INKISH.NEWS -

By Prof. Dr. Ulrich Hermann

If I may add to this insightful interview with Anthony Thirlby some thoughts around biz models and IoT. You (editor Morten Reitoft) were struggling with the fact that Machine as a Service (MaaS) Models like “Heidelberg subscription” include a fix monthly payment and is not charging 100% variable i.e. per produced sheets.

Well, this is in the very nature of subscription models. The Heidelberg model has 3 components in its payment structure: Upfront payment, monthly payment (including a fix number of produced sheets without extra payment) and a payment per produced sheet (impression charge) once the fix number of sheets has been exceeded.

Every individual customer may set the model different to match her/his preference. Some want to pay more upfront and a higher amount per month but in the same time a lower impression charge for a single sheet, once the base volume has been exceeded.

Some want the opposite, means to pay a higher impression charge for a single sheet but less fix fee per month. Customers who have a pretty cyclicle order entry may tend to pay less fixum per month and would accept in return a higher impression charge. And so on.

In a nutshell, in a subscription model, both, customer and Heidelberg are discussing a “risk/opportunity split” with regards to the business opportunity and market of the print shop. That’s new compared to the classical transactional model, where Heidelberg is selling the press and charging all services at full cost. In many cases printing machine sales guys dont even know the revenue of the customer - as long the customer can pay the bill.

Now, so why would Heidelberg be willing to share risk at all? Of course it’s a great offer to customers, to share risk with the manufacturer and create value while the manufacturer is helping technology to be used at its optimum. But the real reason behind are capabilities from the Internet of things.

Without IoT capabilities, a manufacturer like Heidelberg would not be able to offer MaaS - Machine as a Service. If you have data you can manage risk and create value from it. IoT will have a strong impact on biz models and will fundamentally change the economics of our business.

The Expression "Economy of Things" has been introduced already.

In a couple of years there will be not a single machine customer, no matter which industry, who is willing to manage an by then even more complex technology, without being fully connected to the manufacturer. The risk to overpay technology due to underutilization over the life cycle is increasing the more technology moves into data and artificial intelligence.

AI will be the domain of the manufacturer, fueled from mass data of the installed base of connected machines. Their offer to machine users will be absolutely superior to what a single machine user, disconnected from the ecosystem of the machine supplier can achieve on its own. If you follow the maths and the current technology curve, it’s pretty obvious that IoT will fundamentally change the economy of today’s business. Especially in printing industry, where underutilization and overcapacity of installed machine capacity (as a result from machine driven push sales competition) is so omnipresent.

It’s a race and those print shops will win, that start to get rid of todays old style and digitally disconnected plant management.

One should put this context into the recent discussion around subscription as well.

All and every “thing” will be connected to the net, by that will enable the producers to charge usage instead of selling more and more (unused) products. The more business will come from “using” instead of “selling” products, the better our global ecological footprints gets. For me the IoT era will guide us (back) into long lasting sustainable products, less waste and deeper customer relationship.

May 17, 2020

Author: Prof. Dr. Ulrich Hermann