The COVID-19 pandemic that’s swept the globe this year has brought much of the world to a grinding halt. For OEMs in particular, this includes both production lines and new product sales. And although some countries are beginning to reopen for business, changes to how industry can be conducted will be felt long-term, in addition to the economic impact that’s still unfolding. Companies need to figure out now how they can adapt to the “new normal” and bounce back from this downturn.
Manufacturers should be thinking about ways to better serve the market and create reliable revenue streams in the post-COVID world. It’s time to focus on digitization and shift delivery of Product-as-a-Service (PaaS) and Mobility-as-a-Service (MaaS) into high gear.
According to a recent National Association of Manufacturers survey, 78.3% of manufacturers anticipate a financial impact during this time.
A recent McKinsey study of the 2007-2008 financial crash and its aftermath found that the 10% of companies that acted earliest were also the most resilient, and fared the best. McKinsey identified three things these “resilients” did that set them apart from their peers: they created financial and operational flexibility, cut costs and focused on growth by finding new ways to capture market opportunities when the crisis ended.
The study also found that these companies invested in software to gain predictability and efficiency, resulting in a significant competitive edge. Manufacturers today have a similar opportunity to get ahead of the curve by adopting new technologies that facilitate the rollout of new service models. Getting ahead now will help businesses connect with loyal customers, improve the customer experience and provide a more predictable and stable revenue stream.
Accelerating digitization has widened the gap in capabilities and performance between digital leaders and laggards—a gap that is likely to grow during any downturn. – McKinsey
New World, New Ways of Doing Things
Consumers and companies alike will have to re-think “business as we know it” in the months and years to come. Much of the population relies on public transportation, but continued social distancing measures will require transit systems to operate at 50% capacity. This will force many people to seek new ways of getting around. Plus, cash-strapped consumers won’t have the capital to make large purchases or long-term commitments, including new automobiles. They’ll be looking for more flexible use models instead, putting car sharing, carpooling and MaaS in the spotlight as people return to work. On a similar note, the economic fallout has slowed down new construction projects, which will drive builders and contractors to seek flexible access to construction equipment.
Shifting the focus from growth to retention will lead manufacturers to put the customer at the center of the equation. Instead of just delivering products, they’ll need to think about how they can enable their customers’ businesses and lifestyles in the post-COVID world. Some dealerships are already offering at-home sales service, where they bring potential buyers a sanitized car to test drive and can complete the sales transaction virtually. It’s all about thinking outside the box.
Your business context is and will remain uncertain. But if you get moving now, you can ride the waves of uncertainty instead of being overpowered by them. – McKinsey
After-sales service is another reliable source of revenue, and can also be a competitive differentiator with consumers and businesses looking to extend the life of their products in the economic recovery. For example, PACCAR saw a $1.3 million drop in truck sales in the first quarter, but their parts division set record profits. By optimizing and evolving their operations, companies can use this margin-rich side of the house to fuel growth and drive long-term loyalty. This will require investing in new technologies like IoT, sensor data and AI to improve after-sales service performance overall. There is a real opportunity here for OEMs to emerge from the economic slump faster, stronger and more resilient—but the time to act is now.
To learn more about how Syncron can help manufacturers adapt in aftermath of COVID-19 and thrive in the new normal, contact us today.