Q. What do you see as the next big R&D trend that pump and fluid systems manufacturers should consider?

Probably the most exciting trend is what we call – ‘holes not drills’ – or in other words the move to a service-based model. This is essentially a business model based on the delivery of a service, rather than a sale of a fixed asset. Previously this was impossible – you couldn’t sell holes as there was no way to deliver that. In the past manufacturers might sell a pump or a meter and customers would look at the specification and check that it delivered the performance they needed. But that’s not the most efficient way of getting things done.

The best way (and one that is becoming possible) is to have the manufacturer of the equipment to manage the equipment when it’s in use. So we’re seeing a move away from a race to produce devices at the highest specification for the lowest cost. Now manufacturers want to ask their customers how they want to use the asset.  If it’s to meter water – they want to be able to provide the meter at little or no cost to the customer but the customer pays for the metering of the water. The manufacturer wants to provide data about what is going through the pipe as part of a service-based business model. 

Q. How are service-based business models being used?

Other than a few exceptions like Rolls Royce’s ‘power by the hour’, industry hasn’t reached this stage yet but it’s moving in that direction. One possibility for an interim stage to Industry 4.0 that we’re working on, is to enable a manufacturer of meters to sell the asset as normal but additionally sell an analytics package to their customers. For utility customers or those with a large plant, customers may wish to get daily readings or hourly data and better stats on how the fluid is being processed. The manufacturer of the asset can enable that by monitoring the meter or pump remotely. In turn, the utility company that purchased the meter might choose to offer different tiers of analytics and provide this information to end users to give them deeper insight into their usage patterns.  These development start to change the business model of both pump/meter supplier and their customer.

Q. What value does a service-based business model offer manufacturers of pumps, meters, and fluid systems?

A service based business model or ‘servitization’ means the meter manufacturer gets to upsell something of real value to their customers but also gives them a monthly revenue stream. They have essentially servitized their business and given themselves a more consistent revenue stream from those subscriptions. It’s a bit like a set top box – In a smart factory, you don’t buy the box you buy the service. The value of service-based revenue models is that they enable closer relationships between the vendor and their customer base. Manufacturers get much deeper insight into how their customers use their product. It allows the manufacturer to see how the product is being used and help them develop improved functionality in future iterations or guide the customer to better models depending on the features they use.