XaaS and the art of connected manufacturing

There are few industries as physical as manufacturing. Yet it is being transformed as radically as any other by the adoption of connected digital technologies. And despite the differences between industries, there is a consistent pattern to this transformation that is common to all. Reviewing the sessions at the recent Google Cloud Digital Manufacturer Summit, it's striking to see the same themes come up that we've been hearing from other industries for a decade or more.

It's important for manufacturers to learn from the experiences of those other industries. It's all too easy to look at digital transformation and assume it's just a matter of introducing new technologies. While it's true that you can't transform without technology, this needs to happen within an overarching plan that determines which to select and where to deploy them first. That requires a clear-headed focus on business outcomes and priorities.

It's almost a quarter-century since the software industry first started delivering products to its customers digitally. In its case, the entire product set was digitized — but that was just a small part of the transformation that software vendors faced. When traditional software switched to become Software-as-a-Service (SaaS), early adopters of this new model quickly realized that this was much more than a transition to digital products and pay-as-you-go recurring revenue models. The continuous digital connection with its customers fundamentally changed the nature of the relationship.

That continuous connection — and how digital connectivity flows through the entire organization in support of it — is at the core of what we at diginomica call the XaaS Effect, where XaaS (pronounced 'x-ass') stands for Everything-as-a-Service. While the software industry became the pioneer with SaaS, the lessons it learned apply to every industry that embarks on this digital journey. Here are five themes that stood out from the recent discussions at the Digital Manufacturer Summit.

1. Digitally connect to your customers

Traditionally, manufacturers have had a disconnected relationship with their customers, only getting feedback through market research and surveys, via their sales and distribution channels, or as part of the after-sales service process. Digital connection bridges that gap, providing a new channel for enhancing the experience of using the product, as well as gathering direct feedback on that experience.

This is changing how they think about products as they add a digital layer of additional communications, services and capabilities to the physical product. Mattias Ulbrich, CIO of Porsche brought this to life in his description of how the prestige automaker is investing to bring a digital dimension to the customer experience. As he explains:

We are investing heavily in software competence and really developing software components that are serving the customer needs, as an ecosystem around the car.

Porsche stands for real customer experience — that means you can smell the leather, you can feel the exhilaration, you can see the design, you can hear the sound. And that is what we are taking right now to the digital world. This is very important for us, so we are investing heavily in the digital ecosystem.

It's up to every manufacturer to work out what the digital dimension can bring to their own customers and in a moment we'll explore further how to gather data than can help that decision process. One point I think is important to emphasize is that customer experience is not something that happens only at the point of sale. Yes, that's an important element, and Porsche's CMO Robert Ader explained how it is also making sure that customers have a seamless omnichannel retail experience. But in an XaaS world, closing the sale to a new customer is only the start of this new digitally connected customer journey.

2. Continuously engage, monitor and improve

What early software vendors discovered as they adopted the SaaS model was that maintaining a continuous digital connection with customers as they use their products enables a three-stage virtuous cycle that iteratively adds new value over time:

• Engage. The customer is directly connected to the business every time they use the product or function.
• Monitor. The business can see how all of its customers are using its products or services, and proactively fix any problems.
• Improve. The direct connection allows the business to update its software or offer new capabilities.

Beyond the software industry, that digital connection might be to the customer's experience or to ancillary apps that provide add-on services rather than directly to the product. But many manufacturers are indeed instrumenting and connecting previously disconnected products. Both approaches aim to create what Google Cloud calls the 360 customer experience. Suchitra Bose, Director of Manufacturing Industry Solutions at Google Cloud, provides an example:

If you're selling a coffee machine or a dishwasher, or a fridge, your relationship with your customer does not end after selling the product. The customers are expecting that you will provide software updates. [They want you to] understand the usage pattern and recommend a maintenance service, or send a consumable, as and when required. The shift from the product to as-a-service, an outcomes based model, allows you to deliver personalized and predictive experiences.

This engagement with the customer experience then leads on to monitoring their usage so that you can evaluate how well the product is performing for them and look at ways of improving it. Those improvements might feed back into the design of future products, or in the case of digital features they might be delivered as upgrades to the existing software or firmware. Harry Powell, Director of Digital Excellence at Jaguar Land Rover, gives an example:

My Range Rover's seats have 24 different directions of movement. It would be really useful to know which of those directions do people actually use — because customer experience is only customer experience if people actually use those features, right?

What people say they want is not actually always their revealed preference, what they actually use. If they're not using stuff, unless it has some weird halo effect, you're better off not putting it in the car to make the car cheaper — or even better, replacing it with something that they actually do use.

Digitally connecting its cars allows for continuous improvement of the customer experience. Get the experience right, and the customer relationship will extend through replacement products too. Powell says:

It's not enough to get people to buy your product once, you want to provide things that get them absolutely loving the way that they use your product. Providing them with the right kind of packs that they're going to use, that they're going to get really attached to, so that they want to buy it again next time. It's really important in the sustainability of your business.

3. Focus on customer outcomes

Getting the experience right isn't necessarily about having all the bells and whistles you can think of. JLR's customers have a very straightforward goal when they get in one of the company's vehicles, as Powell points out:

The very basis of the customer experience is being able to drive their car, being able to get where they want to get to, every time, all the time.

Sometimes it sounds a little less exciting. But if you're the person that's stuck on the hard shoulder of the motorway [because of a breakdown], life is not about 'exciting' at that point. It's about getting where you need to go.

To SaaS vendors, the notion of customer success is one that's become second nature, but often the focus is still very product-centric. Customer success is measured by how intensively they're using the software, whether in terms of user adoption or breadth of functionality. That's sensible to the extent that doing poorly on those metrics is often a sign that the customer won't renew the contract. But it's also ignoring what might be important to the customer in terms of the business outcomes they're achieving.

At a time when digital transformation can lead to new patterns of usage, manufacturers need to look at the whole customer experience, not just the narrow experience when using the product. For carmakers, for example, what happens when "getting where you need to go" is fulfilled by the likes of Uber and BlaBlaCar? Understanding how the customer defines success is a crucial talent in this new world.

4. Join up data and processes throughout your organization

Digital connection also extends inside a manufacturer's operations. Everyone from the production line to the finance function can contribute towards achieving a great customer experience. In the past, this type of internal collaboration has not been seen as a priority in many industries, with each function focusing on its own internal goals and metrics. But in a digitally connected world, customers expect joined-up service and rapid response. If an organization is not set up, both technically and culturally, to provide that, it's going to be on the back foot in a competitive landscape.

Collecting and analyzing the right data is an important starting point, as Laura Merling, Managing Director of Digital Transformation at Google Cloud, explains:

Usually where there's customer pain, there's some efficiency issues internally. Looking at aerospace, you could say I want my PLM system, tied to my MRO [Maintenance Repair and Overhaul] data, my manufacturing parent operations data, to my real time aircraft data ... if I could create a view of that across a particular set of parts or components or particular craft.

The real reason for doing that is to ensure uptime for the airline — measuring it based on uptime or lag, reducing aircraft on ground. So it's really thinking, what's the end value which determines your data streams that you need?

Having the right digital collaboration tools in place also helps speed response times. Not surprisingly, Google's Bose described the use of the vendor's Workspace collaboration tools to provide an example of a joined-up process for dealing with customer enquiries. Other digital teamwork tools are available, of course. The key point is that a successful XaaS strategy needs the support of enabling technologies and working practices throughout the enterprise.

5. Prepare for the long haul

Summing up after Bose's comments, my colleague Derek Du Preez cautioned that getting all of this right is a challenge:

None of this is easy, however. It requires a sophisticated approach to data use, teams to build and run digital services, as well as a strong focus on customer success. The customer success piece is particularly important — and particularly challenging. It requires not only a huge cultural shift internally, but also for processes and tools to be put in place to support customers continuously. Building a great product is one thing, building a great product and providing a great service is another.

One of the most difficult aspects is working out where to start. As Dominik Wee, Google Cloud's Managing Director of Global Manufacturing, Industrial and Transportation, puts it:

Every change is a risk. The more disruptive these technologies are, the more hesitation there is.

The best advice is to start by finding projects that can deliver quick wins and build confidence, whether that's consolidating data for analysis, streamlining process workflows, bearing down on production line quality, improving data collection around the customer experience, or adding new digital capabilities to products. But such projects must also be judged within the context of a broader roadmap that sets out a more ambitious destination — one that advances the goal of improving the customer experience and helping them achieve their outcomes. That depends not only on having the right enabling technology in place, but also overhauling processes and culture to adapt to this new connected world.

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For more diginomica stories from Google Cloud's Digital Manufacturer Summit visit our event hub. The Google Cloud Digital Manufacturer Summit took place on June 22 2021. register now to view on demand.

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