Otis Elevator Co. barely makes money selling elevators.
Its Q3 results, filed on 28 October, put service at 94% of segment operating profit. The new elevator is how Otis wins the maintenance contract, and the contract is the business. That is the As-a-Service logic, from a company that rarely uses the term.
I read the release twice, because I almost never see that number. Most boards I sit with track service as a share of revenue. It looks healthy, it moves slowly, and it hides where the money is made. Service as a share of profit is the figure that changes the conversation. It is rarely on the slide.
Ask a CFO for it and you usually get a week's delay, not an answer.
For Otis, each equipment sale works like the cost of acquiring a service relationship. Plenty of manufacturers still price the machine as the main event and throw the contract in to close the deal. Some have good reasons: a short machine life, a thin installed base, customers who maintain in-house.
So, in your own P&L: is the machine sale the business, or the cost of winning the contract?
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PS: for those discovering me for the first time, I'm Florian André, Founder of P2S Management Consulting. We help industrial companies shift their business model toward subscription and As-a-Service models, drawing on a database of 500+ industrial As-a-Service cases we've studied. I post weekly on what we learn from them.