OEM companies should embrace a servitization strategy. Gijs Meuleman, CEO of Sensorfy, joins Ryan Chacon on the IoT For All Podcast to discuss how IoT and predictive maintenance can enable OEM servitization. They cover what predictive maintenance is, the current OEM business model, servitization and outcome as a service, the challenges of servitization for OEMs, the benefits of servitization, the current adoption of servitization, how to shape a business case, and the technical challenges of digital transformation.

Episode 292's Sponsor: Avnet Silica

The We Talk IoT Business Podcast is back! Explore best practices, IoT use cases, and formulas for success on your preferred streaming provider. Or visit avnet-silica.com/podcast.

About Gijs

Gijs Meuleman is an entrepreneur and engineer. He has a passion for building teams and solving real-world problems using IoT wireless technology. Gijs takes inspiration and excitement from these topics:

- Servitization revenue streams through predictive maintenance

- The sustainability impact of predictive maintenance

- How IoT enables predictive maintenance

- Designing successful IoT solutions for predictive maintenance

- Creating recurring revenue for OEMs through servitization and predictive maintenance

Interested in connecting with Gijs? Reach out on LinkedIn!

About Sensorfy

Most manufacturers want to work smarter but lack the knowledge to design an IoT solution tailored to their use case. Sensorfy is an all-in-one partner to get started with predictive maintenance. They help OEMs to reinvent their business models and stay competitive. With a team of engineers, they design and build custom IoT solutions for predictive maintenance - to help customers maximize operational efficiency, reduce unplanned downtime, and cut costs with optimized maintenance resources.

Key Questions and Topics from this Episode:

(01:09) Introduction to Gijs and Sensorfy

(02:09) What is predictive maintenance?

(02:53) How are OEMs currently selling their products?

(04:15) Servitization and outcome as a service

(07:07) Challenges of servitization for OEMs

(08:39) The benefits of servitization

(11:09) Current adoption of servitization

(13:31) How to shape a business case

(17:06) Technical challenges of digital transformation

(20:08) Learn more and follow up

Transcript:

- [Ryan] Hello everyone and welcome to another episode of the IoT For All Podcast. I'm Ryan Chacon, and on today's episode we have Gijs Meuleman, the CEO and Founder of Sensorfy. They are an all-in-one partner to help companies get started with predictive maintenance. Good conversation. We talk a lot about industrial OEM companies and how they should embrace a servitization strategy.

We talk about how IoT and predictive maintenance can enable this.  If you're listening to this on a podcast directory, please feel free to subscribe, so you don't miss an episode going forward. But yeah, I'm really excited for you to listen to this episode. But before we get into it, we have a quick word from our sponsor.

The We Talk IoT Business Podcast is back. Explore best practices, IoT use cases, and formulas for success on your preferred streaming provider. Or visit avnet-silica.com/podcast. That's the We Talk IoT Internet of Things Business Podcast. If you wanted to check it out on the website, it's www dot avnet a v n e t silica, s i l i c a dot com slash podcast.

Welcome Gijs to the IoT For All Podcast. Thanks for being here this week.

- [Gijs] I'm glad to be on the show.

- [Ryan] Yeah, it's great to have you. Let's kick this off by having you give a quick introduction about yourself and the company to our audience.

- [Gijs] Yeah. Yep. No problem. So my name Gijs Meuleman. I'm an engineer, background in electronic engineering from Eindhoven University of Technology in the Netherlands. I started in the field of IoT after I finished my graduation project in 2012. At the moment, IoT was still relatively new.

And yeah, from there we started, and we implemented various IoT solutions. So Sensorfy is active in the field of predictive maintenance. So we help mainly industrial OEM companies by integrating our IoT solutions into their equipment or assets. It's a full stack solution.

So including hardware, sensors, software. And also of course data analysis.

- [Ryan] We've actually had a few conversations in the past about predictive maintenance, but can you just high level it for our audience, just for those maybe who'd be a little familiar, or I guess talk about where predictive maintenance is now when it comes to the IoT space.

- [Gijs] So what's predictive maintenance is at least what we do is we build smart sensor technology that can predict technical failure. And in that way we eliminate unplanned downtime and also lengthen the lifetime of assets. Mainly, it's mainly important when when you have expensive assets that if you detect a failure upfront, then you can usually prevent it from really breaking down.

- [Ryan] One thing I wanted to ask you is, when we're talking about kinda the industrial space, this is where predictive maintenance obviously gets talked about a lot. What is the current model that OEMs in, or industrial OEMs, I should say, are taking right now when it comes to selling their products. Selling their offering and things like that. Because I feel like from- what I want to get into is if there are other better approaches to doing business, but just I guess to set the stage, how are industrial OEMs right now selling their products from a, like how, what's the strategy that they're using, that they're taking right now?

- [Gijs] Yeah, very good question. So what you typically see in the industrial OEM space is that a certain OEM produces an asset and sells that to their customers, which are called asset owners. And that's usually very transactional in the sense that they've built an asset, a type of equipment and once it's manufactured, they sell it to the customer, and they start using this equipment.

Once it breaks down they might still order some service, but after the equipment reaches the end of the lifetime, then they usually buy again, which generates another transaction.

- [Ryan] And is there- with IoT and everything that's out there now, it sounds like there may be different ways to approach this or maybe even better ways to go about this. And if so, from your perspective, what are those ways, if you could talk to us a little bit about that.

- [Gijs] Absolutely. So what you see that it's a trend actually. OEMs are investigating and some are already very far and many are just starting. Just selling their product more as a service. Because a customer buys a piece of equipment because it can do something.

And if you as an OEM can guarantee the outcome of what the equipment does, then you might even consider not selling the equipment itself, but saying, okay, I guarantee for a certain period that the equipment functions as expected. One of the challenges you faced then as an OEM is that, you actually don't know that much about how the equipment is used in the field.

So if you want to pursue this strategy, which is also very very interesting for businesses because if you sell something as a service, you have a recurring revenue model, which increases the valuation of your company. A recurring revenue generating businesses are valued much higher.

You need to know how your equipment has been used. If it's almost breaking down. So that's where sensors come in place. Usually IoT sensors and that's something we're quite familiar with. And we help customers integrate those sensors so they can actually see how their equipment is being used and when they need to intervene.

- [Ryan] So that would be for the OEMs to be able to monitor and track their equipment? Or is that for the end user that's basically buying or bringing these pieces of equipment in and engaging with it or both?

- [Gijs] It's actually both. The main benefit, of course, is with the what we call the asset owner, which buys from the original equipment manufacturer. For example, one of our customers makes railway switches. That's usually a very transactional business seller. A railway switch to a railway company.

But if you can guarantee and say, okay, now it's going to break down, it's almost going to break down, then you might understand that the asset owner is- can benefit a lot from that because equipment downtime is a very costly event and the moment you can predict that, that's yeah, that's very beneficial for the asset owner, which means that the original equipment manufacturer can also charge a fee for that.

- [Ryan] So let me ask then, going from selling their product in a more transactional way to the product as a service, outcome as a service in a sense, it sounds like, how would an OEM- how challenging is it for an OEM to go about doing that? Why would they do that? And are there kind of risks associated with it from the years of doing business the way that they've been doing business?

- [Gijs] Yeah it's a- quite some challenges involved, as you might expect. One of the things is that as a, from a sales perspective, usually the sales department is rewarded for a transaction. If you sell a service, then it's usually a small fee. So there is some kind of trade off there.

You need to educate your staff on how to sell a service instead of a piece of equipment. But before that you actually need to figure out what are the important things you want to monitor? What do you want to know about your equipment in the field? What are the typical failure modes in your equipment?

So what can go wrong and is it possible to capture those and how difficult is it to capture those moments? And that's where we come in. We provide the technology, the various sensors. And also help developing the right algorithms.

- [Ryan] Right. No, that's fantastic. So then if, I guess if we go to the other end of that, from the challenges to once it's implemented, what are the real benefits of a company going to this servitization strategy around, I'm sure there's increased value for end customers, there's a more effective use of resources, things like that. But what are like the full scope of benefits that these companies are now looking into, or I guess now realizing that this is something that we should strongly be considering.

- [Gijs] Multiple cases why this is beneficial for OEMs. So one of the things is if you're a service based business, then you usually get paid from the OpEx part of an asset owner, which means it's very stable because they need your solution. And this goes on- doesn't matter what the economic conditions are because they just need the solution. In case you're a purely transactional business, what you typically see is that, especially during an economic downturn, is that companies, asset owners just delay their investments. So it's- your business is less stable. It's one of the, this is one of the key benefits of a recurring revenue model. Of course, the other thing is if you can figure out first, as in, in your industry on how you can monitor and detect technical failure upfront, then you can be, you can differentiate yourself from the competition. And it's like a the more- usually it's like the more data you have, the more access you have to data, is the faster you learn, and the faster you can add value to your clients. If you're first, then you can end up like a winner in your industry and take a lot of market share.

- [Ryan] Yeah. Yeah. It's such an interesting way to think about it because from just a historical perspective, thinking about how OEMs usually sell into companies, like you mentioned, it's very transactional, but there's- it's interesting to really think about how you can really shift an entire way of doing business with the help of IoT to make this plausible and make this beneficial, ideally to both sides at the end of the day, which is super interesting.

What are you seeing, so from your conversations or your engagement in the industry with OEMs and the end buyers, what are you seeing, or I guess, how far along are we in this process and being able to make this model successful? Are you seeing a lot of companies implement it? Do we- is it still pretty early on in companies getting to the ability to do that?

Because I know it probably changes some things internally, but where are we in that journey?

- [Gijs] Yeah so what I see there is a huge variation in- to be honest much, most industrial companies, original equipment manufacturers are in the beginning. They're starting to see the benefits of this strategy. They're exploring, they're doing some proof of concepts, see what they- yeah, to validate a business case. And then there are like a few front runners that have fully implemented servitization. They're fully outcome based, almost fully outcome based. And then there's everything in between, like where you still sell this in transaction. And then sell this as an additional service, for example.

And usually it's a journey. You don't do it in- it's not the flip of a switch that you say, okay, today I'm transactional and the next moment I'm fully outcome based.

- [Ryan] Yeah, no. It sounds like there's a lot of things that need to be adjusted, thought about, reorganized in order to make this viable. And also for probably existing customers, because the model has always been transactional. So how do you articulate this to them the value on both sides so that the way they're doing business benefits and can fit in with this as well as the way the OEMs are selling into these companies.

- [Gijs] It starts with just an added service. So there's still transactional business model, and I say, okay, if you add some sensors to this, then we can predict this, this, and this type of failure, and we can inform you in time to do X, Y, or Z. And then from there they develop their strategy so they can capture more and more failure modes and then eventually completely or partially go to outcome based business model.

- [Ryan] It sounds like it could be something a little bit of a hybrid approach, depending on how they do things and how their customers want to engage with them. Giving them the option is very interesting for sure. So let me pivot away from this just slightly and ask you some questions about- because we've been talking about business case, which I think is a really interesting topic.

But if you were to remove out of just what we're talking about here with OEMs and transactional versus more of the outcome based relationships and business models, how could a company just generally speaking be thinking about when it comes to an IoT solution shaping their business case and moving through that early stages of digitization to more mature stages of it by that business case evolving. Because I think that's always a challenge for companies is to be able to justify and understand how the business benefits from the implementation of an IoT solution or other digital transformation initiatives and things like that.

But how do you think about it? How do- how are you seeing companies shape their business case in order to keep moving down that path?

- [Gijs] Yeah so what I see is when a company starts doing this, it's usually a- there has to be a management buy-in, of course, saying, hey, this is something we really need to pursue. We need to look into. Usually if you want to implement predictive maintenance, then you're you're going to take a look and say, okay, how is my asset performing?

What are the typical failure modes I have in my asset? And then usually have a conversation with people from the operations, from service. You have some technology provider like us have multiple brainstorm sessions. See, okay, what is there, what's the possible that we can measure?

Where can we add value? You go to customers, validate these ideas. Say, okay, if we can measure this and this how does that benefit you? And from there, you start creating a concept. I say, okay, this is something if we can measure this, then this might be beneficial.

Then the typical next step is that a company starts with a proof of concept. We install some of the technology usually based on more, more or less mature building blocks. So you don't have to develop a lot of or yeah, do a lot of development and then really validate if these, the use cases as you think about really provide the value you're looking after. The moment you validate that and say, usually this can take like weeks to months to sometimes even a year to do this. Once you've identified the typical steps and the typical what kind of use cases you want to cover, then you can really look at, okay how are we going to industrialize this? How are we going to make a solution that's scalable for almost every asset?

That takes also quite some time depending on the complexity of the IoT product. For example, the day you deploy some of your sensors in the field, and then the most interesting part starts, is gathering all the data and and making the correct algorithms, which depending on the complexity of your equipment and the failure modes you want to capture, can take between months to years.

- [Ryan] Absolutely. And then as you move that into- once you get through the business case side, there's obviously technical challenge that comes from the implementation of all this and just thinking through it, planning, and all the good things that go into this whole process.

What are some of those challenges that you're seeing and how can companies approach those technical challenges when it comes to trying to move further down the path of digital transformation?

- [Gijs] Yeah so are there multiple, you need to look at the pricing of course. The technical challenges we typically face is how do we ensure that the IoT solution works for a long period of time, usually battery. So low power operation is a typical thing we need to address.

Reliable wireless communication is another, quite another thing. But that's something we deal with every day. It's wise to select a good partner.

- [Ryan] It's interesting because with new connectivity technologies that come out on a regular basis and new use cases that are imagined up, built, rolled out, the connectivity is something that finding that perfect match is always, can always be a- can oftentimes be a challenge, I guess I should say.

But the nice thing is there's lots of options. There's lots of different ways to find the right connectivity that works for your use case without overkill from a cost standpoint, bandwidth standpoint. Just, what do you really need to do it? So.

- [Gijs] Yeah, absolutely. Yeah. When I started in 2015, there were only a few, but over the years, there have- the options have increased a lot. And it's selecting the right connectivity for your application, which is key of course.

- [Ryan] Yeah, I definitely think it's important for companies that are listening to this or looking to bring in IoT solutions to move down that digital transformation journey, once you've established the business case, to really talk with companies who specialize in what you're looking to build.

I think trying to go horizontal with a company is not always easy or go to a company that is more horizontal focused is not always easy, but the companies who have- who specialize and really understand your space and have built solutions with your end users and your problems in mind, I think is a really important way to be approaching that decision making process when it comes to trying to get over those technical challenges that we're talking about.

- [Gijs] Absolutely. Yeah.

- [Ryan] But yeah. But this has been a really cool conversation. We haven't actually talked about industrial OEMs much and how they do things. I think it's just historically been like, oh, they just, they sell their equipment and that's kinda how it's done. But with IoT and sensors and collecting data in different ways, there's just so much that that opens up, not just for the end user to benefit, but also for the OEMs themselves.

So I really appreciate you coming on and talking about your perspective on this topic, how predictive maintenance is playing a role here as well, and what you all do for the industry. It's been a great conversation. So I thank you for your time.

- [Gijs] Thanks a lot. Thanks for having me.

- [Ryan] For our audience who wants to learn more about what you all have going on and maybe follow up on this conversation, any questions, any topics, what's the best way they can do that?

- [Gijs] Yeah, so the best way is to go to our website, www.sensorfy.ai and fill in the contact form. And then we'll be in contact shortly.

- [Ryan] Perfect. Well, thank you so much for taking the time. Really appreciate it and excited to get this out to our audience.

- [Gijs] Thank you very much. Have a great day.