Implementing Total Cost of Ownership (TCO): A SMART Strategy for Service Growth
For many industrial OEMs and technology providers, the greatest growth opportunity is often hidden in plain sight.
Most manufacturers can tell you exactly what it costs to build their equipment. They know their material costs, production overheads, warranty reserves, and sales margins. Yet when asked a much more important question — what does it actually cost your customer to own and operate your equipment over its lifetime? — the answers are often surprisingly vague, incomplete, or entirely absent.
This gap in understanding matters enormously.
At Si2-Group, we have observed this repeatedly across industrial sectors ranging from Equipment Manufacturers to components, to heavy vehicles, aerospace, energy systems, as well as larger assets such as building infrastructure. The businesses that consistently outperform their competitors are not necessarily those with the best products. They are the businesses that deeply understand their customers’ Total Cost of Ownership (TCO) and use that understanding to shape their service strategy, innovation roadmap, commercial model, and operational priorities.
The most successful industrial organisations do not simply sell products. They help customers improve profitability!
They understand where the real cost drivers sit inside the customer’s operation and identify the hidden risks and inefficiencies that damage profitability. They develop services that reduce those costs and risks and crucially, they communicate this value in a way that resonates commercially and emotionally with decision makers.
This is where TCO becomes strategically powerful.
Unfortunately, many organisations still treat TCO as a narrow procurement calculation focused on acquisition cost, maintenance expense, and lifecycle accounting. While these elements are important, this approach alone misses the broader strategic value of TCO thinking.
Used correctly, TCO is not simply a finance tool, it is a TOOL FOR GROWTH!
Making “Trusted Advisor” Real
For years, “Trusted Advisor” has been the go-to phrase whenever service leaders describe the relationship they want with customers. It’s used in sales kick-offs, service strategy decks, and job descriptions for everyone from field engineers to key account managers. The trouble is that the more a phrase gets used, the less it tends to mean. Ask ten people in your business what a trusted advisor actually does differently, day to day, and you’ll likely get ten different answers — usually some version of “being really good at customer service.”
That ambiguity is a problem, because for suppliers of industrial equipment, components and solutions, the trusted advisor relationship isn’t a nice-to-have. It’s the difference between being treated as a replaceable vendor and being the partner customers call before they’ve even finished defining the problem. So it’s worth being precise. We define a trusted advisor as:
A service professional whose relationship with a client goes beyond basic transactional expertise. They act as a long-term confidant, providing holistic guidance to help customers make critical, informed decisions — operational or strategic. The goal, through that relationship, is to add more value to both parties through collaboration.
Two words matter most in that definition: “both parties.” This isn’t altruism, and it isn’t really about being liked. Done properly, it’s a commercial discipline that benefits the customer’s operation and your order book at the same time. This article explores how that plays out in practice — and what it actually takes to build it into an organisation rather than just hope for it.
Margin Not Growth: Why Service Leaders Must Shift Their Focus in an Uncertain Global Environment
With many customers shifting their focus from growth to margins, the opportunities for Service Leaders to increase their influence both within customers, and their own organisations is opening up.
Vendor Service Strategies: HVAC Business
The HVAC market is changing. To succeed in service OEMs must up their game, expand their offerings and upgrade their sales and operational capabilities. And the competition is not standing still.
Benchmarking Industrial Services: A Methodology Outline
Benchmarking is a powerful tool for improving performance. In industrial services, it has been underused partly because services are more difficult to benchmark and partly because companies didn’t see a pressing need for it. But as service becomes more of a competitive focal point managements face pressure to up their game and benchmarking is gaining in importance.
Internet of Things: Strategic Options for OEMs in Industrial Services
In leveraging the IIoT for topline growth OEMs face difficult strategic choices. They all require significant commitment and investment. But not getting involved is not an option.
Technology is servitizing the value paradigm. Time to change management thinking
As digitization servitizes business models it is also shifting the source of value -from products to data and information. For most product companies this is an existential threat. But for a few a big opportunity. Almost 10 years ago, Nokia, then still the global leader in mobile phones, was busy undertaking project after project to […]
How digitization is changing the competitive space in industrial after-sales services
Digitization enables continuously increasing automation in business execution, operations, and decision making. As a matter of course, this not only opens up numerous opportunities for major improvements, for example in productivity, but, when certain thresholds are reached, fundamentally changes the nature of the business and brings therefore numerous risks.
The Challenges of Solutions Strategies
A successful solutions business is hard to implement. Whether or not it is the right competitive approach depends on a company’s relative strength in the market, how well it knows its customers and to what extent it is willing to invest in the necessary capabilities and see through the many required operational and organizational realignments. Most of all though, it depends on whether the company can integrate products and/or services in such a way that the total provides more value than the sum of its parts.
