Key factors for manufacturing companies to invest in advanced services

Mar 05, 2018 • FeaturesManagementAdvanced Services GroupAnnick PerrymanufacturingNoventumServitizationValue ChangeServitization and Advanced Services

Annick Perry, Senior Project Manager, Noventum gives us some insight into the findings of a recent research project that Noventum and Aston Universities Advanced Services Group have undertaken to look at Advanced Services Trend within Manufacturing...

In a joint research study with the Advanced Services Group, a centre of excellence at Aston Business School, Noventum explored how five societal ‘Megatrends' bring opportunities for business growth for manufacturing companies through advanced IoT enabled services.

The five societal megatrends we explored in this research are:

  1. Value change: The increasing importance of transparency, diversity, individualisation and freedom of choice, as well as demand for meaning and connectedness.
  2. Green and resource scarcity: The increasing consciousness of manufacturers when providing products and services to fulfil human development and at the same time take care of the natural system.
  3. Health and Aging: An ageing society and the increasing importance of healthy living and lifestyle.
  4. Globalisation and the need for community: The increasing emphasis on communities, localities, etc. to foster identity in light of a globalised world.
  5. Inequality and Social Exclusion: The increasing market share of poor customers, means reducing the complexity and cost of a good and its production. Designing products for emerging countries may also call for an increase in durability and when selling the products, reliance on unconventional distribution channels. Globalisation and rising incomes in emerging countries may also drive frugal innovation, which implies that services and products need not be of inferior quality but must be provided cheaply[/ordered_list]

In this article, the focus is on just one of the Mega Trends ‘Value Change’ which provided some interesting insights on how this will impact the manufacturing industry.

Customers’ perceptions of value are changing

Consumer habits are changing, we are becoming more tech-savvy, and less connected to ownership of products and, in favour of experiences delivered by service providers operating new business models, like Airbnb. Expectations of a personalized experience are higher, which means companies must respond to customers’ needs faster and in a unique way. This change is passed on by B2C customers towards their B2B suppliers and partners. For manufacturers, this means staying alert and being proactive. As Anders Mossberg of Scania Trucks stated in our study, “Talk to your customers’ customers because they are the ones that will drive the trends in the future.”

Customers want to Buy Everything as a Service

Manufacturers are recognising the need to find new ways of offering value to customers. Their offerings are changing from a product focus to a service focus, which emphasises providing the customer with the capability to achieve their business goals, instead of emphasising product features. They are now competing through a combination of products and services, enabled by technology, tailored to meet the customer’s needs. Rolls-Royce, for example, sells hours of flight time for its jet engines rather than the more traditional purchase of the engine. These are more sophisticated, higher-value contracts, based on outcomes. They are also higher risk for the manufacturer but with higher potential to create a competitive advantage.

New technologies enable to respond to changing needs

New developments in technology are enabling the value chain to be redesigned. Embedded sensors and processors in assets and devices are increasingly capable of transmitting data to control centres to signal the need for repair or refurbishment. Research participants cited the introduction of driverless vehicles, some of whom mentioned that this is already a reality in some situations, and will increasingly be the case in the future. It will provide the opportunity for companies to take leadership and redesign the value chain to increase efficiency and added value. New configurations of networks allow companies to redefine their role in the value chain.

A transformation is needed

Delivering such advanced service requires fundamental changes in the manufacturer’s operations, relationships, organisational structures and potentially a change in their culture. Denis Bouteille of Fives addressed this in our study by saying, “Talking to the customer, we need people who can really develop the empathy, the listening and the deep understanding.”

Conclusions of the research on societal ‘Megatrends’

This exploratory research concludes that societal megatrends can drive opportunities for manufacturers to compete and grow through advanced services. To realise those opportunities, it’s important that companies exploit the implications of new trends together with their customers and explore what the impact of societal trends might be for future needs. The megatrends explored in this research show a significant potential for companies to develop advanced services and strengthen the competitive position of companies. However, some key factors need to be taken into mind when manufacturing companies take the decision to invest in developing advanced services.

1. Before companies can start developing advanced IoT enabled services…..

  • Top management needs to support the development of advanced services and provide clear leadership to staff in the mindset appropriate to the development of the new capabilities[/unordered_list]

2. Stay close to your customers to identify opportunities for advanced IoT enabled services by understanding how value perception and needs are impacted by societal trends

  • Understand your companies role in tackling global social and environmental challenges
  • Explore the opportunities of the ‘circular economy’
  • Recognise the impact of IoT on your customer's value chain

3. When you are developing the business models around advanced services make sure that:

  • The tacit knowledge of the very experienced but ageing workforce is transferred into technical solutions to deliver advanced services
  • Your company thinks global, but acts local and delivers a superior customer experience

Want to know more? Download an executive summary of this research and learn how the other societal trends can bring business opportunities. @