The transformation in mid-sized industrial companies has evolved from a strategic option to an existential necessity. While in 2020 about 35% of mid-sized industrial companies still considered comprehensive digital transformation as “optional,” by 2025, according to the current McKinsey Global Manufacturing Study, less than 5% do. The shift from being a pure product manufacturer to becoming a holistic solution partner is now the decisive competitive factor.
In this comprehensive guide, you will learn which five success factors determine the success or failure of your transformation and how you can specifically proceed to make your company future-proof.
Table of Contents:
- Transformation in Mid-Sized Industrial Companies: Market Data and Current Challenges 2025
- The Evolution of the Business Model: From Product Focus to Solution Orientation
- Customer-Centric Transformation: How Data is Revolutionizing Business Models
- The 5 Success Factors in Transforming into a Solution Provider
- Building Competencies and Change Management: People as the Key to Transformation Success
- ROI of Transformation: Economic Metrics and Success Measurement
- The Pragmatic Implementation Roadmap: From Manufacturer to Solution Partner in 4 Steps
- FAQ: The Most Important Questions About Transformation in Mid-Sized Industrial Companies
Transformation in Mid-Sized Industrial Companies: Market Data and Current Challenges 2025
German mid-sized companies are at a decisive turning point. According to the Fraunhofer study “Industry in Transition 2025,” 78% of mid-sized companies have recognized that their traditional, product-centered business model is under massive pressure. The reasons for this are multi-faceted, ranging from disruptive technologies to fundamental changes in customer behavior.
The Three Major Market Trends Driving Change
The current market dynamics are shaped by three central trends that are forcing mid-sized industrial companies to rethink:
- Digital Disruption: According to Deloitte’s Digital Transformation Index 2025, 63% of traditional industrial companies have already lost market share to digital newcomers. The entry barriers to established markets have drastically decreased due to digital technologies.
- Changing Customer Expectations: Today’s B2B buyers expect the same seamless experience they know from the B2C sector. The Bitkom study “B2B-Purchasing 2025” shows that 82% of purchasing decisions are researched digitally before the first contact with sales.
- Global Competitive Pressure: While German mid-sized companies traditionally scored with product quality, the competitive advantage is increasingly shifting toward integrated solutions and digital services. The VDMA report “Global Competition 2025” documents that companies with service-oriented business models exhibit 43% higher profitability than pure product manufacturers.
These trends illustrate: The pure focus on product excellence – once the trademark of German mid-sized businesses – is no longer sufficient to remain competitive in the long term.
Why 67% of Traditional Product Manufacturers Could Become Obsolete by 2030
The numbers speak a clear language: The Boston Consulting Group predicts in its study “Manufacturing 2030” that up to 67% of today’s product-oriented medium-sized businesses could lose significant market share or disappear from the market entirely without successful transformation.
Particularly alarming: The average lifespan of a company in the S&P 500 Index has decreased from once 60 years to less than 20 years today. This “Corporate Mortality Rate” is increasingly affecting German mid-sized companies as well.
The main reason for this bleak forecast lies in the fundamental shift in what customers value. According to a recent PWC study “Value Perception in B2B 2025,” 73% of B2B customers value the overall benefit of a solution more highly than pure product features.
“Anyone who still believes they can survive with superior product quality alone will be punished by the market tomorrow. The transformation to becoming a solution provider is not an option, but a survival strategy.” – Prof. Dr. Michael Dowling, Digital Manufacturing Institute
The Economic Consequences of Missed Transformation
The economic consequences of a delayed or failed transformation are massive. The following key figures from the Roland Berger study “Digital Impact 2025” illustrate this:
- Mid-sized companies that have successfully completed the transformation to solution provider record an average 26% higher EBITDA margin
- Successful transformers achieve a 32% higher customer retention rate
- The company value (measured by EBITDA multiple) for transformed companies is on average 2.4x higher than for traditional product manufacturers
- The growth rate of transformed companies exceeds that of traditional manufacturers by an average of 8.3 percentage points per year
These figures show: The transformation to a solution provider is not just a question of survival, but also an enormous economic lever.
Particularly explosive: In times of economic uncertainty, the gap between transformed and non-transformed companies widens further. During the recession phases of 2022-2024, solution-oriented mid-sized companies, according to IW Köln, recorded on average only one-third of the revenue declines of their product-focused competitors.
The Evolution of the Business Model: From Product Focus to Solution Orientation
The journey from product manufacturer to solution partner means a fundamental realignment of the business model. It’s not just about enriching existing products with digital features, but about a fundamentally new understanding of value creation.
New Value Creation Logic: How Does the Customer Perspective Change?
The transformation begins with a change in perspective: It’s no longer the product that stands at the center, but customer value. According to the study “Customer Value 2025” by Bain & Company, 84% of B2B customers today define value primarily as “achieving a business outcome” and not as “ownership of a product.”
This fundamental shift in customer perspective requires a rethinking of the value creation logic:
| Traditional Product Logic | New Solution Logic |
|---|---|
| Focus on product features | Focus on customer outcome |
| One-time sale | Continuous customer relationship |
| Rigid product definition | Flexible, customer-specific solutions |
| Product as customer asset | Outcome as service without capital commitment |
| Value Proposition: “Best quality” | Value Proposition: “Guaranteed results” |
Concretely, this means: Instead of selling a production machine, for example, the solution provider guarantees a certain production output – and is measured against it.
Product-as-a-Service and Outcome-based Models in Detail
The shift from product sales to solution offering manifests in concrete new business models. According to the McKinsey study “Subscription Economy 2025,” 47% of German industrial companies have already taken first steps toward service-based business models.
An overview of the most important models:
- Product-as-a-Service (PaaS): Instead of the product itself, its usage is sold. Example: A compressor manufacturer no longer sells the compressor, but compressed air per cubic meter.
- Performance-based Contracting: Compensation is tied to achieved performance indicators. Example: A plant manufacturer receives bonuses for efficiency improvements above the agreed base value.
- Outcome-as-a-Service: The provider guarantees a specific business outcome. Example: Instead of selling lighting systems, a provider guarantees a certain lighting intensity with minimized energy consumption.
- Solution-as-a-Subscription: Complete solutions are offered in a subscription model. Example: A machine manufacturer offers the entire production line including maintenance, updates, and performance monitoring as a monthly subscription.
The advantages of these models are obvious: For the provider, continuous, predictable revenue streams emerge instead of volatile one-time sales. For the customer, capital commitment decreases while planning security increases.
The Importance of Data as a New Value Driver
Data plays a central role in the transformation to a solution provider. It is the fuel for new business models and customer value. According to the IDC Report “Data Value in Manufacturing 2025,” by 2027, around 65% of value creation in industry will be directly or indirectly attributable to data analysis and usage.
Three types of data are particularly valuable:
- Operational data: Information about the operation of machines and equipment that enables real-time optimizations
- Customer and usage data: Insights about how customers actually use products, forming the basis for customer-specific offerings
- Context data: Broader information about the overall environment in which the solutions are used, opening up entirely new optimization potentials
The key lies in the intelligent linking of this data to create holistic value for the customer. Successful transformations are characterized by understanding data not as a by-product, but as an integral component of the value proposition.
“In the transformation to a solution provider, data becomes the most valuable asset. Those who possess data sovereignty and can convert it into customer value will dominate the market.” – Dr. Angelika Voß, Digital Business Models Institute
Practice shows: Mid-sized companies that have systematically integrated data into their business model achieve, according to a study by the Fraunhofer IPA, an average margin 23% higher than their data-ignorant competitors.
Customer-Centric Transformation: How Data is Revolutionizing Business Models
The successful transformation to a solution partner requires consistent customer centricity. While traditional product manufacturers align their development with technical specifications, successful solution providers orient themselves to customer needs and behavior.
Customer Journey Mapping and Experience Design in the B2B Context
The systematic analysis and design of the customer journey has also become a decisive success factor in the B2B context. According to the Gartner study “B2B Customer Experience 2025,” 72% of successful transformation projects invest significant resources in customer journey mapping and experience design.
The B2B customer journey fundamentally differs from B2C processes:
- Longer decision cycles (average 3-12 months)
- Multiple stakeholders (on average 6-10 decision-makers per purchase process)
- Higher rationality (ROI orientation instead of emotional purchase drivers)
- Stronger focus on long-term partnership instead of single transaction
Successful solution providers consider these particularities and develop differentiated approaches for each touchpoint and each stakeholder. They systematically use collected customer data to continuously optimize the journey.
A proven approach is “Stakeholder Experience Mapping,” where a separate journey with specific content and approaches is defined for each relevant decision-maker in the customer’s company (CTO, CFO, Production, Purchasing, etc.).
Implementation of Feedback Systems and Continuous Improvement
While traditional product manufacturers often collect feedback only at specific points (typically after the sale), successful solution providers establish continuous feedback loops across the entire customer lifecycle.
The Forrester Research study “Voice of Customer in B2B 2025” shows that companies with systematic feedback systems achieve a 41% higher customer retention rate than those without structured feedback processes.
Modern feedback mechanisms in the B2B sector include:
- Quantitative metrics: Net Promoter Score (NPS), Customer Effort Score (CES), Customer Satisfaction (CSAT)
- Qualitative insights: In-depth interviews, advisory boards, co-creation workshops
- Implicit feedback: Usage data, behavior patterns, engagement analyses
- Real-time monitoring: Performance dashboards, anomaly detection, predictive maintenance
The decisive difference: Successful solution providers don’t make feedback the task of a single department (typically marketing), but integrate it as a core process across all business areas.
Case Study: How a Traditional Machine Manufacturer Transformed Its Business Model in a Customer-Centric Way
The mid-sized machine manufacturer Heidelmann GmbH (name changed) accomplished a remarkable transformation from equipment manufacturer to productivity partner for its customers between 2022-2024. The company with 220 employees and annual revenue of 45 million euros faced the challenge of declining margins in the classic equipment business.
The transformation process encompassed four phases:
- Creating a data foundation: Installation of IoT sensors on existing customer equipment to capture operational data
- Identifying added value: Analysis of the data to identify optimization potentials (energy consumption, maintenance intervals, utilization)
- Business model innovation: Development of a “Performance-as-a-Service” offering with guaranteed equipment efficiency
- Organizational adaptation: Building a Customer Success Team and transition to integrated product-service teams
The results after 30 months speak for themselves:
- Increase in recurring revenue share from 12% to 43%
- Increase in EBITDA margin from 8% to 14%
- Reduction in customer churn by 62%
- Increase in average Customer Lifetime Value by 210%
Particularly remarkable: The transformation was enabled not through massive investments, but through consistent customer centricity and step-by-step development. The ROI of the transformation project was achieved after just 14 months.
The 5 Success Factors in Transforming into a Solution Provider
The analysis of over 150 transformation projects in German mid-sized companies by the University of St. Gallen and the Mittelstand Digital Center has identified five central success factors that determine success or failure in the transformation to a solution provider.
Factor 1: Strategic Realignment and Leadership Commitment
The transformation to a solution provider begins at the top. Without clear commitment from company leadership, according to BCG analysis “Transformation Leadership 2025,” 83% of all transformation projects fail in the early phase.
Concretely, leadership commitment means:
- Personal driving of change by management
- Provision of sufficient resources (budget, personnel, time)
- Consistent communication of the strategic realignment
- Adjustment of incentive systems and KPIs to the new strategy
- Role model function in dealing with change and uncertainty
Example: In a successful transformation project of a mid-sized company in automation technology, the CEO personally devoted 40% of his working time to the transformation process and conducted weekly transformation reviews with the entire leadership team.
Factor 2: Digital Infrastructure and Technology Stack
The technological basis for the change to a solution provider is a powerful digital infrastructure. According to the Capgemini study “Digital Foundation 2025,” successful transformers invest on average 5-7% of their annual revenue in building the digital foundation.
The key components of a transformation-capable technology architecture:
- IoT platform: For capturing and processing device and equipment data
- Data Analytics & AI: For intelligent analysis and utilization of the data
- Customer Data Platform: For a 360° view of the customer across all touchpoints
- API-First Architecture: For flexible integration into customer systems and ecosystems
- Cloud Infrastructure: For scalability and flexible provision of new services
The crucial point: Technology follows strategy, not vice versa. Successful transformers first define their target business model and derive the necessary technological components from it.
Factor 3: Agile Organizational Structures and Processes
The organizational dimension of transformation is often underestimated. Traditional silo structures oriented towards product development and manufacturing are only suitable to a limited extent for solution-oriented business models.
According to the Deloitte study “Agility in Manufacturing 2025,” 76% of successful transformers have fundamentally adapted their organizational structure. The most effective organizational models have the following characteristics:
- Cross-functional teams: Bringing together product, service, sales, and development in integrated teams
- Customer Success Management: Dedicated functions for the continuous optimization of customer value
- Agile working methods: Scrum, Kanban, and other methods for faster iteration and higher adaptability
- Ambidexterity: Balance between optimizing the core business and developing new business models
A proven approach is the “Dual Operating Model,” in which the traditional product business and the new solution business initially operate in parallel before they are gradually integrated.
Factor 4: Customer Centricity Across All Business Areas
True customer centricity goes far beyond marketing and sales. In successful transformation projects, it becomes the guiding principle for all business areas – from product development to controlling.
The PwC study “Customer Centricity Index 2025” shows that in successful transformation projects, concrete mechanisms are established to anchor customer centricity:
- Customer Advisory Boards: Direct involvement of customers in strategic decisions
- Customer-Centric KPIs: Metrics such as NPS, CES, or CLV at all company levels
- Customer Journey Ownership: Responsibility for the end-to-end customer journey
- Voice-of-Customer Programs: Systematic collection and use of customer feedback
- Service Design Thinking: Customer-centric innovation methods in all areas
Particularly important: The incentive systems must be aligned with customer centricity. In successful transformation projects, 30-50% of the variable compensation is linked to customer-related metrics.
Factor 5: Data-Driven Decision Making
The fifth success factor is the consistent use of data for business decisions at all levels. The McKinsey study “Data-Driven Manufacturing 2025” shows that data-driven companies have an 85% higher probability of successful transformation.
The most important aspects of data-driven decision making:
- Data Governance: Clear regulations on data ownership, quality, and usage
- Data Democratization: Broad access to relevant data for all decision-makers
- Analytics Capabilities: Building competencies for data analysis and interpretation
- Experimentation Culture: Systematic testing of hypotheses based on data
- Closed-Loop Processes: Continuous data collection, analysis, and optimization
“The transformation to a solution provider is at its core a transformation to a data-driven organization. Those who do not understand and use data as a strategic asset will fail due to the complexity of the transformation.” – Prof. Dr. Oliver Gassmann, University of St. Gallen
These five factors form the foundation of successful transformations. Experience shows that companies that act consistently in all five dimensions have a three times higher probability of success than those that are active in only individual areas.
Building Competencies and Change Management: People as the Key to Transformation Success
Perhaps the greatest challenge in transforming from a product manufacturer to a solution provider lies in the area of employee competencies and corporate culture. According to the Korn Ferry study “Skills Gap in Manufacturing 2025,” 71% of companies state that missing competencies are the limiting factor in their transformation.
The Most Important Skills for Transformation in Mid-Sized Companies
Successful transformation requires new competencies at all levels. The most critical skill gaps that mid-sized companies must close are:
- Data analysis and interpretation: Ability to extract valuable insights from data and translate these into customer value
- Business Model Innovation: Competence to develop and monetize new business models
- Customer Success Management: Continuous optimization of customer value across the entire lifecycle
- Agile development methods: Iterative, customer-oriented development of products and services
- Digital technologies: Understanding of IoT, Cloud, AI, and their application in one’s own business context
Successful transformers rely on a mix of three strategies:
- Upskilling: Systematic further training of existing employees (particularly effective in the technical area)
- New hires: Targeted recruitment of specialists with digital and service-oriented competencies
- Partnerships: Collaboration with external specialists for specific competency areas
Experience shows: About 70% of the required competencies can be built through further training of existing employees, 30% must be gained from outside.
Strategies for Overcoming Resistance in the Company
Resistance to change is human and observable in almost all transformation projects. The Kearney Change Management Study 2025 shows: In 62% of failed transformation projects, internal resistance was the main reason for failure.
Successful transformation leaders employ five levers to overcome resistance:
- Clear “Burning Platform” narrative: Conveying the urgency and consequences of inaction
- Positive vision: Attractive target image that provides orientation and motivates
- Early wins: Quickly visible successes that generate momentum
- Multipliers: Identification and activation of supporters of change
- Psychological safety: Creation of an environment where experiments and mistakes are allowed
Particularly effective is the approach of “co-creation”: When employees themselves are involved in shaping the transformation, resistance decreases significantly. According to the mentioned study, systematic co-creation reduces transformation-related resistance by an average of 64%.
Building New Leadership Structures for the Transformed Organization
The transformation from product to solution provider also requires an adjustment of leadership structures and principles. In traditional product companies, hierarchical structures with clear chains of command and functional specialization often dominate.
The Deloitte study “Leadership in Digital Transformation 2025” has identified four central changes in the leadership structures of successful transformers:
- From functional to customer-centric organization: Reorganization along customer segments or journeys instead of functions
- From control to empowerment: Delegation of decision-making authority to customer-facing teams
- From planning to adaptation: Agile planning cycles instead of rigid annual planning
- From management to coaching: New leadership role as enabler rather than controller
A particularly successful approach is the “Squad Model,” where cross-functional teams with clear outcome responsibility are formed for specific customer segments or solutions.
“The transformation to a solution provider usually fails not because of technology, but because of the lack of transformation in leadership and organizational structures. Those who try to implement new business models with old structures will inevitably fail.” – Dr. Carsten Linz, Business Innovation Leader
Experience shows: Companies that consistently transform their leadership structures achieve a 43% higher success rate in the transformation to a solution provider than those that adhere to traditional structures.
ROI of Transformation: Economic Metrics and Success Measurement
The transformation to a solution provider requires significant investments in technology, competencies, and organizational development. For mid-sized companies, the question of Return on Investment (ROI) is therefore of central importance.
Typical Investment Costs and Amortization Periods
The Roland Berger study “Transformation Economics 2025” provides empirical data on the typical investment costs and amortization periods for the transformation of mid-sized industrial companies:
| Company size | Typical investment (% of annual revenue) | Average amortization period |
|---|---|---|
| Small mid-sized company (10-50 employees) | 3.5-5.0% | 18-24 months |
| Medium mid-sized company (50-250 employees) | 2.5-4.0% | 16-22 months |
| Large mid-sized company (250-500 employees) | 2.0-3.5% | 14-20 months |
These investments are typically distributed across the following areas:
- Technology and infrastructure: 45-55%
- Competency building and personnel development: 20-30%
- Organizational development and change management: 15-25%
- Market introduction and communication: 5-10%
Crucial for the ROI is a phased approach, where early successes already generate resources for later transformation steps. The study shows that successful transformers focus on “quick wins” in the first phase that achieve positive financial effects within 6-9 months.
KPIs for Measuring Transformation Progress
Progress measurement in transformation requires a balanced set of KPIs that includes both early indicators and late indicators. The Boston Consulting Group recommends in its study “Transformation Metrics 2025” a three-tiered KPI framework:
- Activity KPIs (Lead Indicators): Measure the implementation of transformation activities
- Number of implemented use cases
- Proportion of employees with digital training
- Degree of process digitization
- Business Model KPIs (Intermediate Indicators): Measure the development of the new business model
- Share of recurring revenues
- Number of customers in the solutions business
- Usage rate of digital services
- Value KPIs (Lag Indicators): Measure the economic success of the transformation
- EBITDA margin
- Customer Lifetime Value
- Company valuation multiple
Successful transformers are characterized by systematically measuring and managing all three KPI levels. They recognize early on whether transformation activities are having the desired business model changes and whether these in turn lead to improved value KPIs.
Long-term Effects on Company Valuation and Market Position
The long-term economic effects of a successful transformation to a solution provider are substantial. The PwC study “Valuation Impact of Servitization 2025” shows significant differences in the valuation and market position of transformed versus non-transformed companies:
- EBITDA multiple: Transformed companies achieve on average a 2.7 times higher EBITDA multiple than pure product manufacturers
- Revenue growth: The average annual growth rate for transformed companies is 6.3 percentage points higher
- Crisis resilience: During the recession phases of 2022-2024, transformed companies recorded an average revenue decline of only 4%, compared to 15% for non-transformed competitors
- Exit options: Transformed companies have an 85% higher probability of being acquired by strategic investors or private equity firms
Another long-term effect is improved innovation capability: According to the mentioned study, transformed companies bring an average of 2.3 times more successful innovations to market per year than their non-transformed competitors.
“The transformation to a solution provider is not only a question of survival, but also a massive value enhancement opportunity. Companies that successfully complete this change will experience significant value enhancement in the coming years, while pure product manufacturers will come under increasing margin pressure.” – Michael Träm, Partner at PwC Germany
These long-term effects are particularly relevant for entrepreneurs in mid-sized companies who are working on succession solutions or planning a strategic sale of the company in the next 5-10 years.
The Pragmatic Implementation Roadmap: From Manufacturer to Solution Partner in 4 Steps
The transformation from product manufacturer to solution partner is a complex undertaking. To make the process manageable, we have developed a pragmatic 4-step roadmap based on successful transformation projects.
Step 1: Analysis and Strategy Development
The transformation process begins with a thorough analysis and the development of a clear strategy. According to the study “Successful Transformations 2025” by the Mittelstand Digital Center, successful transformers invest an average of 8-12 weeks in this phase.
The critical activities in this phase are:
- Customer needs analysis: In-depth interviews with key customers about unsolved problems and needs
- Competitive analysis: Systematic recording of the solution offerings of relevant competitors
- Competency audit: Honest assessment of existing and missing competencies
- Digitization check: Evaluation of digital maturity and identification of gaps
- Business model design: Development and validation of alternative solution offerings
The result of this phase is a clear transformation strategy with defined goals, priorities, and an implementation roadmap. Important here is the consistent involvement of the leadership team to create a common understanding and commitment.
A proven approach is conducting a two-day strategy workshop with the extended leadership team, where analysis results are discussed and strategic course settings are made together.
Step 2: Pilot Projects and Quick Wins
After the strategy phase, it’s about achieving initial successes and validating the concept in practice. The McKinsey study “Scaling Digital Transformations 2025” shows that companies that start with pilot projects and quick wins have a 2.7 times higher probability of success than those that want to transform directly on a broad front.
The following approaches have proven particularly effective:
- Lighthouse customers: Identification of 2-3 open-minded existing customers for joint pilot projects
- Minimum Viable Solution (MVP): Rapid development of a first version of the solution offering
- 90-day sprints: Clearly time-limited project phases with defined results
- Cross-functional teams: Composition of dedicated teams for the pilot projects
- Systematic learning: Regular retrospectives and adaptation of the approach
The pilot phase typically lasts 3-6 months and should conclude with measurable successes. These early wins are crucial to convince skeptics and create momentum for further transformation.
Example: A mid-sized plant manufacturer started with a “Remote Monitoring & Optimization” pilot project with three existing customers. Within 4 months, it was able to increase plant availability by 17%, generating a measurable economic benefit that served as a reference for acquiring more customers.
Step 3: Scaling and Organizational Adaptation
After successful pilot projects, the scaling phase begins. Here, the validated solution offering is rolled out to a broader customer base and the organization is adjusted accordingly. According to the Bain study “Scaling Solutions 2025,” this phase is particularly critical – 64% of transformation projects fail in this phase due to insufficient organizational adaptation.
The most important activities in the scaling phase:
- Organizational anchoring: Building dedicated structures for the solutions business (e.g., business unit, profit center)
- Competency building: Systematic qualification of employees for the new requirements
- Process adaptation: Revision of core processes (sales, development, service)
- Scaling of technology: Expansion of the technological infrastructure for larger numbers of users
- Adjustment of incentive systems: Alignment of compensation and KPIs with solution orientation
A proven approach in this phase is “Ring Fencing”: The new solutions business is initially set up as a separate unit with its own processes and KPIs, while the traditional product business continues to run in parallel. This enables focused development of the new business model without the constraints of established structures.
Step 4: Continuous Evolution of the Business Model
The transformation to a solution provider is not a one-time project, but a continuous process. In the fourth phase, it’s about establishing a mechanism for the ongoing evolution of the business model. The Accenture study “Business Model Innovation 2025” shows that the most successful companies substantially develop their business model every 3-4 years.
The core elements of continuous business model evolution:
- Systematic trend monitoring: Continuous observation of relevant technology and market trends
- Innovation radar system: Process for early identification and evaluation of new business opportunities
- Experimentation culture: Establishment of a structured approach for business model experiments
- Venture approach: Development of promising ideas in a startup-like setting
- Ecosystem management: Strategic partnerships to access complementary competencies
A particularly successful approach is the establishment of a “Business Model Innovation Lab,” where cross-functional teams work on the next generation of the business model.
“The transformation to a solution provider is not a sprint, but a marathon. Companies that want to be successful in the long term must anchor the ability for continuous business model innovation in their DNA.” – Christoph Keese, CEO Axel Springer hy GmbH
This four-step implementation roadmap offers a pragmatic approach for mid-sized companies wanting to make the change to a solution provider. It takes into account the typical resource constraints in mid-sized businesses and enables a step-by-step transformation with manageable risk.
FAQ: The Most Important Questions About Transformation in Mid-Sized Industrial Companies
How long does the transformation from product manufacturer to solution provider typically take?
The transformation from pure product manufacturer to holistic solution provider is a multi-year process. According to the Roland Berger study “Transformation Timelines 2025,” the average duration for a comprehensive transformation in mid-sized companies is 24-36 months. However, initial successes and quick wins can be achieved after 3-6 months. Decisive is a phased approach, where the transformation is accomplished in manageable steps, rather than trying to change everything at once. Companies that proceed according to the principle “Think big, start small, scale fast” demonstrably achieve better results than those that rely on a “Big Bang” transformation.
What typical resistances exist in the transformation and how can they be overcome?
In the transformation to a solution provider, resistances typically occur at various levels. The Kearney study “Change Resistance in Manufacturing 2025” identifies four main sources of resistance:
- Sales: Fear of more complex sales processes and changed compensation models
- Development: Concern about devaluation of traditional engineering competencies
- Controlling/Finance: Skepticism regarding the profitability of new business models
- Middle management: Fear of loss of power due to new organizational structures
Successful transformation leaders overcome these resistances through a combination of clear communication, early involvement, targeted competency building, and visible successes. Particularly effective is including representatives of potential “resistance groups” early in the pilot projects so they can become ambassadors of change themselves.
Must a completely new team be built for the transformation?
No, a successful transformation does not require the complete replacement of the team. The Deloitte study “Transformation Talent 2025” shows that in successful transformation projects in mid-sized businesses, an average of 70-80% of existing employees support the change and acquire the necessary new competencies. Typically, new employees with key competencies in the areas of data analysis, service design, software development, and digital business model management are strategically hired to act as “transformation catalysts.” A proven approach is forming “buddy teams,” where new employees with digital competencies and existing employees with deep product and customer knowledge work closely together and learn from each other.
How does the role of sales change in the transformation to a solution provider?
The role of sales changes fundamentally in the shift to a solution provider. According to the Forrester study “Solution Selling 2025,” sales evolves from product seller to strategic advisor and solution architect. The biggest changes are:
- Competency profile: Less transaction focus, more consulting competence and business understanding
- Sales cycle: Longer, more complex sales processes with multiple stakeholders
- Customer relationship: Continuous support instead of point-of-sale activities
- Compensation model: Shift from pure new business commission to components such as customer satisfaction and recurring revenues
Successful transformers support this change with intensive training programs, coaching, and adjusted incentive systems. A proven approach is the temporary introduction of “bridge bonuses” that give sales staff financial security during the transition phase.
What technological minimum requirements are necessary for the transformation to a solution provider?
The transformation to a solution provider requires a solid technological foundation. The Capgemini study “Technology Foundations 2025” identifies the following minimum requirements:
- Connectivity: Ability to network products and equipment (IoT infrastructure)
- Data platform: System for capturing, storing, and analyzing usage and operational data
- Integration: APIs and middleware for connection with customer systems and third-party services
- Cybersecurity: Robust security architecture to protect sensitive customer data
- Customer Engagement Platform: System for continuous interaction with customers across the entire lifecycle
The good news: Many of these technologies are available today as cloud services and do not require massive initial investments in proprietary IT infrastructure. Successful transformers typically rely on a hybrid architecture, where strategically important components are developed in-house and standard functionalities are sourced from specialized technology partners.
How does the transformation affect company financing?
The transformation to a solution provider has significant implications for company financing. The PwC study “Financing Transformation 2025” identifies four essential changes:
- Capital requirements: Increased investment needs during the transformation phase (typically 2-5% of annual revenue)
- Cash flow patterns: Shift from large one-time payments to smaller, recurring payment streams
- Balance sheet effects: Change in key figures due to higher intangible assets and shift to service business
- Financing sources: New forms of financing such as venture capital or specialized transformation funds become more relevant
Successful transformers adapt their financing strategy early by, for example, securing special credit lines for the transformation phase or raising mezzanine capital. Particularly important is transparent dialogue with existing financing partners who must account for the changed cash flow patterns. A proven approach is developing a “Transformation Funding Mix” that combines different financing sources and is specifically tailored to the various phases of the transformation.
What legal aspects must be considered in the transformation?
The transformation to a solution provider touches numerous legal aspects that should be considered early on. The Deloitte Legal study “Legal Aspects of Servitization 2025” highlights four particularly relevant areas:
- Data protection and usage: Clear regulations for capturing, processing, and using customer and usage data (GDPR-compliant)
- Contract design: New contract models for service-based offerings, outcome or availability guarantees
- Liability issues: Adapted liability regulations for remote maintenance or proactive troubleshooting
- Intellectual Property: Clear regulations on ownership and usage rights for jointly developed solutions or generated data
Successful transformers involve legal experts early in the development of new business models and develop modular contract components that can be flexibly adapted to different solution offerings. A proven approach is assembling an interdisciplinary team of internal and external experts with competencies in IT law, data protection, and contract design that accompanies the entire transformation process.
Can a company be both a product manufacturer and a solution provider simultaneously?
Yes, the parallel management of product and solution business is possible and in many cases even sensible. The Boston Consulting Group study “Dual Business Models 2025” shows that 68% of successful transformers operate both business models in parallel for a period of 3-5 years. This hybrid approach offers several advantages:
- Risk minimization through stable cash flows from the established product business
- Serving different customer segments with different preferences
- Step-by-step transformation without disruptive changes
- Opportunity to gain experience in the solution business before committing larger resources
The biggest challenge of the hybrid model is managing potential cannibalization effects and resource conflicts. Successful duality managers establish clear governance structures and separate P&L responsibilities for both business models, while central functions such as research & development or operations are shared. A proven approach is the “Ambidexterity Model,” where the traditional product business is optimized for efficiency, while the new solution business is equipped with greater flexibility and experimentation space.
Conclusion: The Future Belongs to Solution Providers
The transformation from product manufacturer to solution provider is not an option for mid-sized industrial companies, but a necessity. The market data is clear: Companies that successfully complete this change achieve higher margins, stronger growth, and a better market position.
The five central success factors – strategic realignment, digital infrastructure, agile organization, customer centricity, and data-driven decision making – form the foundation for a successful transformation. The four-step implementation roadmap offers a pragmatic approach to accomplishing this complex change in manageable steps.
As the numerous examples of successful transformations show, the change is feasible even for mid-sized companies with limited resources. A systematic approach that combines quick successes with long-term perspective is decisive.
The time to act is now. Companies that proactively shape the change will be the winners of the next decade. Those who cling to outdated business models risk being displaced by more agile and customer-oriented competitors.
“The transformation to a solution provider is the greatest opportunity for German mid-sized businesses since digitization. It allows them to combine traditional strengths – engineering expertise, quality consciousness, and customer orientation – with new digital possibilities, thereby creating sustainable competitive advantages.” – Prof. Dr. Julian Kawohl, Berlin University of Applied Sciences and Technology
Take the first step: Conduct an honest assessment of your current business model and develop a vision of what your company could look like as a solution provider. The path may be challenging, but the reward – a future-proof, profitable, and resilient company – is worth it.
