For manufacturers, digitizing products can often be much easier than monetizing those products. In other words, a technology shift can be less onerous than an entire business model shift. But Bridgestone, the world’s largest tire and rubber manufacturer, provides a use case for how manufacturers can successfully make the transition from a high capital-intensive product business to a service business driven by digital capabilities. In short, the Bridgestone story shows how a legacy manufacturer with the right mindset and customer-centric approach can “lap” even a digital native on the road to becoming a service and solution mobility provider.
There’s no question that digitization in the world of manufacturing is reaching critical mass.
Cheap data storage, exponentially more powerful computing, and Industry 4.0 technology have converged to spark a digital transformation conflagration. Investments in digital capabilities — think digital customer experience, cloud, sensorization, automation, AI-based cognitive capabilities, and digital ecosystem partnerships — are quickly gaining on traditional capital investments for industrial companies.
But tech investments alone are not enough to drive growth. To realize the full potential of digital investments, manufacturers need to also transform their business models. That’s because Industry 4.0 can only be monetized when companies make the transition from a focus on products to a customer-centric servitization model. As noted in a Deloitte article on trends influencing the manufacturing industry, in 10 years, as much as 30 percent of new revenue for manufacturers could come from digital revenue streams. In fact, industrial companies could see a 50/50 split between selling “products” and selling “outcomes/solutions.”
The problem is that for some companies, throwing money at technology is much easier than it is to change their business model — and their strategic mindset.
Companies that have committed to digitization have made the right first step. But to monetize that investment, manufacturers need to build a business model that turns digital capabilities into recurring revenue streams via subscription services. Manufacturers looking to make the leap would do well to learn from Bridgestone.
Bridgestone is the world’s largest tire and rubber manufacturer with $33 billion in annual revenue. As a legacy manufacturer, Bridgestone started out behind “digital native” companies on their journey to Industry 4.0. But with the right strategic vision, they were able to transition from a traditional tire manufacturer — a high capital–intensive products business — to a services and solutions mobility provider driven by their investment in digital capabilities. And they also showed that one company can effectively sell to both B2B and B2C; it’s not an either/or proposition.
Digital Capabilities = Service-Based Subscriptions
“Over the past few years we have launched the Digital Garage, which is a partnership between R&D, Marketing, and IT. It’s an open innovation platform and ecosystem where we are incubating new potential services that we can bring to our customers,” says Michael Johnson, Vice President of IT and CIO of Bridgestone Europe, Middle East, and Africa (EMEA). Here are just a few examples of digital capabilities that Bridgestone is leveraging into successful service-based subscriptions:
- Sensorization. Bridgestone’s traditional expertise in creating “things” has been augmented by the evolution to next generation smart devices, enabled for IoT. External valve-mounted sensors on tires can measure pressure, temperate, and tread depth. “Smart tires” optimize tire life, improve safety and fuel efficiency, and prevent breakdowns, all while replacing time-consuming manual inspection processes. Firestone (a Bridgestone brand) offers this technology to enterprise customers ranging from truck fleets, to mining and agricultural vehicles, to tires used in aviation.
- Cloud. Cloud computing allows Bridgestone and their customers to store and manage vast quantities of data on tire performance and more. Fleet managers can collect vehicle data via a centralized router, then use an app to generate fleet inspection reports and repair alerts. Bridgetone also reduces their own manufacturing costs by managing workloads in the cloud much more efficiently than they could using traditional infrastructure.
- AI-Based Data Analytics Capabilities. Bridgestone uses machine learning and AI-based analytics to process the data collected from its IoT-enabled products. Analytics drive Bridgestone’s proprietary service delivery platform for roadside assistance, REACH, which uses web and mobile applications to centralize communications between fleet managers, drivers, dealers, and service technicians with real-time updates and GPS support. Digital Customer Experience.
- Of course, both individual and enterprise customers can purchase and manage their subscriptions online, but the digital customer experience does not end there. Services like Intellitire are seamlessly integrated with other products in the Bridgestone ecosystem, like the Toolbox Total Rim and Tire Management system.
- Digital Partnerships. Bridgestone uses SaaS within their partner ecosystem to optimize the end-to-end supply chain and develop APIs to be able to move data around that supply chain. These digital partnerships help them reduce inventory and working capital, which results in faster execution and speedier times to market. Digitization has helped not only with large partners like Tata Consultancy Services (TCS), but also with smaller, niche, boutique companies that bring specific capabilities and an entrepreneurial innovative mindset.
Turning Digital Capabilities Into Recurring Revenue
Bridgestone currently has a number of different subscriptions on offer, for consumers and enterprise, using a mix of digital capabilities. And what’s the link between all these subscription offerings? For all of them, Bridgestone started with the service, not the product.
They realized the outcome that customers wanted: convenience. And they build services that help customers achieve that outcome. For almost everyone who drives a vehicle, whether for work or for pleasure, checking the tire pressure is probably one of the most inconvenient parts of owning the machine.
Bridgestone’s subscription services don’t just provide a solution for this unpopular task; they layer on benefits for their subscribers from safety to fuel-efficiency to longer-lasting tires. All of this value is a no brainer for customers, and something they’re willing to pay a regular monthly fee to have. All it took was the right investments in digital, and a gear shift to the right strategic mindset, to help Bridgestone put the pedal to the metal on recurring revenue.