The pandemic completely disrupted the travel industry. Worldwide air travel decreased 43.5 percent in early January 2021 compared to the same week in 2020, before lockdowns began. It is estimated the passenger aviation industry lost nearly $400 billion in 2020. While cargo aviation was soaring, airlines cut capacity on the passenger side.
As travel begins to rebound and airlines work to re-build capacity, there is an opportunity to disrupt traditional business models and drive transformation efforts. Demand and customer expectations will continue to be volatile, which means building new business models and revenue streams may be the path to more agile, adaptable operations for aerospace companies.
Aerospace has traditionally been driven by single purchases of equipment, with operators taking responsibility for maintenance of their aircraft. Starting with engines, servitization increasingly replaced this purchase model by selling outcome-as-a-service, with additional services supplementing traditional products and commitments on service parts or aircraft availability through performance contract management. These largely rely on in-service data analysis, condition monitoring, and innovative capabilities such as predictive maintenance.
At the center of this is the rapid pace of change for both technologies and expectations that challenges the benefit of long-term investment in costly products. But as servitization becomes more common across multiple industries, it has the potential to continue transforming aerospace. Recurring revenue and continuing connections to customers are keys in this market. While manufactured products go-to-market phases may be very long to ensure quality and regulatory compliances, services provide a complementary pathway to profitability and competitive advantage through shorter Return on Investment cycles.
In a servitization model, the focus for companies moves towards innovation around smart designs and connected products, plus services leveraging tools such as 5G, Edge, blockchain, and cloud computing. From a manufacturer standpoint, well-positioned, adaptative, and renewed services provide continuous, non-cyclical, and high-margin revenues. This is so attractive because pay-per-use services financially benefit providers and ensure customers a high level of service, when compared to costly and low-margin models based on purchase and fix processes.
Focusing on the customer
Moving to servitization is only beneficial if there is a clear roadmap, strategy, and organization to support it. Companies need to develop quality servitization use-cases and revenue streams so new business models and associated products and services can be explored. This will re-define the overall customer-service model, architecture, processes, and transformation plan, supported by a coherent, scalable end-to-end customer-services platform.
Servitization models rely on data to succeed. Companies must address legacy disconnects and duplications to streamline data exchanges and foster collaboration. Storing information in silos will no longer work; the data ecosystem must flow in the new model, with a clear and transparent data-governance strategy, key to the stakeholders’ buy-in.
Digital technologies can provide a foundation to transform customer service. From chatbots to 5G to machine-learning, there are user-friendly tools and solutions that better connect with customers. Stakeholders’ platforms need to be connected through orchestrated, secured, and authenticated data exchange. Providing a single point-of-entry to all data, business applications, and services is vital and will support multi-channel communication, end-to-end technological convergence and integration, and a seamless customer experience.
Digital transformation is an opportunity, but it does involve all areas of the business. It will impact every department and employee, so it is not an easy undertaking. Before transformation can happen, companies should develop a high-level benefit case and transformation roadmap to drive the vision forward. And there needs to be buy-in from the highest levels in an organization to truly succeed.
For more information on servitization and aerospace, visit our aerospace and defense page.
Principal Business Analyst – CoE Digital Manufacturing
Cyrille advises clients on their servitization strategy and roadmap, bringing innovative technologies and solutions that include mobility, drones, 3D mock-ups, and virtualization.