The organisation uses those digital capabilities to engage with the final customer to provide more reliable service that is tailored in a dynamic fashion to the customer’s needs as they evolve over time, then we have an exemplar for the solutions business model. This situation is sometimes referred to as a “servitized solution”.
Customers – Who They Are
The customers of the capital goods firm are the intermediate firms that purchases the good for use in their operations and the final end user that benefits from the services those intermediate firms provide.
Engagement – Value Creation Proposition
With the digital solutions business model, the provider promises that the capital good (such as the engine) will give a predefined level of service, which is likely to vary over time. If the capital good does not perform to pre-agreed levels of service, the customer typically will be compensated for the full impact cost of that failure – possibly a very large sum.
Learn more about the Solutions Business Model
A dyadic relationship where your physical good or service can only be designed and delivered after prior interactions with the customer.
Delivery – Value Chain
The provider uses digital technology to ensure that the capital good performs to standards, is repaired or replaced in anticipation of any breakdown, and is optimised for the customer’s needs at that particular time.
Monetization – Value Capture
Capital goods as a service are typically charged on a use basis, with the fee rising when the good is undertaking more demanding value adding tasks. For the provider, the margins can be high, but the cash flow is much less attractive. For the user, the risk of non-performance is taken by the supplier and the cash flow more attractive compared to the option of buying the capital good outright and organising the servicing and operations.