Business Success with Subscription Business Models

How are subscription business models and their management to be structured in mechanical and plant engineering?

How can subscription business models contribute to increasing customer value, continuous optimization and continuous innovation of service offerings?

Within the Subscription Business Management Division, we are working on answering these and other questions.
Our research activities are based on the premise that companies achieve a revolutionary competitive advantage through the transformation from being a traditional product and service provider to a provider of subscription business models. New business models enable companies to convert the technological possibilities of Industry 4.0 into economic success. The basic principle of a subscription business is to offer customers access to an ever-improving service in return for regular payments rather than a one-off sale of products or services. Subscription business models consistently focus on customer benefit. They are particularly effective if the customer is not only granted access to a service, for example the availability of a machine, but the supplier also achieves a permanent increase in performance.

In order to realize such an offer, it is first necessary to record customer behavior in the form of data. This is only possible through the implementation of an appropriate technical infrastructure and the interconnection of existing physical products. The goal is to create a digital shadow through the Internet of Production, which allows unique customer understanding (Customer Insights).

In order to sustainably transfer the newly acquired expertise into innovation and performance improvement, the company needs a culture of continuous learning and improvement. This culture, combined with organizational framework conditions, enables effective and efficient implementation of high-frequency updates and further development of the service offering. In addition to mastering the technical challenges, it is required that the entire organizational be transformed.

Companies that use subscription business models must be able to permanently transform their knowledge about customer behavior into an innovation of their service portfolio. In contrast to today's thinking in terms of product generations and completed development projects, subscription companies are in a permanent state of performance improvement. Due to the high proportion of digital added value generated directly on site at the customer’s, these improvements can be transferred much faster into new releases for the customer. Such an approach, which is now common in the software industry, namely to extensively adapt or expand the scope of services after market launch, is still viewed very skeptically in many machine and plant engineering companies.

In addition to the innovation process, however, other corporate divisions, such as sales or marketing, are involved. Today, virtually all business areas are aligned with the product and service-oriented way of thinking and must be adapted accordingly to a subscription business model. In addition, the financial resources of a company must be reassessed when offering subscription business models. Financial processes must capture the dynamic, ongoing revenue relationships that form the foundation of the business model.

The Subscription Business Management Division focuses on

• the design and organization of subscription business models
• the development of a digital shadow to build customer insights
• the revenue design and evaluation of financial resources
• the development of suitable service packages comprising product, service and digital service offerings
•  the development of suitable cultural and organizational framework conditions