What It Takes to Scale Value-Based Industrial Solutions

B2B sales is fiercely competitive. Companies selling big-ticket products and services to other businesses must design solutions that meet their customers’ specific needs with a provable value proposition. Increasingly, that means engaging in value-based sales, where the benefits to the customer are defined, quantified, and managed by the vendor. That’s a challenging practice to get right: Many industrial companies fail to move on from piloting solutions to delivering them at scale.

To improve their customer value propositions and their profit margins, IEMs are creating value-based industrial solutions.  The authors define them as customized and integrated combinations of products, service, and digital technology that allow companies to achieve profitability and sustainability simultaneously by providing value in use.

Offering value-based industrial solutions requires manufacturers to shift from selling products to fulfilling complex customer needs — that is, to a value-in-use business logic, where the value created is shared between manufacturer and customer.

The authors’ research shows that it is relatively easy for an IEM to create an initial value-based industrial solution. Doing so on a one-off basis for a single, key customer limits the scope of financial commitments.  However, scaling these solutions is much more challenging than delivering pilot initiatives: Offering these solutions across a large and diverse customer base requires a repeatable, structured process and strong, entrenched capabilities.

The authors’ analysis shows that organizations that have been able to scale value-based industrial solutions have established a set of prerequisite capabilities in the initial phase of designing and piloting such offerings. In the second phase, where scaling gains traction, they have gone on to develop additional capabilities required to repeatedly sell and deliver those solutions.  In the framework the authors developed from their research, they have defined three core scaling capabilities for each of the two phases and the 17 practices that are key to executing each phase successfully.

Phase 1: Scaling prerequisites. The groundwork for developing value-based industrial solutions comprises the following three steps.  Develop a solution strategy, create a dual value proposition, and design for modularity and customization.

Phase 2: Scaling execution. As detailed below, scaling execution centers on the capabilities needed to deliver value-based industrial solutions repeatedly and across a variety of customer engagements while ensuring that financial objectives are met.  Manage ecosystem contributions, ensure financial viability, and expand the addressable market.

Based on theirr analysis, the authors offer the following guidance to managers pursuing a strategy of developing and marketing value-based solutions broadly.  A) Take a systematic and holistic approach to scaling them. B)  Pay special attention to getting the dual value proposition, solution configuration, partner alignment, revenue model, and delivery organization.  And C)  Misalignment or poor timing — such as engaging global partners before a clear internal strategy is likely to create bottlenecks, resource misallocations, and scaling fatigue. Therefore, make sure that scaling practices are conducted in the suggested order.

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