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For a Strong Aftermarket Business: Digital Transformation  

Mitch Lee< Mitch Lee January 6, 2023

In 2022, we partnered with Copperberg for the 4th annual Aftermarket Benchmark study. With the luxury of now being able to look back over several years of response data, and especially since the initial survey was fielded pre-Covid, we can see significant swings in the amount of revenue the aftermarket business generated as a percentage of total company revenue. 

While there were some large changes in years that one would expect – 2020 and 2021, as the pandemic wreaked havoc throughout the global business environment – the aftermarket revenue contribution of 2022 is back to being very similar to what was reported 4 years ago in 2019. While the optimists would view this as a return to normalcy, pessimists would suggest this sameness shows a missed opportunity to change the perception and significance of the aftermarket business for overall revenue when it mattered most. 

The need for digital transformation 

While the reasons for the decline in revenue contribution are likely many, one important factor is digital transformation. More than ever before, delivering aftermarket services depends on advanced technology capable of remote diagnostics and data-driven solutions. A higher degree of servitization requires a higher level of digital transformation.  

In 2021, manufacturers made significant strides in digital innovation as the pandemic gave them no other choice than to accelerate their plans for the sake of business continuity. In 2022, most survey respondents who were previously behind indicated they have now developed at least a partial digital strategy.  

Aftermarket Benchmark Study 2022

Common roadblocks and solutions 

But the process of digital transformation takes time. The most common challenge, according to respondents, is the integration of new technologies in their legacy IT infrastructures. To overcome this roadblock, manufacturers are evolving their servitization technology solutions over the next 12 months. Specifically, they report setting aside healthy budgets for: remote diagnostics, e-commerce platforms and AI-fueled data analytics. 

  • Remote diagnostics provide the ability to monitor, detect, and solve issues from a distance and these capabilities are now table stakes since the pandemic. It continues to be an ideal solution for aftermarket service providers who want to address customer issues in a timely, efficient manner, while also saving costs on field service expenses 
  • E-commerce platforms are obviously transactional but more importantly, they are convenient and fast for consumers. Manufacturers say they will set aside more budget to get these solutions in prime working order. 
  • Artificial intelligence and machine learning supported technology continues to garner high interest, with the advanced solutions facilitating the collection of data insights and evolution toward proactive and predictive service models. 

In addition to the technology challenges of digital transformation, 22% of survey respondents report having difficulty communicating their new value-added offering to their customers. Others struggle with designing appropriate new service business models. These hinderances to progress are often the lack of support from top management in cultural transformation and the lack of necessary skills and competencies from the current workforce. 

Get creative and don’t forget cultural change 

The biggest roadblocks to furthering digital transformation required for servitization are capital and proof of value in technology-based services. Work to avoid them by developing a long-term vision, add in a solid solution-based business model, and remember to bring plenty of patience because improving service maturity is seldom fast. Consider this your recipe for success and four years from now, you can look back to see how far you’ve come.  

To learn more about the current state of the service business and how the Aftermarket business can contribute to revenue and profit growth, download the Annual Aftermarket Benchmark Study.