Open Services Innovation

As manufacturing continues to shift to lower-cost regions, companies are finding it increasingly difficult to compete and escape the commodity trap. This has led to a growing emphasis on service offerings to provide value to customers and gain a competitive edge. GE Aviation offers a clear example of this trend, as they have transformed their business model to focus on engine maintenance and repair services through their ‘‘Power by the Hour’’ pricing model. By selling engines as a variable cost, GE aligns incentives with the customer to reduce downtime and improve aircraft availability. This also provides insight for GE to develop sophisticated algorithms for predicting future engine failures, making their services more effective than those of third-party providers. The success of this new business model is further emphasized by GE’s OnPoint brand, which provides one-stop-shopping for all aviation services offerings. By focusing on services and exploiting knowledge gained about their customers’ challenges, companies can increase margins, prevent customers from switching to lower-cost competitors, and add more jobs to the overall economy.