of metal autonomously, you buy a 70 30. But with the civilization model, we, we thought that we turn it the other way around. We democratize cutting and everybody could get it because he only has to pay the parts. .
And unfortunately, the market was not ready for this when we started it or, and we are still learning, I think it what, what, what Jörg just mentioned, it, it is the benefit of new business model innovation is getting these three things together, the hardware system, the software system, and the Not the service, but the idea of how to operate and deploy service the over the lifetime to help our buyers, our customers to use their equipment as efficient as possible.
And the complexity of autonomy, the complexity of making this happen in a time where you don’t get enough trained operators. These are the questions of the futures. And also to bring in for the circularity aspect, how to maintain the products you have sold in a way that you, that both sides could participate on the success of keeping the equipment longer in the field, both the end customer and the OEM, because both need to continuously invest.
We also need to invest, so we have to participate once we would like to keep. The product as long as possible in the market, we need to generate value out of it and that we can keep our focus on investing the money back in the innovations of the future and our customer needs us in a healthy condition that we can further invest to make him more successful.
So it’s a, it’s for both sides. Important that they over the lifetime generate values that both can survive, survive in business.
[00:42:08] The transformation journey wrapped up in a book
Tom, because coming back to, to the economic success of it, I think it’s also at the core Why we wrote the book and why we kind of conveyed our message, how we did all that, because what we in our heart believe very much is that the idea of this has so many good aspects and so many things that should be used again somehow that we said, okay, we need to share it because this needs to be worked on.
Other people need to look at that and say, okay, we can do that differently. Let’s do it this way. And yeah, it’s probably going to be quite good. But that’s the idea of our book that we convey. What did we do? How did we do it? What did we learn and what can someone else do differently?
And three value propositions of the book.
It’s only 130 pages.
It’s the perspective of three people who fighted a lot over three years to make this happen. So we are now, since a couple of years, maybe in friendship related due to the fights we had in the past.
It’s, it’s a nice story of how different perspectives make a product better for a customer, and we don’t want to see it as a learning book. So just, it’s over a week and it’s readable and and and we didn’t write it as engineers we got a wonderful support from somebody who can really do nice wording.
So, and this is all open and publicly available that we didn’t write it. We just told our story and somebody else wrote a wonderful book.
So, and that would be our journey and our, our top message is. It’s so much to learn if you start doing it and circularity will come, it will need different answers from the engineers and from the successful companies out of Europe and we need business models and if it’s pay per part, it’s nice and if you find something different, just write us an email or connect us on LinkedIn.
And so we are really interested in the community of those who would like to make the difference. And if you get a lot of pain and bad feelings, you can call us too, because we have experience and we give positive answers. Everything can be survived in business innovation. It’s not a question, even if the market doesn’t buy it.
So if somebody would like to buy it, just call our German agency or the Austrian or the Swiss. Or the Netherlands, and they can sell it to you, and we are not allowed to because we are in the development department, but it could be available.
[00:44:50] It needs the right people to drive the change
Cool. Great. So that brings me already to the end and I have three generic questions. The first one is about the perspective of a manufacturer or brand. So what is the main thing you need to make sure as a manufacturer before you start something like a product as a service? Mm hmm.
You mean as an OEM?
Mm hmm.
You need people like these two.
Well, and you need someone that gives you the power to do that. Because I think in the end what we realized, there’s so many obstacles and, and people telling you what is not working. That you really need someone, a power promoter that kind of open the doors.
Especially because we talked to a lot of companies who called us after our story went public. And most of these companies had a team working on something very similar, but they didn’t make the move on releasing it to the market. And, and what I think is that most of these companies should just try it in a learned set up and go to the market because otherwise you, you cannot solve these topics in your basement thinking about it.
And as a CTO who will, might have had the impression of all listeners that I was a powerful person, it’s, but I just survived. And the, the credits go finally to our family owners and the CEO who let it happen that I could survive bringing this idea to the market.
I think it’s a, it is nothing you can bring with a business case.
You have to have some core beliefs. And as of today, the business case is not positive, clearly stated, but I strongly still believe that it will trans act positively. Because one thing, and that was the biggest challenge our CEO gave to us when he challenged us on this it was, is every transaction at least positive.
And we worked over two years. We are still not positive. But every produced part and the transactions to produce a part, this is positive, but we don’t produce enough parts at enough customers that the overall P and L of this business model is positive.
So, and that is only possible if a leadership team is still somehow looking on it with the, but there is a strong support that because we did this KPI right, the transaction itself is positive. It’s not enough transaction. So it’s for the time and the market to come.
In the end, the question always is, what do you make of it? What do your listeners make of it? What do our colleagues and whoever, whoever looks on it, what do you make of it? And that’s the core thing, what we want to convey. Please think through it and we think there’s a lot of things to take from it.
[00:48:09] Even more digital, more collaboration, more gamification, more robotics
All right. My second question is about the future. What are the significant trends you see in yeah, Circular as a service for the next five years?
So I think, as I mentioned before, the, the way of the digital way with the physical world connected in, in somehow supported by AI applications will boost the way how mechanical systems design is done, we will see an IT OT connect in the core of manufacturing, manufacturers, OEMs, so this will change the products we could serve in the future.
And and I clearly see the openness of all manufacturers to contribute in ecosystems, in data sharing ecosystems for the benefit of our end customers.
It, it will take another five years because it’s, everything is longer and I always thought it can be faster. But after four years, I can say there will be a lot of change in the next five years.
And it’s starting today and it will be enabled by technology gamification for digital simulation to send better provide services to our end customers will change the way how products will look like.
And to, to, I think that’s something you would like to say, but I will take it away from like robotics will be play a big role in those as a service models and everything that is connected to robotics that can be done with robotics.
So I think there will be a great deal of, of, of things happening, not as in a system, as a, as in total, but on, on the kind of a component level.
What do you, what do you mean exactly there?
well, you know, we, we presented, for example, a solution on, on our biggest fair, just, just previously on the Euroblech, a solution where you can sort parts with an AI solution with a robot. And in this, there’s also so many points where you can, can connect as a that I would say, you know, it’s not there yet, but it will come for sure.
And that is a trend, say, that, that is is waiting to come.
Robotics will be in manufacturing one of the next decade. The democratizing of robotics by the use of AI and then new business model will bring robotics To companies where they have never planned to have robots because of the lack of skilled operators and PhD available engineers in small and medium business companies.
And, and, and this will change, so that will be the way.
All right. And my last question is about people. Yeah. So this podcast is about sharing knowledge and connecting people. And you certainly have goals, challenges projects around the corner. So what kind of people should reach out to you?
So the willing people, we invite everybody to connect to us who’s interested in, after having read the book.
Because we decided to, to write the book because we had so many interviews that we, every time explains the same. So everything, what we say is in the book, we share our knowledge in the book, but the ones who have read it and have specific questions are always, always invited to connect us over LinkedIn or our, our a webpage, which will, you will provide.
And I think it’s needed that you are willing to learn and then you will find solutions and don’t judge if your solution is different to what you have seen before. That could be a unique learning opportunity. So take the challenges to learn and and don’t stop if you get the first fight, not won, but you lose it.
And if you think the idea is right. I, I, I would say there’s still every day the obligation to dissent against the one who say you are wrong. If you have the strong belief that the idea is right, you, you have to drive it.
And if you have any idea to make our business model better than just, you know, feel free.
But Benedikt has done a lot of math. So it will be a challenge. But we are, we invite everybody to challenge us.
Yeah. Great. So, and if by now you still missed that Tom, Jörg and Benedikt wrote a book. Yeah. They wrote a book. So, and if you’re eager to learn more about equipment as a service read it. And you find a German version at www. umdenkenasaservice. de. I’ll add the link to the show notes.
And maybe when you’re listening, there will also be a English version or a English product added to that one. Thanks for your time. Thanks, Tom. Thanks, Jörg. Thanks, Benedikt.
Thanks, Patrick.
This was another episode of PaaS Decoded, 16 conversations about the fine details of Product as a Service. If you liked it, share this episode with colleagues or on social media. If you missed a question or topic, please send me an email so I can improve the conversations for you. If you learned something from this episode, please provide a review via Spotify or Apple Podcasts.
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