WEBVTT

00:00:00.360 --> 00:00:03.091
Industrial companies are always
on the lookout for sources of

00:00:03.091 --> 00:00:03.400
growth.

00:00:03.520 --> 00:00:06.019
It's often hard to come by,
especially for those serving

00:00:06.019 --> 00:00:08.782
mature industries and we've seen
a lot of different evolutions

00:00:08.782 --> 00:00:09.440
over the years.

00:00:09.680 --> 00:00:12.112
Companies have looked to
emerging markets for growth but

00:00:12.112 --> 00:00:14.288
often found their cost
structures are not, are not

00:00:14.288 --> 00:00:14.800
competitive.

00:00:15.160 --> 00:00:18.184
They've looked at adjacencies,
they've looked at consolidating

00:00:18.184 --> 00:00:21.256
M&A in the core, but there's
only so many targets and often

00:00:21.256 --> 00:00:24.040
times the M&A doesn't result
in the value you expect.

00:00:24.520 --> 00:00:27.086
The place we're seeing
industrial companies and

00:00:27.086 --> 00:00:30.080
manufacturers really focus on
currently is services and

00:00:30.080 --> 00:00:33.609
specifically services enabled by
connected equipment and the data

00:00:33.609 --> 00:00:35.000
coming off those machines.

00:00:35.560 --> 00:00:38.680
This often can take the form of
software as a service or SAS.

00:00:39.120 --> 00:00:42.838
And this is really the next wave
of growth and we're seeing a ton

00:00:42.838 --> 00:00:45.880
of investment and opportunity
here for manufacturers.

00:00:46.640 --> 00:00:47.960
And the rewards are really high.

00:00:48.080 --> 00:00:49.360
It's good for your customer.

00:00:49.640 --> 00:00:52.907
It reinforces your core
competitive advantage and it's

00:00:52.907 --> 00:00:55.760
higher margin, often 40 to 60%
return on sales.

00:00:56.440 --> 00:01:00.179
And that profit is actually
valued more highly by investors

00:01:00.179 --> 00:01:03.980
2 to 5X your traditional core
multiple we're seeing when you

00:01:03.980 --> 00:01:05.040
do this at scale.

00:01:05.520 --> 00:01:07.809
The good news is there are
examples of companies who have

00:01:07.809 --> 00:01:08.520
made this journey.

00:01:08.600 --> 00:01:11.577
If we look at the tech space,
Microsoft, Adobe are great

00:01:11.577 --> 00:01:14.920
examples of companies who have
pivoted to a SAS business model.

00:01:15.360 --> 00:01:17.934
And there's increasingly
examples in the industrial

00:01:17.934 --> 00:01:19.320
space, albeit earlier stage.

00:01:19.600 --> 00:01:21.040
So there's lessons to learn
from.

00:01:21.360 --> 00:01:24.751
What we've learned is that one
step that's required is a clear

00:01:24.751 --> 00:01:27.389
strategy upfront and open
communication with all

00:01:27.389 --> 00:01:30.781
stakeholders about the end to
end journey that you're about to

00:01:30.781 --> 00:01:31.320
embark on.

00:01:31.920 --> 00:01:33.920
There's also some key
investments along the way.

00:01:34.280 --> 00:01:37.596
We've seen specifically
investments in customer success

00:01:37.596 --> 00:01:41.386
in the commercial model and go
to market in the underlying tech

00:01:41.386 --> 00:01:45.236
stack that enables all this and
in talent and operating model to

00:01:45.236 --> 00:01:46.480
make this successful.

00:01:47.160 --> 00:01:49.440
The good news is you don't need
to tackle this all at once.

00:01:49.520 --> 00:01:52.651
You can sequence it and make
smart investments over time, but

00:01:52.651 --> 00:01:55.581
the rewards are significant for
companies that we've seen

00:01:55.581 --> 00:01:57.400
successfully navigate this
journey.