Executive Summary and Main Points
The report underlines significant insights into the role of aftermarket and service in the revenue streams of Original Equipment Manufacturers (OEMs), particularly with the revelation that margins in this sector can quadruple compared to those for new units. Over roughly a decade and a half, businesses attuned to aftermarket excellence have observed twice the Total Shareholder Return (TSR) compared to their less focused counterparts. Recent economic woes—namely uncertainty, inflation, and high interest rates—have catalyzed a shift towards prioritizing aftermarket spending due to its cost-effectiveness relative to new capital investments. Technological advancements, such as firmware-enabled updates, are decreasing up-front expenditures and inadvertently promoting the aftermarket and service model’s strategic importance.
Potential Impact in the Education Sector
In the context of Further and Higher Education as well as Micro-credentials, the principles derived from the importance of aftermarket and service could inspire a more sustainable and long-term engagement strategy with learners. Just as OEMs are leveraging ongoing support to maintain revenue streams, educational institutions might focus on lifelong learning, continuous education, and alumni services as their aftermarket, fostering deep relationships and recurrent engagement. The strategic partnership between educational entities and tech companies, reinforced by digitalization, is poised to enhance the learning experience through accessibility, adaptive learning platforms, and personalized content delivery.
Potential Applicability in the Education Sector
Adopting an AI-driven approach similar to firmware updates in the tech industry, education systems around the globe could implement iterative and scalable learning updates without significant capital investment. The aftermarket in education could encompass AI-based career advisory, alumni networking platforms, continuous competency assessments, and upskilling opportunities that keep educational institutions relevant and engaged in the professional lives of graduates. Incorporating such technologies offers a way to digitally transform the ‘education aftermarket’ into a strategic advantage, ensuring institutions remain at the forefront of educational innovation and support.
Criticism and Potential Shortfalls
While aftermarket and service strategies in industry boast financial success, transplanting this approach into the education sector warrants caution. An overemphasis on profit can run counter to the intrinsic values of education, potentially inviting criticism for commercializing a sector traditionally focused on societal development. Ethical considerations, such as data privacy in AI applications, and cultural implications, respecting diverse learning needs and equity in access, must be balanced against the push for digital transformation. International case studies suggest wide variability in success when tech-driven education strategies are applied without accounting for cultural and socio-economic contexts.
Actionable Recommendations
For Higher Education leadership, it is recommended that a comprehensive strategy be developed to establish a robust ‘education aftermarket,’ focusing on alumni engagement and career progression services. Partnerships with technology firms should be explored to implement AI and digital tools. This could take shape through virtual career fairs, alumni mentorship platforms, and online micro-credential offerings. Moreover, the framework for aftermarket and service, as elucidated in this report, could serve as a guide for structuring these new educational services in a phased and efficient manner, with a vigilant watch over ethical considerations and inclusivity.
Source article: https://www.mckinsey.com/industries/industrials-and-electronics/our-insights/why-aftermarket-and-service-are-vital-to-oems-and-how-to-excel