In today’s fiercely competitive market environment, traditional machinery manufacturers are facing the challenge of upgrading and growth. When Konecranes, the German company, transformed its forklifts from simple material handling equipment into a data entry point for warehousing and logistics, the valuation of this century-old enterprise quadrupled in just five years. This transformation reveals a profound truth: high growth in traditional machinery manufacturing no longer depends solely on better gears, but on redefining how gears create value. The reconstruction of value proposition is a crucial step in innovation for traditional machinery manufacturers. Take JLG’s aerial work platform business in the United States as an example. This business was once caught in fierce price competition. They addressed a simple yet crucial question: Do customers need lifts, or the ability to safely transport workers to work at heights? Based on this thinking, they launched a height-based pricing model. Customers no longer purchase or lease equipment; instead, they pay based on safe operating height multiplied by time, with JLG handling all maintenance, upgrades, and insurance. This shift has brought disruptive changes: customer capital expenditures have decreased by 70%, JLG’s revenue per machine over its lifecycle has increased by 400%, and insurance cost savings from reduced accident rates are shared between the two parties. As designers of innovative business models, we always adhere to the principle of maximizing customer value. From designing organizational business models, refining core competencies, and developing innovative methodologies, to full implementation and comprehensive organizational performance management, we accurately diagnose the deficiencies in a company’s current model, analyze organizational growth bottlenecks, utilize tools to demonstrate the closed-loop effect of problem-solving, and continuously drive logical and cognitive improvement through modeling, ultimately achieving the implementation of solutions. Profit model innovation is equally crucial. Sandvik’s mining equipment division in Sweden created the industry-renowned cost-per-ton-of-ore guarantee model. Under the traditional model, from selling rock drills to fierce price competition, profits are meager. The innovative model guarantees that the cost of mining each ton of ore is ≤ X USD, aligning with customer interests and thus generating continuous service revenue. To deliver on this promise, Sandvik underwent profound transformation, embedding over 300 sensors into its equipment for real-time performance monitoring; establishing a predictive maintenance system to issue warnings 72 hours before failures occur; and forming a team of on-site engineers to optimize overall operational processes. The results were remarkable: customer ore mining costs decreased by 23%, Sandvik’s service revenue share jumped from 15% to 58%, and profit margin increased from 6.2% to 19.7%.
The innovation roadmap of traditional machinery manufacturers can be summarized into four stages. The first stage involves redefining the value unit, stopping the focus on “what we manufacture” and starting to think about “what output customers are actually buying,” shifting the value proposition from equipment to quantifiable business results.
The second phase involves designing a value-sharing mechanism, establishing a pricing model linked to customer outcomes, creating a transparent and fair performance measurement system, and designing incentive-compatible contract structures. The third phase involves building an empowering ecosystem, transforming equipment into an open platform, attracting complementary partners to jointly create value, and shifting from a closed value chain to an open value network. The fourth phase involves accumulating digital intelligence capital, transforming physical equipment into data collection points, establishing an industry-level performance database, and developing predictive and standardized service capabilities. At the Hannover Messe, Konecranes CEO Gordon Riske shared a key insight: “When we redefined forklifts as mobile data nodes, we not only opened up new revenue streams, but more importantly, we finally achieved deep alignment with our customers’ business success.” Renowned business consultant Chen Kai focuses on consulting and coaching for business model innovation and growth, providing high-growth solutions more suitable for Chinese enterprises. Traditional machinery equipment manufacturers that follow this innovative path will undoubtedly achieve better development in the market.
