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COVID-19 has hit many companies hard, including industrial companies that are no strangers to volatility and economic recession. Battered by various boom and bust cycles, the industrial sector has mastered how to deal with demand volatility, supply volatility, financial volatility and asset volatility. Companies have embraced digital transformation, lean operations and sustainability to help them overcome most of the challenges.

However, the current situation has added a new element – workforce volatility. The aging workforce was expected to negatively affect skilled labor, but it has a long-term impact vector and companies were well-positioned to handle the transition by leveraging Industry 4.0 technologies. But, now, companies are faced with an escalating level of challenges. Employees are being quarantined and whole cities or even countries are under lockdown. What if your main pump bursts in the middle of the night and rapidly floods your plant? What about the backlog of hundreds of minor maintenance activities?

Operation managers are grappling with this new challenge. Companies always counted on their employees to help them weather the storm but now they need to be nimble enough to navigate the new territory. There have been several opinion pieces and columns on COVID-19 and its impact. I would like to look into opportunities for innovation in new business models. 

  • Everything-as-a-service (XaaS): The value proposition of XaaS has been “buy what you need and only what you need.” Ramp up or down your capability quickly, safely and economically. End users have always been reluctant to use this model as they feel they lose control. Another major challenge was RoI compared to owning the asset. The current situation has highlighted that operational challenges in the face of demographic (pandemic) and economic (oil price crash, recession) issues are also important. The XaaS model will help end users manage volatility better by being able to raise and lower the capacity based on demand. This also frees up your resources, including workforce and capital, as it reduces assets and liabilities. The industrial equipment alone is more than a trillion-dollar market; hence, even a 1% adoption is a billion-dollar market.
  • Service Innovation – Core Exchange Program: There is a focus on reducing CAPEX and moving toward OPEX. As a result, servicing assets and extending asset life are crucial. Servicing assets involves downtime and end users can’t afford it. One example to overcome this challenge is Gardner Denver’s Core Exchange program. Gardner Denver holds a large inventory of various remanufactured power ends for high-pressure pumps. End users can trade in their power ends at a fraction of the price of a new pump and get back to pumping as soon as possible.
  • Industrial E-commerce as a Service: Industrial e-commerce is on the rise. Grainger reports that e-commerce accounts for more than 60% of its business and expects it will be more than 80% by 2022. Even with companies like Grainger taking the lead, e-commerce is still a transaction model similar to industrial distribution. The current crisis has affected every company’s supply chain because they are unable to diversify their suppliers. Companies such as Amazon, Alibaba and Grainger need to develop new business models leveraging their extensive supplier network to guarantee availability of components similar to cloud service providers with guaranteed uptime of 99.999%.The best-case example is GoExpedi, which is developing a specialized approach to real-time supply chain management for the oil and gas industry. Leveraging proprietary technology, GoExpedi can create a reliable solution that connects end users with suppliers to eliminate bottlenecks, reduce lead time, increase compliance, and give enterprise leaders access to advanced logistics management services. See how GoExpedi is disrupting the oil and gas supply chain market at www.goexpedi.com.
  • Profit-sharing/Risk-sharing Leveraging Blockchain: Industrial companies have closely guarded their operations and are reluctant to engage in these models. As supply chains are disrupted, everyone is looking at their contracts to check the various force majeure clauses to see who is responsible. Rather than participate in a transactional relationship, profit-sharing and risk-sharing models enable greater trust to be placed on the business relation, and companies and their suppliers can respond quickly. Trust is the key currency, and by leveraging blockchain, companies can securely share the data within their network. This enables the companies and their partners to be resilient as they act as one cohesive unit, helping them to be nimble and navigate the treacherous environment.

During the 2014 oil price rout, it was assumed the US shale industry was done and dusted as oil prices stayed at $30 a barrel. Instead, enterprising individuals thriving on innovation found a way to make it work and outlasted their rivals. The current scenario is no exception. Bold innovations, especially on business models and operations, are the way to survive the current challenge.

About Anand Gnanamoorthy

Anand GnanamoorthyAnand is an Industry Manager with a decade of experience in manufacturing, business strategy, and technology, with an innate understanding of the manufacturing landscape.

About Anand Gnanamoorthy

Anand Gnanamoorthy

Anand is an Industry Manager with a decade of experience in manufacturing, business strategy, and technology, with an innate understanding of the manufacturing landscape.

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