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Mar 20, 2017

Finding new business models in the digital age

Digitalization has to pay off – for mechanical engineering companies and for their customers. From a technical point of view, the possibilities are endless. But what does a promising business model for mobile apps in the industrial sector have to provide? Franz Koller, UID's Managing Director, answered this question at the "Maschinenbau vorausgeDACHt" convention on March 17, 2017 in Salzburg. We don't want to keep his answers from you and would like to show you how to tap the potentials of digitalization using Business Model Canvas.

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Digitalization has many benefits for machine and plant manufacturers: It enables them to offer their customers added value by means of individualization, flexibilization or the extension of the range of features. However, companies should be wary of kicking off an app project just because the competitor has an app or because this seems to be the done thing these days. In fact, it is more important to develop an app strategy to ensure that the app can be seamlessly integrated into the existing product and service portfolio. This enables companies to offer a holistic, connected user experience - and to generate revenue from the app.

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Nine pillars

When creating abusiness model, Alexander Osterwalder's Business Model Canvas can be put togood use. It presents nine core factors that are relevant for a businessmodel's success. These have to be fleshed out and a relationship has to beestablished between them. That way, individual ideas can be combined in amodular system to form a business model.

Knowing the user

Every app has the purpose to solve a problem or satisfy a need experienced by the customer. Whether this goal can be achieved is decisive for the success of the app. But just like user-centered design, successful service design has one prerequisite: Machine and plant manufacturers have to know their customers inside out and analyze their requirements and characteristics. This not only helps to identify the benefits for the customers but also serves to build and nurture a relationship with them and to identify which channels are suited best for communications and sales.

Planning the development

As a next step, the necessary activities and resources for developing, maintaining, marketing and selling the app have to be defined. Possibly, external suppliers or partners will be able to take over certain key activities or provide resources. It may, for example, make sense to resort to external legal services as requirements concerning legal notices and terms of use vary depending on the target markets.

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Finances at a glance

The last two key factors deal with finances. What sources contribute to income and expenditures? How much is the customer willing to pay for the added value offered by the app? The answers influence pricing model and strategy.

Business model patterns

When it comes to developing business models, machine and plant manufacturers can follow so-called Business Model Patterns. In his "Business Model Navigator", Oliver Gassmann demonstrates 55 such patterns that can serve as a basis to

identify and develop innovative business models. Some of them are also promising with a view to Industry 4.0 and mobile usage scenarios. Below, we would like to introduce two of these models – Freemium and Experience Selling.

Freemium

The "SIMATIC S7" by Siemens is an example for this business model. It allows mobile control and monitoring of machines and plants using S7 controls and permits to project control types such as pointer devices, switches, bar displays, slide bars, etc. A basic offer – one control per control type – is free of charge. If more controls per type are needed, users can activate the control type once via in-app purchase and project as many controls of the required type as they need.

Experience Selling

This model is based on emotionalizations of products. The GE Healthcare app is an example for such a model. With it, doctors in the role of Detective Zacky solve "diagnostic cases" based on GE's diagnostic images. The more correct diagnoses they make, the better. The prize for their efforts is a practice account. The aim of the app: creating a positive brand awareness and boosting confidence in the quality and innovative power of GE's products.

Practical assistance

If you are interested, you can download a checklist (in German) that supports companies in creating an individual business model from the website of the German Engineering Association VDMA.